Southern California natgas market looks healthier this winter - U.S. EIA

(Reuters) - Southern California Gas Co has more flexibility to supply natural gas this winter than in recent years due to a change in state rules and the return of a pipeline, the U.S. Energy Information Administration said in a report on Friday.

Gas supplies have been tight in Southern California for years due to pipeline limitations and reduced availability of SoCalGas’ biggest storage field at Aliso Canyon in Los Angeles, following a leak at the underground cavern between October 2015 and February 2016.

Following that leak, state regulators only permitted SoCalGas to withdraw gas from Aliso as a last resort after all other alternatives had been exhausted.

But in July, the California Public Utilities Commission (CPUC) approved rules making it easier for SoCalGas to withdrawal gas from Aliso.

In November, however, California Governor Gavin Newsom sent a letter to the head of the CPUC urging the agency to “expedite planning for the permanent closure” of Aliso. The CPUC was already looking into whether the facility could be shut or reduced.

SoCalGas has said Aliso is needed to maintain energy reliability.

SoCalGas, meanwhile, completed repairs on Line 235-2 in southeastern California in October, increasing pipeline capacity by 0.27 billion cubic feet per day. EIA said Line 235-2 had faced reduced capacity after an October 2017 rupture.

One billion cubic feet is enough gas for about 5 million U.S. homes for a day.

In addition, EIA said Line 235-2 increased SoCalGas’ access to lower-cost gas from the San Juan Basin in northwest New Mexico and southwest Colorado and the Permian Basin in West Texas and eastern New Mexico through the Needles and Topock receipt points on the California-Arizona border.

SoCalGas has about the same amount of gas in inventory now as this time last year and much more than in 2016 and 2017.

On Dec. 12, SoCalGas’s stockpiles totaled about 73.8 billion cubic feet. That compares with 74.2 bcf on the same day in 2018, 68.0 bcf in 2017 and 59.8 bcf in 2016.

EIA said the average spot gas price at the SoCalGas Citygate during the winter (November 2018–March 2019) reached a record $6.93 per million British thermal units (mmBtu) with a one-day spike to $22.29 on a cold day in February.

With milder weather expected this winter, EIA said S&P Global Market Intelligence data indicates gas prices will average around $6.66 per mmBtu in December and $4.08 in January-March 2020.

Reporting by Scott DiSavino; Editing by David Gregorio