National Fuel acquires storage field, capacity

National Fuel Gas will assume full ownership of an underground natural gas storage field in New York and lease 39mn cf/d (1mn m³/d) of capacity on Tennessee Gas pipeline in the US northeast, according to a decision from the US Federal Energy Regulatory Commission (FERC).

TGP in filings with FERC said it no longer needs the storage assets to satisfy its existing storage service commitments, and determined it would be more cost effective to use third party storage to support those commitments. TGP at the start of this month entered into a firm storage contract for nearly 4 Bcf of capacity with Kinder Morgan.

But National Fuel still needs the storage field and capacity on TGP's 200 Line in order to continue providing storage services to its customers. TGP agreed to sell its 50pc ownership interest in the field to National Fuel for $1. National Fuel will pay TGP $97,333/mo in lease reservation charges for the pipeline capacity.

Now that FERC has approved the companies' agreement, National Fuel will acquire full ownership interest in the Colden Storage natural gas storage field in Erie county, New York, including nearly 8.7 Bcf of base gas, or gas that must be present to maintain the storage field's pressure. That field has a working gas capacity, or the volume of gas that can be injected and withdrawn from storage, of 7.6 Bcf, and includes 168 active wells and about 60 miles (97km) of gathering and well lines.

The pipeline capacity National Fuel will lease from TGP flows from north to south on the 200 Line, originating in East Aurora, New York, and ending at Mercer, Pennsylvania. TGP will continue to provide compression and other services to National Fuel using existing facilities near TGP's compressor station 229 near Hamburg, New York. The initial capacity lease term is 15 years.

National Fuel expects to receive incremental revenue of $6.3mn during the first two years of the agreement because TGP will purchase storage service from National Fuel on an interim basis.