Natural Gas Market Information

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Natural Gas Market Information

• Barbara Mariner-Volpe
• February 2001
• Bangladesh Ministry of Energy and Mineral
  Resources
• barbara.marinervolpe_at_eia.doe.gov

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Scope of Presentation

• Natural gas information
• market monitoring
• support for market transactions
• Information models
• architecture

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Generalized SchematicSales of Natural Gas in U.S.
Consumers
Gas Processing Plant
Residential Commercial Industrial Elect. Util.
Local Distrib. Company
Wellhead Production
Pipeline
Underground Storage
Imports
Third Party (Marketer, Broker)
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(No Transcript)
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The U. S. Natural Gas Industry At A Glance
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Sources of Information

• Delivery
• LDC / pipeline tariffs
• Pipeline internet sites
• Third party internet sites
• Commodity
• Spot Market Center Systems
• Futures Markets (NYMEX / KCBOT)
• Third party (after-the-fact) published prices
• EIA (used to monitor historical activity)

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Diverse Users with ...
Trade Press and Media
Government
Information Aggregators
OPERATORS Producers Pipeline Storage LDCs
FINANCIAL Risk Managers Investors
Marketers Brokers Traders
Market Players
CONSUMERS
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...Diverse Information Needs
Government
Trade Press and Media
Information Aggregators
MARKETERS Spot prices Futures prices Storage
changes Supply Demand Weather
OPERATORS
FINANCIAL
Spot prices Futures prices Supply/demand forecasts
Market analysis
Reserves Flow Rates Nominations Receipts/Deliverie
s Weather Prices
Market Players
CONSUMERS Price Terms and Quality of
Service Alternative Fuel Prices Long-term
Availability
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Regulators Role Is Changing

• Company Centric Industry Centric
• Federal regulation of pipelines (by FERC) focuses
  on the structure and operation of energy markets.
• Effect of competition
• Impact of policies
• Monitoring and oversight of markets

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Overarching Goal of Federal Energy Regulators in
the U.S.

• Maximize consumer and economic benefits
• Minimize the need for future regulatory
  intervention

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Market Monitoring

• Tracking performance indicators of a
  well-functioning market
• Efficiency
• Transparency
• Transactional liquidity
• Ease of market entry and exit
• Competition

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Information Needed to Support Rate Making
Activities
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Access to Information - Important in a
Competitive Market

• Relevant information is needed by
• Consumers - to make informed decisions on energy
  purchases.
• Regulators - to monitor transactions and to
  prevent exercise of market power.

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What is Relevant Information?

• Information on
• Available services - e.g. capacity (capacity,
  available capacity, system outages)
• Market structure including affiliate
  relationships
• Transactional Information
• Imbalance and overrun information

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The Information Revolution... How far Weve come
Information that was not available prior to the
industry restructuring
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In the Future Information Needs May Include
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Information Systems to Support Market Transactions

• Electronic bulletin boards
• Electronic trading systems
• Value added networks (VANs)

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Non-EIA Information Systems For Consumers
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Natural Gas Page on EIA Web Site (Upper Screen)
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The Case for Standardized Business Practices

• Gas Industry Standards Board
• Pro-active approach - reps from many segments of
  the industry participate
• Facilitates business transactions with multiple
  pipelines and suppliers.

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Information Architecture FERC Model
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Information Architecture(FERC Model)
Source FERC
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Information Technology Architecture (As
Implemented by the FERC)

• Built on the concept of 3 layered infrastructures
  connected by the security infrastructure
• Information infrastructure
• Communication infrastructure
• Processing infrastructure

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Information Infrastructure

• Well-defined data and data relationships are
  essential to a secure and interoperable
  information infrastructure
• The information itself is what is most important
• Characterizes the type of information (who needs
  it and how it is generated, accessed and
  maintained.
• Defines data, models, data relationships,
  facilitates storage and retrieval, and describes
  the constraints/limitations on the use of the
  data
• This knowledge is then used to develop a tech.
  strategy for efficiently managing the data
• Value through use of common data format and
  exchange standards

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Communications Infrastructure

• Objectives
• connectivity - ability to interface with current
  and anticipated processing equipment
• interoperability - permit hardware from competing
  vendors to communicate. Open system design that
  allows independence and flexibility
• scalability - configured to support required
  range of users and traffic requirements

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Communications Infrastructure

• Consists of the communication equipment, software
  and networks that link computers and peripherals
  within the organization. Provides
• protocols for information movement
• mechanisms for detecting network faults
• mechanisms for linking with other networks

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Processing Infrastructure

• Provides the computer systems and software
  necessary for
• computing, comparing, selecting, evaluating
• moving, displaying information
• managing user interfaces
• managing system processes and controlling system
  usage

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Security Infrastructure

• Consists of the requirements, policies and
  practices to secure information sharing
• safeguard resources and supervise resource
  sharing
• ensure resource availability to authorized users
• detects and reports intrusion attempts by
  unauthorized users

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Design Considerations

• Flexible - should accommodate future needs
• A standard architecture reduces the complexity of
  the computing environments promoting consistency
  among applications and data and reduce redundant
  products
• Central to the definition of architecture is the
  identification and use of standards.
• Develop the user's ability to transparently
  interact and exchange information with other
  systems and users.
• Communication services and associated standards
  are a fundamental part of establishing
  interoperability.

