The gas industry's newest commodity
- JOFREE Corp., Houston, TX (United States)
Deregulation of natural gas prices at the wellhead began with the Natural Gas Policy Act of 1978. Through various other regulatory moves, natural gas was made market-sensitive at the wellhead to ensure that supplies would be available. A critical element of market sensitivity at the wellhead is open access to transportation for buyers and sellers. To ensure that buyers and sellers could move gas from production to marketplace, new rules were put into effect in the interstate transportation business, the latest being the Federal Energy Regulatory Commission's (FERC's) Order 636. No longer were long-distance pipeline companies both transporters and merchants. Instead, the new [open quotes]open access[close quotes] rules made it possible for anyone - producer, buyer, or marketer - to get needed transportation. Still, the industry has retained the [open quotes]firm[close quotes] and [open quotes]interruptible[close quotes] categories of transportation. Firm transportation is guaranteed by the transporter, while interruptible means that the buyer can be displaced. This is where pipeline space as a commodity derives. Buying and selling already-committed firm transportation capacity has turned pipeline space into a vital commodity market. Selling firm transportation to buyers opened up a new market. When the purchased, firm pipeline space is not needed by the buyer at any price up to the original pipeline space is not needed by the original buyer, it can be resold by the buyer at any price up to the original pipeline tariff. The availability of this space and its sale make up the [open quotes]capacity brokering[close quotes] marker. The sale of this unneeded capacity by the original purchaser can make a big difference in the final pricing of the natural gas. The transformation of the transportation rate into a negotiable commodity adds to the marketing dynamics.
- OSTI ID:
- 7249571
- Journal Information:
- Fortnightly; (United States), Journal Name: Fortnightly; (United States) Vol. 132:7; ISSN FRTNE8
- Country of Publication:
- United States
- Language:
- English
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