Risk of Infrastructure Failure in the Natural Gas Industry

1
Risk of Infrastructure Failure in the Natural Gas
Industry
Society for Risk AnalysisAnnual MeetingDecember
5, 2000

• Aileen Alex
• (aileen.alex_at_eia.doe.gov)
• Energy Information Administration
• U.S. Department of Energy

2
Scope of Presentation

• EIAs mission
• Importance of natural gas infrastructure
• Infrastructure failure
• Remediation

3
Mission Statement

• The Energy Information Administration (EIA),
  created by Congress in 1977, is a statistical
  agency of the U.S. Department of Energy. We
  provide policy-independent data, forecasts, and
  analyses to promote sound policy making,
  efficient markets, and public understanding
  regarding energy and its interaction with the
  economy and the environment.

4
EIA Web and Natural Gas Products Links
5
Natural Gas Supply and Disposition, 1998
6
Market Trends

• Consumption - 2 growth from 99 level (for 1st 9
  months of 2000)
• Storage - stocks are down about 10 from 5 year
  average
• Supply - production and import levels similar to
  last year
• Commodity Prices - high and volatile spot price,
  6 per mcf wellhead price is over 50 higher than
  a year ago

7
Outlook for the Short-Term

• Current storage levels are not extraordinarily
  low but may prove to be tight if gas demand
  surges
• Domestic and Canadian gas developments should
  address market tightness (timing is an issue)
• With normal weather, consumption will be higher
  than last winter
• Expanded import capacity into Northeast Midwest
  adds to supplies (Sable Island, Alliance
  Pipeline)
• Barring extreme weather, pipeline capacity will
  be adequate
• Prices will be higher than last winter

8
Major Natural Gas Producing Basins and Associated
Transportation Corridors
9
Estimated 2000 Interregional Pipeline Capacity
and 1999 Average Flows
10
Infrastructure Failure - Data

• Variables include the start date, end date,
  location, type, and size of the interruption
• Source is a patchwork of items from the trade
  press, company web sites, contacts from our data
  collection efforts, and DOEs Emergency
  Operations Center

11
Infrastructure Failure - Types and Frequency

• Small events that have no impact on supplies
• Events that require supply/demand responses
• Events that result in a shortfall despite
  supply/demand responses

12
El Paso Disruption August 19, 2000
13
The Lower 48 Pipeline System in DELIVER
7 Projects - 2.4 Bcf/d
14
Stylized State Node in DELIVER
13 Projects - 4.1 Bcf/d
7 Projects - 2.4 Bcf/d
15
A major pipeline disruption leads to re-direction
of pipeline flows and some delivery curtailments
RED designates pipeline corridors at maximum flow
13 Projects - 4.1 Bcf/d
BLUE indicates States experiencing curtailments
7 Projects - 2.4 Bcf/d
16
In Summary Risk of Infrastructure Failure in
the Natural Gas Industry

• Increasing demand could put additional stress on
  capacity-constrained areas
• Data from a number of sources document a
  continuum in the type of infrastructure failure
  and the associated risk
• DELIVER, EIAs natural gas network flow model
  identifies possible actions industry may take as
  the invisible hand rectifies the situation

17
SupplementalWhy Have Natural Gas Prices Surged
in 2000?

• Supply Tightness
• Consumption increases
• Storage Stocks - lower than average
• Oil Price Increases
• Market Perceptions