Gas Supply Agreements Tariffs and Contracts Tom Chizinski Director Engineering- Southern CT Gas & Conn Natural Gas
[email protected]
The focus of this presentation will be gas supply agreements primarily between gas transmission companies (pipelines) and local distribution companies (LDC’s) along with gas quality aspects of supply agreements.
First let’s talk about the word “tariff”. Both us (LDC’s) and the Pipelines have tariffs, and we often talk about tariffs, but what does it mean? A tariff is either….or (2) a list of prices for such things as rail service, bus routes, and electrical usage (electrical tariff, etc.).[
So think of a gas tariff like a restaurant menu….the published list of prices, services, offerings, or rules that everyone can see…….there’s no secret deals a regulated gas pipeline or LDC can offer.
So, your LDC needs gas from some pipeline, like Algonquin, Tennessee, or Iroquois. Do you work out a gas supply agreement or contract??
Deregulation has forced the separation of church and state…..whoops, I mean supply and transportation. For the most part, Pipelines now only deal with transportation contracts…..they transport the gas you have bought from a supplier.
So you normally work out a “Transportation” Agreement or Contract with the Pipeline. The next slide shows the opening of a typical real transportation agreement between Tennessee and Conn Nat Gas. I’ve attached the whole Agreement at the end if you want to read it.
An important point to note is that the while the Agreement covers a number of specific items like the term of this agreement, it also refers to and “embeds” the Pipeline’s General Terms and Conditions of Transporter’s FERC Gas Tariff. Be familiar with Pipeline general tariff terms!
You can find Pipeline tariffs, and even your LDC tariff on each company’s website. Iroquoishttp://www.iroquois.com/informationalpos tings/reports/# Algonquin http://infopost.spectraenergy.com/info post/AGHome.asp?pipe=AG&mode=1 Tennessee http://webapps.elpaso.com/PortalUI/D efaultB.aspx?TSP=TGP
The bulk of the stuff on the Pipeline’s posted Tariff are business type issues….you know the stuff the exec’s and lawyers like to argue about….like what is the gas day, where do “official” pieces of correspondence get sent to, etc. For the engineers, we’re normally only interested in min delivery pressure and gas quality.
Will you find “min delivery pressure” in either most general tariff postings or specific agreements?? Probably not in the general, since pressures vary depending on the system model…..may not even find in a specific transportation agreement….a min pressure “guarantee” requires pipeline to operate whole system around it.
So one of the “engineering” things we can have fun with from tariffs is Gas Quality. This was a very hot topic some 7 +/- years ago when a lot of imported LNG was expected to arrive. What is Gas Quality?? What Kinds of Things Make Up Gas Quality???
What is natural gas?? A mixture of a bunch of different components.
To understand gas quality issues, need to look at common natural gas constituents: Typical Historical New England Natural Gas Composition
Methane C Ethane C2 Propane C3 Butane C4 Pentane C5 Hexanes C6+ Carbon Dioxide Nitrogen Oxygen (ppm)
Algonquin
Iroquois
94.50% 2.96% 0.60% 0.15% 0.04% 0.03%
95.40% 1.82% 0.11% 0.02% 0.01% 0.00%
0.09% 0.90% 0.44
0.60% 1.90% 0%
Water, hydrogen sulfide, other trace chemicals total 100% HHV (BTU/cu ft)
1024
1006
Wobbe
1345
1321
C2/C3/C4 are the LNG liquifaction issue the hydrocarbon constituents that affect heat value C5 & up are the liquid drop-put issue
the common "inerts" nitrogen is also an LNG liquifaction issue
“Where” Do We Normally Deal With These Issues On A Business Basis? –State Tariff or LDC Contract Level –Interstate Pipeline Tariff
“Where” Do We Deal With These Issues On a REAL Basis?? – Our gas systems – Our customers or end-users
CT DPUC Regulations
State or LDC Tariff Level
Gas Quality Section From an SCG Special Transport Contract
Section of “Old” AGT Tariff on Gas Quality
The two main gas quality issues or drivers: –Imported LNG Terminals and Shale Gas –Gas Processing & Removing Heavies
Let’s talk about the easy one first….gas processing and removing heavies. –What happens- upside down economics, or processing failures. –Impact- “heavies” (C5+ or C6 +) in the gas received and can drop out when gas gets cold or pressure cut. –This is a heavy hydrocarbon (C5 or C6+) issue, and only applies to domestic supplies….those heavies don’t exist in imported LNG.
