Choose to be Creative – 6 Ideas for Consolidating the Confirmations Process in Natural Gas

FERC Order 809 occupies a large share of the time I allot to “what’s next” thinking.  There are so many opportunities inside what the FERC has assigned the industry in Order 809.

Let’s put our thinking caps on and get creative!

Confirmations

In Order 809 the FERC asked us to “. . . explore the potential for faster, computerized scheduling when shippers and confirming parties all submit electronic nominations and confirmations, including a streamlined confirmation process if necessary.”  The discussion here is the reference to submittal of electronic confirmations.  There are some pipelines in the gas industry today that have made great progress in implementation of electronic confirmations through EDI. But there are others who have not done any electronic confirmations and, generally, electronic confirmations are executed between interstate pipelines.

So what can we do?

1 – Is there an opportunity for XML to become the standard for confirmations so that it is less expensive to implement and more web-enabled?

2 – Do we need confirmation-clearing companies such as those used in trading?

3 – Do these streamlined confirmations need to cover the entire natural gas supply chain or do they only need to apply to deliveries to electric generation and their suppliers? Do electric generation suppliers only need to confirm upstream to the nearest point of on-demand supply, such as storage, park-and-loan, etc.?

4 – Is there a new on-demand service offering that would provide a service to supplant streamlined confirmations?

5 – Are there new confirmation services that can be offered to expedite the process while still providing reliable delivery?

6 – Should electric generators be allowed to submit hourly nominations and, consequently, incur hourly imbalances to minimize the number of intraday confirmations?

On September 17th the FERC issued an Order on Rehearing (Docket No. RM14-2-001) where they stated “…the Commission requests that the natural gas and electric industries, through NAESB, begin considering the development of standards related to faster, computerized scheduling and file such standards or a report on the development of such standards with the Commission by October 17, 2016.” This gives us a deadline to work toward.  Deadlines are good.  It also give us a lot of time to get the job done.  So let’s start thinking about this assignment.

Where do you Network? Is your net working for you?

It is important to network in natural gas.  Is your net working?

Why is it important? Three reasons immediately come to mind.

1 – To learn more about the job that you do. If you are a scheduler, accountant, contract analyst – it doesn’t matter.  Other people in your same position in other companies have something you can learn from.  They are dealing with the same counterparties. They are dealing with the same challenges.  Share the knowledge, share the problems and come up with smarter solutions!

2 – To learn more about the business you’re in.  There is much more to the business than your job.  Your job is a vertical position in the company – a slice of the business process.  Networking gives you the opportunity to learn what other positions do and how the holistic business process operates.  The more you know about the entire business process, the more effective you can be in your job.

3 – To become a part of the solution.  Things are always changing in the energy industry because of technology, market shifts, government regulations and IT solutions.  If you network, you can see changes that are coming and prepare for them rather than react to them.  This is when you become a part of the solution.

In Natural Gas, the FERC has asked NAESB to look at the options for scheduling gas on a more continuous basis.  NAESB will pick up that subject in early 2016 to explore the solutions.  By networking, we can get ahead of the curve, find out what each other is thinking in regard to possibilities in the business process and possibilities with technology.  We can know what the possible solutions are before we enter into those negotiations and we can know what the pain points are that we need to avoid.

Where do you network?  This week, I’ve been at LDC Forums – MidContinent in Chicago with OpenLink.  OpenLink brought me to the Forums to promote my new book – Contents Under Pressure. These folks are great at networking!  They set aside time specifically for networking and create networking venues. They hold multiple LDC Forums throughout the year in different locations in North America.  Where are the places that you network?  Share them so that they can grow and become more effective.  I’d love to get your input.

Fun with FERC Order 809 continued – or – “Continuous and Contiguous Scheduling”

We have an interesting challenge ahead of us. One of the take-aways of FERC Order 809 is the requirement for the North American Energy Standards Board (NAESB) to look at and consider ways to make natural gas pipeline scheduling faster and closer to real time. Electric generators have made it clear that they need more flexibility with scheduling as they move more electric generation to a natural gas dependency.

This is not a new idea. It has been tossed about more than once before Order 809. One of the very first principles written by NAESB in GISB Version 1.0 in the mid-1990’s was Principle 1.1.2 which states “There should be a standard for the nominations and confirmations process. Agreement notwithstanding, it is recognized that this is an interim step to continuous and contiguous scheduling.”    (Copyright North American Energy Standards Board, NAESB Version 3.0 published 2014)

NAESB quickly, in Version 1.0, created the standardized Nominations and Confirmations processes including a few touches on the scheduling process in that mix.  A great step was made when NAESB added the Intraday Cycles and now, via NAESB 3.0 and Order 809, there is an additional Intraday Cycle giving shippers a total of 5 nomination opportunities in the day-ahead and day-of scheduling process.

