OREANDA-NEWS. California's response to a gas storage leak could disrupt state refineries during the peak summer demand season.

State-mandated inventory levels in the wake of a massive leak from southern California's largest single natural gas reservoir, Aliso Canyon, "will not preserve the usual levels of reliability for electric generators, gasoline refineries and other non-core customers," utilities warned last week.

Crews in February plugged a four-month leak at the Aliso Canyon storage facility that released 86 Bcf (2.4bn m?). The damaged well forced operator SoCal Gas to drill a relief well, relocate thousands of residents and drain inventories down to 17pc of working capacity.

Regulators have limited Aliso Canyon's usable storage and legislators are considering an outright moratorium on using the facility ahead of the summer electric demand season. An interruption in natural gas supply could complicate what market participants had expected to be a relatively calm summer.

"Disruptions in natural gas supply can and has lead to reductions in fuel production," US independent refiner Tesoro, which operates California's largest capacity by volume, told Argus.

Refiners depend on natural gas to supply both electricity and to make hydrogen, an essential feedstock for the low-sulfur fuels especially prized in California's tough regulatory market. Sudden shutdowns from power interruptions can damage equipment, endangering workers and leaving refining operations offline for weeks of repair.

ExxonMobil in February lost a lawsuit seeking $32mn in damages from SoCal Edison over a series of power outages between 2010 and 2013 at its Torrance refinery, which PBF Energy plans to acquire during the second quarter. The ExxonMobil complaint referenced numerous other outages, including a 1996 event that ExxonMobil said caused $20mn in damage and lost production.

"Refinery unit shutdowns cause substantial damage to ExxonMobil's refinery equipment and shut down production that would result in a substantial loss of profits from the refinery's ability to operate at its usual output," ExxonMobil said in the complaint.

Such outages exacerbate an already narrow fuel supply balance in California. Comparatively few refiners outside of the state produce Carbob, California's boutique gasoline blendstock. US Gulf coast refiners have limited access to the market, and overseas imports may take weeks to arrive.

Los Angeles-area refiners including Chevron, ExxonMobil and Tesoro operate cogeneration plants capable of generating at least a portion of their refinery's electricity demand. But natural gas provides refiners with more than just fuel for electricity — they also need natural gas to produce hydrogen, an essential component for removing sulfur and other impurities from fuels in the tightest regulatory environment in the country. Supplies for hydrocrackers and hydrotreaters help produce Carbob, the state's unique gasoline blendstock, as well as jet fuel and ultra-low sulfur distillates.

Utilities managing and drawing from Aliso Canyon warned that no other resource could respond as swiftly to sudden spikes in gas demand seen last June. The commission's own analysis of the canyon came to the same conclusion, noting in part that "it is not possible to import gas by pipeline from outside the Los Angeles basin to the electric plants in time to meet the electricity system's need for quick ramping."

SoCal gas has sought changes to begin 1 May to state rules in place following the leak.

Hydrogen supply companies and southern California refiners declined to speculate on how Aliso Canyon storage conditions would affect operations this summer but were generally not alarmed. Regulators should carefully weigh management of the accident with state energy demand, Tesoro said.

"Tesoro believes that the focus should be on ensuring a reliable supply of natural gas to Southern California that is critical to the manufacture of transport fuels for customers and businesses," the company told Argus.