Oregon Gas Storage Lease refers to a legal agreement between a gas storage facility owner and a lessee who wishes to use the facility to store natural gas or other forms of gas. This lease allows the lessee to access and utilize the storage capacity of the facility, subject to specific terms and conditions outlined in the agreement. This lease serves as a crucial framework for the gas storage industry in Oregon, enabling efficient and secure storage operations while ensuring compliance with relevant regulations and standards. It helps establish rights, obligations, and responsibilities of both parties involved and defines the terms of storage, withdrawal, maintenance, and fees associated with using the facility. The primary aim of an Oregon Gas Storage Lease is to facilitate the safe, reliable, and economical storage of gas, providing lessees with the flexibility to manage their gas inventories effectively. The demand for gas storage has been growing in recent years to cater to fluctuations in gas demand, pricing, or supply interruptions, and such leases play a vital role in meeting those needs. Different types of Oregon Gas Storage Leases include: 1. Capacity Lease: This type of lease grants the lessee the right to utilize and reserve specific storage capacity within the facility for an agreed-upon period. The lessee pays a fee based on the capacity reserved, irrespective of the actual gas volume stored. 2. Injection/Withdrawal Rights Lease: In this case, the lessee acquires the rights to inject and withdraw gas from the storage facility. These leases are often associated with seasonal variations in gas demand, allowing the lessee to inject gas during periods of relatively low demand and withdraw it when demand peaks. 3. Firm Storage Lease: This lease provides the lessee with a guaranteed storage capacity, ensuring priority access to the facility even during peak demand periods. The lessee usually pays a higher fee for the added security and reliability associated with firm storage leases. 4. Interruptible Storage Lease: This type of lease offers a lower-cost option, allowing the lessee to access storage capacity on a non-guaranteed basis. The storage operator can interrupt or curtail the lessee's access during high demand periods or emergencies. 5. Hub services Lease: Some gas storage facilities in Oregon may offer additional services beyond storage, such as gas balancing, wheeling, or injections directly into the pipeline grid. A hub services lease encompasses these additional services alongside the primary storage agreement. Oregon Gas Storage Leases contribute significantly to the stability and efficiency of Oregon's gas market, facilitating seamless gas storage and retrieval operations for various entities involved in the gas supply chain, including gas producers, distributors, and end-users. The specifics of these leases may vary depending on the facility, the market conditions, and the requirements of the lessees.
Oregon Gas Storage Lease
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FAQ
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.
An assignment of oil and gas lease is a contractual agreement between a landowner and an oil or gas company in which the company gains the right to explore for, develop, and produce oil and gas from the property.
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.
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 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 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.