California Gas Leak Haunts Market With Shrinking Stockpiles

  • U.S. gas stockpiles expanded below analyst expectations
  • Sempra reported drop in inventories after natural gas leak

A massive natural gas leak in California came back to haunt the fuel market more than four months after it was plugged.

U.S. gas stockpiles expanded by only 37 billion cubic feet last week, far below what analysts and traders had predicted in a Bloomberg survey. The culprit: The storage well leak that has limited the use of Sempra Energy’s Aliso Canyon storage field near Los Angeles since last year, according to Bloomberg New Energy Finance. In mid-June, the utility reported a drop in inventories that can be delivered to customers, data compiled by Bloomberg show.

The Aliso Canyon leak, the biggest of its kind in U.S. history, is straining supplies in the West just as extreme heat has air conditioners blasting, boosting demand for the fuel that burns at power plants. Nationwide, a glut of natural gas storage is shrinking as exports climb and shale drillers curtail output.

The U.S. Energy Information Administration reported on Thursday a 5 billion-cubic-foot decline in stockpiles of working gas, which can be withdrawn from storage and sent to customers, in the Pacific region, listing it as “reclassification.”

5 Billion

“We did not do a reclassification,” Rodger Schwecke, vice president of transmission and storage for Sempra’s Southern California Gas, said in a telephone interview. “The revision accounted for the amount of gas that leaked from Aliso Canyon.”

SoCalGas calculated that about 4.62 billion cubic feet of gas escaped from a leak that was detected in October and plugged in February at Aliso Canyon, according to a May 20 filing with the U.S. Securities and Exchange Commission.

While the move preserves the physical integrity of the field, it signals that Southern California Gas will have less flexibility to respond to sudden spikes in demand during a heat wave, Kyle Cooper, director of research at IAF Advisors and Ion Energy in Houston, said by phone Thursday. California officials have said the state could face short-term blackouts on as many as 14 days this summer.

“There’s heightened concern and worry about supplies for power generation,” Cooper said.

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