After a significant El Niño episode in the winter of 1997-98 and two La Niña winters since then, the natural gas industry is stabilizing, says a consulting geologist in the Denver area.
Michael S. Wilson, an AAPG member who has published several papers and made presentations on the El Niño weather patterns in regard to the natural gas industry, declined to speculate on what the weather holds for the gas industry next year. He said he won't make a prediction until next fall at the earliest.
But with no new El Niño in sight, this winter should remain about the same in terms of temperature as it has so far -- and demand for natural gas will stay low, he said.
Wilson, who currently is doing contract work for the U.S. Geological Survey, presented a talk on his findings about El Niño and La Niña in January to the Colorado Oil and Gas Accountants.
He first became interested in El Niño events during 1994, when he noticed that the 1994-95 El Niño coincided with a mild winter in the central United States -- and collapsing natural gas prices.
When he discovered that a similar episode of gas price collapse and corporate restructuring occurred following the 1991-92 El Niño, he collected climatology data from the National Oceanic and Atmospheric Administration and the National Weather Service and integrated this data with gas company earnings.
His data showed that El Niño events generally result in mild winters in the Chicago-Great Lakes industrial region, reducing demand for heating fuels, which affects the Henry Hub gas price.
It also affects gas companies with high exposure to spot prices.
Of the different weather formations, he said, El Niños pose the biggest problem for the gas industry because of the warm winters they bring.
"We have three phases," he said -- El Niño, then the neutral phase and then La Niña -- "and these weather formations oscillate back and forth.
"They're not regular like the tides," he said. "And the combinations are rather strange over the decades. It seems to change every two to three years from what I've learned correlating it to stock charts and heating degree days and gas sector earnings."
Neutral phases, he said, "turn out to be the coldest winters, when the most gas is consumed for heating. Companies tend to start hiring again."
La Niñas, however, "are mediocre." These events rarely follow immediately after El Niños; usually, one or more neutral phase winters follow a strong El Niño.
Historically, the period between one El Niño winter and another is three to five years. The longest gap recorded was 10 years.
"We had a giant El Niño in 1997-98 and that faded out in the summer 1998. Last winter, we had a mild La Niña where the sea surface temperatures along the Equator were moderately colder than normal," he said.
Plenty of residual heat was left over from the previous year and many storm patterns resembled El Niño.
The result: The Total number of heating degree count days was low last winter and gas prices remained in the low $2 range.
"The OPEC cartel was still flooding the market with oil so heating fuel costs hit bottom in January and February last year," he said. "It was about as bad as anything could possibly be."
Because many gas companies were slow to react to the weather pattern, he noted, layoffs resulted in the gas business.
"In the summer of 1999, it looked as if the market might come back to normal or neutral conditions," he said. "But it didn't stay there."
Instead, another La Niña event began in August and continued through October, and "sea surface temperatures cooled off below normal again through this winter."
Weather charts "are all showing a big blue cold water swath across the Equator," he pointed out.
"During La Niñas, the Pacific jet stream wind positions shift northward and come in over Seattle and southern Alaska and Vancouver," he said. "It blocks cold air."
As the 1998-99 La Niña event developed, the Pacific jet stream moved northward and strengthened, blowing eastward along the Canadian border during most of the fall and winter.
Arctic cold fronts were blocked from reaching the central United States. During December, temperatures were about five degrees Fahrenheit above normal in most of the northern and eastern states.
"Both oil and natural gas prices continued to slump," he said. "... The Southwest and Southeast were abnormally warm."
In fact, during February 1999, all of the country east of the Rocky Mountains was one to five degrees Fahrenheit above normal, he said.
Historical studies of La Niña performed by COAP have shown that cold and wet conditions usually exist in the Pacific Northwest and then a warm anomaly occurs across the south-central United States, he said.
"These historical predictions worked fairly well last winter and this year," Wilson said.
"Once every week to 10 days, there's a big wobble in the jet stream, a surge in the force or a big bend, and it brings a storm front in," he said. "These storms sweep across the Northern Tier and pull in a lot of rain from the Gulf.
"The cold fronts are just not getting very far down because of this jet stream blocking."
Although December weather charts have yet to be published, he noted that the last month of 1999 saw some cold weather in the Chicago and Great Lakes area but not enough cold to raise gas prices, which have remained in the $2.40 price range.
Overall, this La Niña season "seems to be following the pattern pretty well," Wilson said.
Wilson noted that National Oceanic and Atmospheric Administration tracks the Pacific Ocean for the start of the next El Niño. But so far, there is no sign of it.