And that’s not all.

Some pipelines have already implemented multiple scheduling cycles throughout the day that are in addition to the NAESB cycles.  A few pipelines have gone so far as to create hourly cycles. But without a consistent solution, the ‘contiguous’ side of scheduling becomes difficult.

Not all pipelines have gone beyond the standard cycles. So, what do we do?  Are we ready for that ‘Continuous and Contiguous’ process that we considered so long ago?

I believe we are. I believe that it will require some serious paradigm-shift-type thinking to make it happen.

The actual excerpt from Order 809 is below, from the Commission request, and as noted in paragraph 107:

However, the use of computerized scheduling would appear to provide an opportunity for faster and more frequent scheduling of intraday nominations for those shippers and their confirming parties willing to commit to scheduling electronically. We request that gas and electric industries, through NAESB, explore the potential for faster, computerized scheduling when shippers and confirming parties all submit electronic nominations and confirmations, including a streamlined confirmation process if necessary. Providing such an option would enable those entities that need greater scheduling flexibility to have their requests processed expeditiously.

What are the opportunities here?

  • If we converted the nomination and confirmation processes to XML based transactions and generated the confirmation request straight from the requested nomination then we could have more immediate communication and create that contiguous chain.
  • If we kept our traditional ‘Timely’ Scheduling cycle, possibly even the ‘Evening’ cycle and then, after that, opened the process to a first come, first serve processing with a quick turnaround, then we could eliminate the interim cycles and provide that continuous service.
  • We would still need a no-bump cutoff where IT shippers could count on their gas to flow. Possibly at the time of the current cutoff already agreed to in NAESB.

These ideas require major technology investments. These are just a few ideas. I have others, but I’d like to hear from other people first.

The NAESB Board has voted to make this aspect of Order 809 a primary topic in 2016.  As an industry, we need problem solvers to step up and create straw man solutions before those NAESB meetings begin.  Let’s get the discussion started.

Gas Happens

Gas Happens

I’ve wanted to say this for a long time.  For those of you who know me, you’ve probably heard me say this more than once.  We need to change the way we think of Natural Gas.

Natural Gas is a Renewable Resource.

Natural Gas (Methane, CH4) is a byproduct of organic decomposition. Period. We have been taught that natural gas is a fossil fuel. That implies that it is coming from those decomposed dinosaurs that have been marinating in our soil for bazillions of years. And it is true – we have gotten a lot of gas from that source, but there are lots of other sources.

Today, we are tapping gas off of landfills, we are running wastewater treatment facilities off of the gas that the facility generates, and we are running farms off of cow poo.  Methane seems to be everywhere!  This is not new news, but we need to associate the fossil fuel with the bio fuel and group these into one awesome renewable resource.

Did you know that in India small farms have their own bio dome to put their animal and plant waste into and it generates enough methane to meet the needs of the home? It’s fascinating, though I’m sure my homeowner’s association would have fits if I tried putting one in my urban yard!  I’ve listed references on some of the India articles at the end of the document.

When I was a little girl, we lived in Florida on the edge of the swamp.  Take a step into a good mucky bit of swamp water and what do you get – nice big bubbles of swamp gas – aka Methane!    I don’t think we are close to replacing our drilling mindset but I do think that we should begin to look at where all of this gas comes from and how use it efficiently rather than letting so much of it dissipate into the atmosphere.

The forecasts for how many years of natural gas have been interesting to watch.  20 years ago, it was believed we had 175 TCF (Trillion Cubic Feet) of reserves in the ground.  Today that number is close to 350 TCF. I’ve heard that the reason that our forecasted reserves has grown so much is because of a) new discoveries and b) new technology that lets us produce more gas. But I think there is one more reason that our reserves are increasing and that is because our earth is still producing more Methane.

We need to harvest biogas as Natural Gas and create a mechanism to feed excess biogas back into the mainstream of gas distribution. Methane comes from our cows, from our decomposing pumpkins, from our wastewater treatment facilities, from our worm beds.  All of these sources of biogas are just as valuable as our dinosaurs, and I believe that we can find cheaper and easier ways to get the Methane we need through renewables that are here on the surface.

We admit that we are greedy consumers.  Can gas field production keep up with our new desires to use clean Natural Gas as the solution for all of our environmental woes?  I don’t think that is the right approach.  The right approach is to explore the additional sources of natural gas and create ways to inject those sources into the mainstream of consumption.

