Arizona Gas Storage Lease refers to the contractual agreement between a gas storage operator and a lessee for the utilization of underground storage facilities within the state of Arizona. This lease allows the lessee to inject natural gas into underground storage formations during periods of low demand and withdraw it during periods of high demand, ensuring a steady and reliable supply of natural gas for consumers. Keywords: Arizona, gas storage lease, underground storage facilities, natural gas, lessee, inject, withdraw, demand, supply, consumers. There are two types of Arizona Gas Storage Lease: 1. Infield Gas Storage Lease: This type of lease involves the use of existing gas fields, typically depleted oil or gas reservoirs, for the storage of natural gas. These fields are retrofitted with necessary infrastructure, such as injection and withdrawal wells, compressors, and monitoring systems, to facilitate safe and efficient storage operations. 2. Aquifer Gas Storage Lease: This type of lease utilizes underground aquifers, which are porous rock formations capable of storing significant volumes of natural gas. The lease allows for the injection of gas into the aquifer's pore spaces, following proper geological and engineering assessments to ensure the suitability of the storage site. Both types of Arizona Gas Storage Lease play a crucial role in enhancing the reliability and flexibility of natural gas supply by providing an efficient mechanism to balance the demand and supply fluctuations throughout the year. These leases are subject to regulations and oversight from state authorities to ensure environmental protection, operational safety, and fair terms for all parties involved. By securing an Arizona Gas Storage Lease, lessees can optimize their natural gas supply strategies, improve market stability, and meet the energy needs of industries, businesses, and residential consumers, especially during peak demand periods or in emergency situations. Overall, the Arizona Gas Storage Lease represents a vital tool in managing and maintaining a secure and efficient natural gas supply system, enabling the state to meet energy demands reliably and sustainably.
Arizona Gas Storage Lease
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FAQ
Depleted natural gas or oil fields function as gas storage reservoirs in California. Natural gas is injected into the storage reservoirs through gas storage wells and stored until withdrawn for use. There are 12 underground natural gas storage fields in the state.
The intrinsic valuation methodology derives value from time spreads in the price of gas. Months for which the forward price is relatively low are chosen from the current forward curve for entering into a long position and injecting gas into the facility.
The storage value is a portfolio of complex spread options. The value of the spread option is a function of the value of the forward contracts plus the risk-neutral expectation of the future forward value spread. The factor driving the spread option values (storage value) is the variability of the forward curve.
The market part of the storage value has two components: intrinsic and extrinsic value. While intrinsic value is a static view of the forward curve, extrinsic value is a complex function of the seasonal spread, spot price volatility, forward spread volatility, asset flexibility and individual optimisation strategies.
The basic approach to storage valuation is to calculate the optimal position given the available forward curve and take this position on the forward market. This intrinsic value approach captures the predictable seasonal pattern in gas prices and secures a sure profit.
Deliverability is most often expressed as a measure of the amount of gas that can be delivered (withdrawn) from a storage facility on a daily basis. Also referred to as the deliverability rate, withdrawal rate, or withdrawal capacity, deliverability is usually expressed in terms of million cubic feet per day (MMcf/d).