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Goals Re Information FERC Model

• Flexible
• Practical
• Efficient (more efficient operations)
• Reduce costs/customer burden
• Provide efficient, cost-effective access to the
  information that is needed by regulated entities
  and the general public -- when they need it --
  and in a format that is useful to them.
• IN ADDITION - security of the data, data network
  and interchange may be a major concern.

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Primary Technical Considerations

• Primary focus include the concepts of
  flexibility, enhancement, security, cost/benefit
  and standards.
• Provide vendor-neutral, cross-platform method of
  transporting and validating critical data

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E-filing Information

• Becoming more prevalent in the gas industry.
• Should ensure that any gains or improvements made
  (e.g. e-filing) are not hindered by
  non-electronic processing i.e., all manual
  processes immediately following the electronic
  filing process.

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Transition Strategy - Options

• 1. System leap - where organizations standardize
  on a system for several years then "leap" forward
  to new systems every 3-5 years (total system
  replacement every x years)
• 2. Incremental change paradigm - when
  organizations continuously adopt incremental
  upgrades
• Advantages include minimal training costs, min.
  problems with staffing and communication, budget
  requirements are spread-out over several years
• 3. Rolling replacement - e.x. change occurs at a
  constant rate - e.g. a third of the change
  happens each year.

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Natural Gas Information Program at the Energy
Information Administration
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Key Data Area of Interest

• Supply activities production, storage, imports
• Supply infrastructure
• transmission and storage capacity
• drilling, producing wells
• Consumption by sector
• Prices
• cash and futures markets
• wellhead to downstream

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Why is Good Information Important?

• Information is needed for policy making and for
  assessing the gas industrys performance.
• Public policy now relies on competition to ensure
  adequate supplies, low costs, and reasonable
  prices to consumers.
• Private investors need accurate and reliable
  information for investment decisions.

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Measurement of Volumetric Information about the
Domestic Natural Gas Industry

• Production volume
• Underground storage
• Consumption by residential, commercial or
  industrial customers
• Consumption by regulated electric utilities
• Consumption by other electric generators
• Transportation of natural gas

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Monthly Measurement of Natural Gas Data
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Monthly Data Measurement Points and Systems
Physical Flows of Natural Gas from Wellhead to
Burnertip
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Important Issues for Data Quality (Accuracy and
Adequacy)

• How do we assure that we are asking the right
  questions of the right parties?
• Assessing the changing information needs
• Issues of frame development and frame maintenance
• If a sample, its design and assuring
  representativeness and precision
• Issues of Forms design

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Major Steps and Processes in a Survey

• Initial Steps
• Determine requirements for information
• Design and test instrument
• Obtain approval for instrument
• Develop and implement processing system
• Field instrument

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Major Steps and Processes in a Survey - Cont.

• Fielding the instrument (some of the details)
• Determine the potential respondents
• Building and maintaining the frame
• Select the respondents
• Total enumeration or sample?
• If latter, design and select the sample
• Distribute the instruments

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Major Steps and Processes In a Survey - Cont.

• For each survey cycle
• Receive, track, and enter data from respondents
• Edit responses
• Follow up with respondents for edit failures
• Deal with non-response
• Prepare and evaluate aggregate estimates
• Prepare dataset feeds for distribution media

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Dealing with Data Problems

• Nonresponse
• Imputation
• Nondisclosure of confidential information
• Noncoverage due to design considerations
• Truth in statistics statements
• Recognize limitations and develop alternative
  procedures to fill the gaps in data requirements

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Natural Gas Information Products Accessibility

• Products are distributed through the EIA web
  site.
• The EIA web site provides quick release of
  products.
• Some reports are also printed, although EIA is
  phasing out most printing.
• Databases are available through the EIA web site
  and on the EIA CD

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Why is EIA doing Strategic Information Planning?
No coverage of key areas - marketers
Information needs have increased
Declining coverage in some existing data series
(prices)
Reassess Data/ Information Program
EIAs goal
- minimize
respondent burden - optimize
processes/resources - maximize
customer satisfaction
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NEXT GENERATION NATURAL GAS (NG)2

• A project to design and implement a new,
  comprehensive information program for natural gas
  to meet customer requirements in the
• post-2000 time frame.

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Natural Gas Data Systems Development
With changes in the regulatory and financial
environment, EIAs natural gas systems are
increasingly unable to successfully measure the
industry

• Separation of equity from custody flows
• Rise of Actors outside the scope of current
  systems
• Development of new phenomena such as market hubs

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Next Generation Natural Gas Project Overview
Data Requirements
Industry Conceptual Design
Information Collection Redesign
Cognitive and Pilot Testing
Focus Group Report
Implementation
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Focus Groups

• Purpose Obtain opinions, information and
  insights on what data EIA should collect in the
  future
• Format
• structured
• administered by an independent firm
• discussions are confidential
• Results will be used to guide EIA in designing
  the natural gas data program to meet the
  information needs of the industry