PIPELINES SEEK NEW PRODUCTION AGGREGATION METHODS

Introduction:

pipelines seek new production aggregation methods deals with the impact of growing natural gas energy demands and the manner in which gas supply transmission and storage issues will have to be addressed. Pipelines seek new production aggregation methods deals with coping with supply issues of sudden surging demands, and as such is relevant to the course of study.

Summary:

            The natural gas pipelines are being expanded with aggression in both transmission and storage capabilities to meet not only the expected surge in demand for natural gas but also to address the fundamental shift in supply growth within the United States of America. However new strategies to aggregate production capacity are becoming more of a reality.

An example of this lies in the growing Rocky Mountains production and the import of LNG, which are likely to be the mainline supplies in the near future, but there are not enough pipelines to make this available to the market.

Augmentation of pipelines thus becomes a priority, but it is not enough to move from one bottleneck to another but to have pipeline projects that alleviate the issue of bottlenecks on the whole. The massive pipeline projects mean injections of investment anywhere between $500 million to $3 billion. Therefore the first issue comes to the fore in that for such massive investments the developers of pipelines will require firm long-term contracts.

The issues from the perspective of the supply developers need also to be taken into consideration, as they are also investing huge amounts of money in the development of the supply basins. Shippers are hesitant to commit to any large pipeline development in the early stages, especially in open season. Thus it is a few shippers in the form of “foundation shippers that share the early risks of the huge pipeline development projects and hold as a major portion of its capacity.

It is the FERC that lays down the policy for the pipeline development and shipping of gas. The current FERC policies encourage the development of smaller conventional projects, which will not address the issues of removal of bottlenecks in gas supply. The FERC needs to be more flexible, without giving up its control on undue discrimination, in its policies to address the issues of the “foundation shippers” and pipeline developers of the required huge pipeline projects.

The flexibility required in the policies include assuring “foundation shippers” of a minimum capacity in the pipelines, allowing the “foundation shippers” to consider possible expansion in the projects at a later stage, differentiation of shippers based on commitment to the project, allowing foundation shippers to reduce their commitments to the pipeline once a minimum subscription level is attained, and allowing continued flexible negotiated rate authority to the pipeline developers.

A possible means to this and bringing on small producers at a later stage is in the “aggregator proposal”. In this proposal, small-time producers, who do not commit to pipeline development projects, due to other financial priorities, are assisted to aggregate royalty-in-kind gas by pooling of their use or commitment. It would not be necessary for the aggregator to buy the gas of the small producers, or hold the title of it; instead, the aggregator would post the list of participating small producers electronically on its bulletin.

Conclusion:

Pipelines seek new production aggregation methods provides the understanding that innovative approaches in collaboration need to be a part of policies in the creation of huge supply potential for meeting demands, particularly so, when the scale of investment on the supply side is immense and raises issues of difficulties to meet the investment demands for the creation of supply-side adequacies.

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