References:
Tal Lee Anderman, Of Cow Dung, Cook Stoves and Sustainability in Practice, http://blogs.ei.columbia.edu/2013/05/15/of-cow-dung-cook-stoves-and-sustainability-in-practice/
R N Bhaskar, Policy Watch: Nov 10, 2014, http://www.dnaindia.com/analysis/column-policy-watch-oh-shit-a-rs-150617-crore-business-2033671
Jo Lawbuary, HES, Biogas Technology in India: More than Gandhi's Dream?; https://www.ganesha.co.uk/Articles/Biogas%20Technology%20in%20India.htm

Source: U.S. Energy Information Administration, U.S. Crude Oil and Natural Gas Proved Reserves

Fun with FERC Order 809 or “How to Put Two Shippers on One Contract” . . .

The Federal Energy Regulatory Commission (FERC) recently issued Order 809 for interstate pipelines. One of the components of the order was for pipelines to support the ability for a Firm transportation contract to have multiple shippers.  The good news is that the pipeline only has to support this ability IF shippers request the service.  The bad news is that the pipeline only has 60 days to implement the service once it is asked for.  This means that the pipeline has to be prepared to offer the service because I don’t know of many pipelines who can implement such a change in just 60 days.

So why on earth would you need two shippers in a contract?  I can imagine several scenarios where this could be advantageous.  For instance, if a shipper needs reliable firm service on an as-needed basis and can find another shipper, such as a marketer, to utilize the un-used firm.  The would give the first shipper the reliability that they need and give them an out for when that service is not needed without having to enter the Capacity Release race on a regular basis.  Another example may be where a shipper needs seasonal firm capacity but the pipeline doesn’t offer a program that meets their specific needs. In this case, the shipper could match up with another shipper that can handle the off-peak quantities and share the transportation obligation. There may even be credit advantages, though I may be stretching my imagination too far on that one.

So what does the FERC have to say about this?  In Order 809, there were very few specifics.  There were references to a number of pipelines already offering this capability and, via that reference, the FERC decided that the service requirement only applies to Firm transportation and implied that there would be an agent involved to manage the contractual relationship and pipeline interaction.

A pipeline could implement such that each shipper had nomination rights.  The pipeline could implement such that the agent is mandatory and the agent manages the different shippers.  In the example pipelines that I researched, it appeared that there was always an agent relationship and the agent was responsible for managing the transactions for the shippers. These pipelines implemented this service prior to Order 809.

Again, the FERC was silent on nominations, billing, quantity rights, and location rights in Order 809.  It did say that the financial responsibility was with both parties.  So, like Capacity Release, if the one party fails to perform, the second party is financially responsible.

If the pipeline implements this in the easiest way, with an agent, then the transaction datasets would be unaffected.  The only impact will be to be able to add two shippers and their separate terms onto one contract and to be able to post those separate terms in the Transactional Reporting requirements.

We have 75 days from the FERC issuance of Order 809 and then 60 days after a shipper issues a request for such a service.  The worst case scenario is that a pipeline would have to implement this on June 14th, 2015 – 75 days after Order 809 was issued. The best case is any 60 day period after June 14th.

Is this something where shippers can find value? Does it help producer services, electric generators or agents?  It will be interesting to see the filings for this requirement, in response to Order 809, and to see how many shippers utilize this offering.

Welcome

It seems like this first posting should explain why I’m writing a blog for Contents Under Pressure. I have worked in the natural gas industry for more than 30 years.  Out of that fabulous experience, I have just completed a book, titled “Contents Under Pressure – The Complete Guide to Natural Gas Transportation”. This is the book you have been waiting for and it will be available in early September.

But that’s not all.

In my work in the industry I get a lot of questions. Sometimes they make me dig deep into history and research to find the answer. Sometimes I know the answer off the top of my head.  And the fun questions make me look at the way I think about the business in a whole new way.

This blog is for those fun questions.

Here we will cover things that make you think (I hope) about the way you look at the business. It will cover super detailed explanations of really nit-picky issues that come up again and again. And we’ll will talk about what is going on in the industry that affects our business – market happenings, FERC rulings, and such that could impact or have already impacted our business.

I hope you enjoy it.  I love working in the natural gas industry because it is constantly changing through government rulings, market shifts and technology advances.  If you like change, natural gas is a great place to work.

Sign up to receive emails as they are posted.  Follow me! Pre-Order my book so that you’ll be ‘in the know’.  Provide comments and questions so that this can be as beneficial to you and your gas industry career as you need it to be.

Sylvia