U.S. Natural Gas Salt Storage Projects Stage Comeback as LNG, Renewables Drive Demand

Natural Gas Intelligence

More than a decade after its last large build-out, natural gas salt dome storage is undergoing a revival along the Gulf Coast as LNG exports and renewables raise demand and prices for the flexible storage option. 

In Mississippi, Enstor Gas is seeking to double the number of caverns at its 22.4 Bcf Mississippi Hub to six for an additional 33.5 Bcf of working gas capacity. The company plans to start the approval process with FERC by the end of March and anticipates a startup in 2028.

The project comes amid a jump in prices for salt storage as demand has caught up with supply from liquefied natural gas exporters, power generators, pipeline operators and traders.

“Demand for salt storage in particular is rising in general because increased natural gas price volatility is becoming a more systemic part of the industry,” according to NGI’s Patrick Rau, director of strategy and research.“ Salt domes provide multiple injection and withdrawal cycles that better enable players to capture those price swings. They also provide critical backup service to renewables.”

With the Gulf Coast home to a majority of the country’s current and future LNG export capacity, LNG trading houses and portfolio players are taking a larger portion of that capacity “and will look to capitalize on emerging price and time spreads, both here and abroad,” Rau said.

Rates Go Higher

“It’s a revival of the gas storage business…because basically the industry went idle for a number of years,” Enstor’s Peter Abt, senior vice president of origination, told NGI. 

In the last round of storage additions in the early 2010s, many projects were financed with monthly storage rates in the mid-teens cents per Dth, Abt said. “As soon as the projects were placed into service, the market fell out and we bottomed out in the low single digits.”

That decade of depressed storage rates and limited natural gas price volatility has moved to the rearview mirror. Abt said salt storage rates have increased to at least 20 cents/Dth, a level that is required now to build new capacity. In addition, customers are signing up for 10 to 15 years compared with previous contracts of one or two years, according to Abt. Banks require the commitments to cover the term of the loans, which have typically been seven or eight years, he said.

Depleted Reservoir
Salt Cavern