The old rule, if it isn’t broken don’t fix it, does not apply to this new change in data reporting. With the onset of the shale gas revolution in 2007, the US energy industry was redefined by new natural gas production plays. Natural gas was trading at a steady $6/MMBtu before 2007 but quickly fell to $4/MMBtu in 2010 and now sits at around $2/MMBtu. With large plays like the Bakken, Marcellus, and Eagle Ford, and smaller plays like Monterey, Niobrara, and New Albany, the US natural gas map needed to be redrawn.
The runaway train of the shale gas revolution left the old way of dividing the country too simplistic. No longer was the southernmost part of the country the silver spoon that delivered more than 74% of the country’s natural gas. Further division of the previous Consuming East and West regions came at the hand of increased production, wavering consumption, and storage mechanisms.
The Consuming East has been broken up into two regions, the Midwest and the East. This house divide came as a result of seasonal usage cycles and storage facilities. The Midwest, with its harsh winters and mild summers, tends to have only one yearly cycle of storage in the summer and fall and consumption in the winter and spring. The storage in the Midwest follows a more consistent rate given the region’s heavier dependence on supply rather that its own production. Storage in this region comes in the form of aquifers rather than the typical storage in depleted fields technique found in the East region. Given the large Utica and Marcellus field’s ability to in fact store gas, these depleted fields offer the East a large advantage. Injection and withdrawal of resources from these depleted fields is also much easier allowing quick and efficient net movement of resources. This is advantageous given the energy demand from large population centers located within the East.
The separation of the Consuming West can largely be seen as a population division. The new Pacific region includes California, Washington, and Oregon while the new Mountain region includes sates such as Montana, Idaho, and Utah with much smaller population densities and energy demand. Storage facilities in the Pacific have almost three times the deliverability allowing for easy response to spikes in demand.
The Producing region removed New Mexico and was renamed the South Central region. This region includes powerhouse gas players Texas and Louisiana, but the region as a whole simply doesn’t contribute to the US natural gas market as much as before. The South Central can be further divided into salt cavern storage and depleted field storage. Salt cavern storage provides the best deliverability allowing for greater operational flexibility, advantageous for region’s proximity to the Gulf of Mexico, Eagle Ford, and Barnett resources.
This mitosis of gas storage regions will give a more accurate snapshot of resources and assets at any given time in the US. The division will allow for more accurate reporting on natural gas storage within each region leading to better predictions of supply increases, price forecasting, and overall storage capabilities. Further divisions may be necessary in the future given the rollercoaster nature of the energy market.