Interview creation

I use research reports to create engaging interviews that are recorded with professional journalists or communications professionals.

I received a fifty page research report on gas storage and summarized it into a ten minute interview.

The interview was recorded and e-mailed to the fifteen thousand institutional clients of the investment bank.

Interview Marco Boeri (2007): Gas Storage

Why is gas storage so important?

With global warming gas storage has been above historical norms in the first part of January and that’s put pressure on gas prices. Winter is ending. We’re coming up to the shoulder season and it looks like there’s more gas in storage than anybody needs. Why is gas storage so important?

Actually gas demand more variable than you would imagine…. Countries where gas is widely used for heating purposes present high seasonal fluctuations. But within the same season, gas demand can vary from day to day, depending on temperatures, and within different hours of the day, depending on power generation needs. As a matter of fact, gas fired generation power plants are supplying an increasing share of the electricity that we consume. As these plants are very flexible and can be turned on and off quickly, gas demand and gas prices on spot markets become increasingly volatile.

Now the most effective way to match a volatile demand with a stable supply flow – as it is often the case for the gas industry – is through gas storage facilities, in which gas can be injected in low demand periods and withdrawn in high demand periods.

Which are the main ways to store gas?

Three parts to the gas price: You’ve got to pump and clean the gas. Put the gas into a pipeline and store the gas? How do you store gas? Do they do it differently in the US versus in the rest of the world: LNG gas versus natural gas?

Natural gas is more difficult to transport and to store than oil products due to its molecular form. Gas storage requires specific underground facilities in order to keep gas trapped. There are three main types of underground gas storage facilities: depleted reservoirs, aquifers and salt caverns. Each of them has its advantages and drawbacks and there are lots of variables to take into account when considering an investment in a new underground storage facility. The bulk of the existing gas storage infrastructures have been built so far by national incumbent operators, in times of monopoly regimes when profitability was a secondary concern compared to the strategic and political rationale of the investment.

But with the ongoing liberalization process of energy markets, gas storage will become an independent business of the gas value chain and new investments will have to be profitable on a stand alone basis. This will require an optimization of marketing, technical and of course financing conditions and bankers can play an active role by helping clients to hedge the price of the gas necessary to operate the infrastructure – which can represent a substantial share of the overall investment – and of course by proposing Long Term Structured Financing solutions.

What are the prospects for the gas storage market?

Are we in a gas storage crisis? Is there enough storage capacity given demand for Europe and the rest of the world?

We are not in a gas storage crisis at the moment, but gas storage needs will continue to increase in Europe and North America, as a consequence of the growing imbalance between declining domestic production and increasing gas demand. Moreover, the development of spot gas markets in Europe should create new business opportunities for Underground Gas Storage (UGS), as it has been the case in North America where storage operations have become more and more instrumental to trading purposes.

We estimate that more than 60 bcm of additional working gas storage capacity will be necessary in Europe and North America by 2015, of which more than two thirds in Europe. According to our model, this could represent a consolidated CAPEX expenditure of almost 13 US$ billions over the next ten years.