Is There a Looming Natural Gas Storage Shortfall?

A predicted natural gas storage shortfall going into the 2014-2015 winter heating period could be an investor opportunity.

Jun 12, 2014 at 3:34PM

The U.S. Energy Information Administration (EIA) is projecting a nearly 10% natural gas storage shortfall this coming November from the same time last year. This is after predicted record gas injections to replenish a 50% storage shortfall reported in March.

Brutal winter increased demand
Because of high demand brought on by the brutal 2013-2014 winter, natural gas stocks are drastically reduced, falling to a March low of 857 billion cubic feet (Bcf) from a running five-year average of 1,577 Bcf for the same month.

Eia Ng Demand Chart

Source: Energy Information Administration (EIA) Short-Term Energy Outlook: June 2014

According to the EIA March 2014 report:

The forecasted April-to-October storage build of nearly 2,500 Bcf would surpass the previous record injection season net inventory build (April-October, 2001) by more than 90 Bcf, to end the injection season at 3,459 Bcf. While the projected storage build for the upcoming injection season would be a record, total Lower 48 end-October inventories in 2014 would still be at their lowest level since 2008. High injections would not fully erase the deficit in storage volumes caused by this winter's heavy withdrawals.

Quiet hurricane season and mild winter predicted
The June EIA natural gas short-term energy outlook report predicts a November 2014 storage shortfall of 9.6%. That same report is estimating a relatively quiet hurricane season based on the National Oceanic and Atmospheric Administration (NOAA) season predictions (with resulting reduced negative impacts on energy production):

 NOAA predicts a relatively quiet hurricane season this year with near- to below-normal tropical weather activity in the Atlantic basin... Despite the potential for significant outages if a strong hurricane were to pass through the GOM [Gulf of Mexico] producing region, the overall effect on U.S. supply would not be as severe as in past years because the share of total U.S. natural gas production originating in the GOM has declined sharply.

In addition, the EIA predicts near normal winter weather for 2015: "In 2015, total natural gas consumption falls by 0.2 Bcf/d as a return to near-normal winter weather contributes to lower residential and commercial consumption." 

Predicting the future?
However, predicting long-term weather outcomes is as tenuous as predicting the brackets and winner of the NCAA college basketball championship. Investments that can weather the storms, or the calms as the EIA predicts, are worth considering. Natural gas storage is critical in any weather and life-saving in bad weather. The three storage companies suggested here have large capacities, volumes, and the pipeline interconnects to major markets to help meet that demand. All three have recent analyst upgrade/buy recommendations.

Plains All American Pipeline, L.P. (NYSE:PAA) owns and operates both the Pine Prairie Energy Center in Louisiana, and Blue Water Gas Storage in Michigan. The EIA 2014 storage facility report shows that Pine Prairie has the highest maximum daily delivery of all of their listed facilities. Pine Prairie has interconnects with nine interstate pipelines and serves virtually all of the eastern U.S. markets. Blue Water serves the Northeast and Midwest U.S markets with six pipeline interconnects.

Boardwalk Pipeline Partners, L.P. (NYSE:BWP) has the second largest maximum daily delivery of all of the EIA listed facilities  and owns the Petal Gas Storage facility in Mississippi. Petal interconnects to major gas pipelines and Boardwalk reports operational control of over 14,000 miles of pipeline.

Spectra Energy (NYSE:SE) owns the Egan Gas Storage facility in Louisiana. Egan has the fifth highest maximum daily delivery rate, serving various markets through 10 interconnects to major pipelines.

No one can predict the future, but companies with all-weather facilities can be a good bet regardless of the storms ahead.

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven’t heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America’s greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, “The IRS Is Daring You to Make This Investment Now!,” and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.


Jonathan Cook has no position in any stocks mentioned. The Motley Fool recommends Spectra Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers