Maine Gas Storage Lease is an agreement between the owners or operators of underground storage facilities and gas companies for the leasing of underground gas storage space within the state of Maine. It allows gas companies to store natural gas in these facilities, ensuring a steady and reliable supply of gas to meet the state's demands during peak usage periods. The main purpose of a Maine Gas Storage Lease is to provide a storage solution for gas companies that enables them to balance supply and demand. Gas companies can store excess gas during periods of lower demand, such as the warmer months, and withdraw it when demand is high, for example, during cold winter months or unexpected supply disruptions. The Maine Gas Storage Lease outlines the terms and conditions under which the gas storage facilities will be accessed, leased, and operated. These agreements typically cover aspects such as the duration of the lease, storage capacity allocated to the gas company, pricing terms, maintenance responsibilities, operational procedures, and environmental compliance. There are several types of Maine Gas Storage Lease arrangements available: 1. Firm Storage Lease: Under this type of lease, the gas company receives a guaranteed storage capacity for a specified period. The storage space is reserved exclusively for the lessee's use, ensuring a continuous and uninterrupted supply. 2. Interruptible Storage Lease: This lease offers gas companies non-guaranteed storage space at a lower rate. The facility operator has the right to interrupt or discontinue the storage service during periods of high demand or emergencies. 3. Seasonal Storage Lease: This lease allows gas companies to lease storage space for specific periods or seasons of the year when demand is particularly high or when they anticipate gas supply fluctuations. It provides flexibility to adjust the leased storage capacity as per seasonal requirements. 4. Hub Services Storage Lease: This type of lease provides gas companies with access to multiple interconnected storage facilities, allowing them to balance their gas supply across various locations. It offers enhanced operational flexibility and reliability for serving customers in different regions. The Maine Gas Storage Lease plays a crucial role in ensuring energy security and reliability by providing gas companies with a strategic method to manage their gas supply and support uninterrupted delivery to consumers. These agreements are governed by the laws and regulations of the state of Maine and are tailored to meet the specific needs of the gas company and the storage facility operator.
Maine Gas Storage Lease
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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.
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.
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.
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).
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 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.