How Do We Protect Against Problem Amounts of Heavy Liquid Drop-Out? “Bible” is white paper on Liquid Hydrocarbon Drop Out In Natural Gas Infrastructure, NGC+ Liquid Hydrocarbon Drop Out Task Group, 2/28/05.
The way to protect in a tariff is to either specify: –a chricondentherm hydrocarbon dewpoint temperature
Or –a C6+ gal per million (GPM) cu ft limit in the gas
I can’t even say chricondentherm hydrocarbon dew point!!!!
•The current preference of most New England & Northeast LDC’s is to have a 15 deg F maximum chricondentherm hydrocarbon dewpoint specified in Pipeline tariffs. •The 15 deg F means even with a pressure cut, as long as the gas temp is above 15 deg F, liquid heavies will not drop out. •Not all Pipeline tariffs have that now, some Pipelines don’t want to have that low a limit.
Proposed TETCO Tariff Section
Now the hard one for gas quality….imported LNG or Shale Gas!!!
Pipeline Tariffs Problem- the current interstate pipeline tariffs were put in place years ago for domestic gas supplies. Most Gulf domestic supplies were similar, so primary issue was only a minimum heating value, and not too much water or liquids. Most pipeline tariffs never anticipated “hot” LNG imports and need for “max” limits. Pipelines putting into place new tariffs for expected gas
“Old”/Prior Algonquin Gas Quality Tariff
Typical Historical New England Natural Gas Composition Compared to Possible LNG Imports
Methane C Ethane C2 Propane C3 Butane C4 Pentane C5 Hexanes C6+ Carbon Dioxide Nitrogen Oxygen (ppm)
Algonquin
Iroquois
Broadwater 1
Broadwater 2
Oman "stabilized"
94.50% 2.96% 0.60% 0.15% 0.04% 0.03%
95.40% 1.82% 0.11% 0.02% 0.01% 0.00%
89.50% 7.90% 0.91% 0% 0% 0%
91.50% 4.60% 1.40% 0% 0% 0%
85.70% 9.80% 2.10% 0.60% 0% 0%
0.09% 0.90% 0.44
0.60% 1.90% 0%
0% 1.70% 0%
0% 1.70% 0%
0% 1.90% 0%
0%
0%
Water, hydrogen sulfide, other trace chemicals total 100% HHV (BTU/cu ft)
1024
1006
1065
1065
1110
Wobbe
1345
1321
1366
1366
1393
Many of the raw LNG import streams are too hot….btu/cu ft values too high. So you “stab” them…stabilize them by injecting an inert to bring down the btu value. Inert can be nitrogen, air, or other inert.
How Do We Decide Which Imported LNG Compositions or Streams are OK For Our Systems??? Interchangeability
How Do We Decide if a Gas is Interchangeable?? We go to the interchangeability “Bible”, the White Paper on Natural Gas Interchangeability and Non-Combustion End Use, prepared by the NGC+ Interchangeability Work Group, 2/28/05
NGC+ Guidelines for Determining Interchangeability
Will all end uses be OK if you use the NGC+ guideline?
FERC Policy Statement
With the proposed AGT/IGT gas quality tariff changes, gist of what most N/E operators feel with imported LNG: •most combustion end uses will be ok •older large ngv engines will probably be a problem (knock) •large DLE gas turbine power plants may need control retorfits and auto-tuning •LNG liquefaction will be a problem as will other feedstock uses
Statoil Cove Point Agreement on Gas Quality
Apparent “key” to a settlement, or contested settlement: •As a long haul pipeline, Tetco can possibly have more control over blending…mix some good with some bad. •Rather than a straight receipt or delivery point spec, looks like settlement will identify some “monitoring” points where gas quality has to meet a given spec. •The monitoring points would be the protection point for LNG liquefaction facilities in the Penn and NY areas.
Gas Quality Tariff Attributes For Local NE Pipelines Attribute
Unit
Old AGT
Current AGT
Iroquois
Tennesee
Heating Value Min Heating Value max
BTU BTU
960 not stated
967 1110
967 1110
967 1110
Wobbe Number
BTU
not stated
1314-1400 CDHP