LONDON, Nov. 13, 2014 /PRNewswire/ -- As natural gas is being increasingly used for heat and power generation, the need for gas storage facilities to ensure reliable and secure supply is intensifying. Gas-importing regions are investing in storage facilities to cater to seasonal spikes in demand as well as the strategic need to have backup stocks. For instance, efforts to develop salt cavities will gain pace in order to meet the short-term gas demand during peak winters in Europe. Similarly, gas-exporting countries will seek storage assets in regions with rising gas consumption to secure their exports and provide higher stability of supply.
New analysis from Frost & Sullivan, Global Gas Storage Market, finds that the total working gas capacity worldwide stood at 381.5 billion cubic meters (bcm) in 2013 and estimates this to reach 453.5 bcm in 2018 at a compound annual growth rate of 3.5 percent. In addition to salt cavities, the study covers depleted reservoirs, aquifers and liquefied natural gas (LNG) storage tanks.
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Traditionally, gas storage facilities have been concentrated in North America, Europe and the countries of the Commonwealth of Independent States (CIS), including Russia. However, reducing gas prices, especially in North America, are lowering margins for gas operators and reducing investment in storage capacity. Instead, new storage capacity is coming from emerging markets like China, the Middle East and Latin America. China is likely to have the highest growth as it begins domestic shale gas production within the next five years.
"However, converting depleted reservoirs, aquifers or salt caverns into gas storage facilities requires high capital," said Frost & Sullivan Energy & Environmental Research Analyst Ashay Abbhi. "The situation is exacerbated by the fact that not all of the stored gas can be withdrawn; some of it functions as cushion gas. This constitutes a major portion of facility expenses and the revenues generated from working gas alone are often not enough to compensate for this expenditure."
Such capital costs amidst reducing gas prices and lack of governmental support are anticipated to arrest market expansion in many countries. Getting funding for high-cost gas storage projects has proven especially problematic. In fact, this restraint has had a direct negative impact on gas storage market revenues, as it has prevented new facilities from coming up or old ones from expanding.
"Gas storage operators must invest in R&D of technologies and proper planning of facility development, as this could lower capital costs," advised Abbhi. "For example, if the storage facility is constructed when gas prices are low, the cost of cushion gas can be considerably reduced."
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