Natural Gas Storage
We own two underground salt dome natural gas storage facilities located near Hattiesburg, Mississippi that are strategically situated to serve the Northeast, Mid-Atlantic and Southeast natural gas markets. These two facilities have a combined current authorized working storage capacity of 13.5 Bcf, and are capable of delivering in excess of 1.2 Bcf/d of natural gas into five interstate pipeline systems: Transco, Destin Pipeline, Gulf South Pipeline, Southern Natural Gas Pipeline and Tennessee Gas Pipeline. We also lease a natural gas storage facility in Texas having 6.4 Bcf of working capacity and a salt dome natural gas cavern in Louisiana having a working gas storage capacity of 3 Bcf.
The ability of these facilities to handle high levels of injections and withdrawals of natural gas makes them well-suited for customers who desire the ability to meet load swings and to cover major supply interruption events, such as hurricanes and temporary losses of production. The high injection and withdrawal rates also allow customers to take advantage of favorable natural gas prices and also provide customers the opportunity to quickly respond in situations where they have natural gas imbalance issues on pipelines connected to the storage facility. The characteristics of the salt domes at these facilities permit sustained periods of high delivery, the ability to quickly switch from full injection to full withdrawal and the ability to provide an impermeable storage medium.
In the third quarter of 2004, we began to convert an existing brine well at our propane storage complex in Hattiesburg, Mississippi to natural gas service. This conversion, which is expected to cost $18 million, will create a new natural gas storage cavern with 1.8 Bcf of working gas capacity that will be integrated with our existing Petal natural gas storage facility. We expect to have the cavern in service during the third quarter of 2005 and have executed long-term storage agreements with BP for the entire capacity of the new natural gas storage cavern.
| Facility | Ownership Interest | Approx. Acres | Working Gas Capacity (Bcf) |
|---|---|---|---|
| Petal | 100% | 76 | 9.5 |
| Hattiesburg | 100% | 73 | 4.0 |
| Wilson (2) | Operating Lease | 62 | 6.4 |
| Acadian (3) | Operating Lease | 62 | 3.0 |
| Total | 22.9 |
(1)Working gas is the volume of natural gas in the storage reservoir that can be extracted during the normal operation of the storage facility. This is the natural gas that is being stored and withdrawn. Working gas differs from "base gas" or "cushion gas," which is the volume of gas that must remain in the storage facility to provide the minimum required pressurization to extract the working gas. The Petal working gas capacity is authorized by the FERC and the Hattiesburg working gas capacity is authorized by the Mississippi Oil and Gas Board. (2)We have the exclusive right to use the Wilson natural gas storage facility under an operating lease that expires in January 2008 and, subject to certain conditions, has one or more optional renewal periods of five years each at fair market rate at the time of renewal. (3)We lease the Acadian natural gas storage cavern under an operating lease that expires in December 2012. This storage facility is an integral component of our Acadian Gas System.