By Richard Lee Assistant Business Editor, The Advocate/Greenwich Time
Organizers of a new energy business in Westport believe demand for natural gas will continue to grow, and have disclosed plans to create a salt‐cavern natural‐gas storage facility in Mississippi.
Leaf River Energy Center, a subsidiary of Westport‐based NGS Investments LLC, plans to apply to the Federal Energy Regulatory Commission to construct and operate the facility in Smith County, Miss.
The Leaf River Energy Center would consist of salt caverns created in two salt domes under 400 acres of land, plus 40 miles of pipeline.
A cavern is created by drilling deep into a salt dome and circulating water to remove the salt. It would be 4,000 feet below the surface and could take two years to develop, said Laura Luce, a principal in NGS and former president of Energy Center Investments, a subsidiary of Sempra Commodities in Stamford.
The initial phase would have 16 billion cubic feet of capacity, half the size of its planned build‐out. The first cavern could be operational by late 2008.
Salt caverns are well‐suited for natural gas storage because they allow little injected natural gas to escape, according to a 2004 Federal Energy Regulatory Commission report, which said salt cavern walls have the structural strength of steel.
Storage of natural gas underground is more economical than in above‐ground tanks, said Ed Murrell, a gas expert at FERC, which will receive Leaf Riverʹs application in early 2007.
FERCʹs review process typically takes 12 to 18 months.
Since 1988, natural‐gas demand in the United States has risen 24 percent, but in the same period storage capacity has increased only 1.4 percent, FERC Chairman Joseph Kelliher said.
The result can be price volatility.
"Supply and demand (for natural gas) are never in equilibrium. You have to store it for times of peak demand. When prices are lower, they put their gas in the ground," Luce said. "We're providing the cavern. We're like a storage unit."
A key factor is finding a suitable location that is accessible to a gas pipeline network.
"You have to have the right geology and location. In Mississippi, we'll be building 40 miles of pipeline to connect to other inter(state) and intra(state) pipelines," she said, estimating the project cost at more than $200 million.
NGS plans to assemble a portfolio of gas storage assets throughout North America. It also is proceeding with projects in Colorado and Texas.
Companies such as NGS create geologic storage space to provide gas suppliers an opportunity to steady prices, said Terry Boss, senior vice president, environment, safety and operations at the Interstate Natural Gas Association of America.
"It's a key tool that people use to stabilize prices of natural gas. Prices vary throughout the year. The key is to put it in when it's cheaper and take it out when it's more expensive," he said. "If you find the right formation, you can fill it up very quick and empty it very quick."
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