Natural Gas Supply: Owning Capacity or Buying Delivered Supply

Author: Brian Ford, Account Manager, U.S. Energy Services

Around our homes and around the office, much of what we do revolves around food.  We all need food for survival.  It is pretty straight forward.  When we are hungry, we want to eat, we want to know what time we are going to eat and we always like food to be available.  Large volume natural gas customer needs are also pretty straight forward.  They want their natural gas on time, at a specified point, and available to meet their demand.

While the options available to us when it comes to dietary choices seem endless, the options of how we purchase natural gas are not quite as lengthy.  There are however, options available and choices that need to be made.  Most options can be categorized into two groups:  Customers who own capacity on a pipeline and customers who purchase delivered supply from a natural gas marketer.

When a customer owns their own natural gas pipeline capacity, they are committing to an “a la carte” way of buying natural gas.  Just like going to an up-scale restaurant, you are purchasing each piece of your meal separately to complete the experience.  Buying natural gas supply from a marketer is more like buying a combo meal from any of the local fast-food restaurants.  Most everything is provided for you in an all-inclusive price and in a nice little pre-decided package.  The results of each are the same; you are now less hungry and you have received natural gas at your facility.  Everything else just depends on what your needs are at a given point of time.

We can all relate to why we may choose a nice steakhouse over a combo meal, so let’s leave the food analogy behind for just a moment.  Let’s consider the reasons you may choose between owning capacity and buying from a marketer.  Owning capacity on a pipeline means you are committed to a receipt and delivery point at a specified price for the length of the agreed upon term.  The terms of the agreement are very specific on how the natural gas flows and can be 10 to 15 year contracts.

Customers may elect to own capacity for any of the following reasons:

  • They have constructed their own pipeline attached to a major inter/intrastate pipeline;
  • Their business plan and subsequent production schedule certainty extends far into the future;
  • Their facility is located in a constrained area;
  • Or their operation cannot be interrupted for any reason.

Owning capacity gives a great deal of control to the customer.  Along with this control comes the responsibility of managing the capacity or contracting with a third party to manage it for you. When buying from a marketer, you agree to a price, delivery point and level of management you require for the natural gas.  Because a marketer potentially owns multiple pieces of capacity, there is flexibility within the terms of the agreement as to how the natural gas may flow to the delivery point.  Marketers may also have specialized products they have developed that offer benefits to customers based on a geographic, utility or pipeline dynamic.

Capacity and marketer choices available in the region around your facility can be overwhelming.  Sorting through the options and offering solutions is where U.S. Energy can help.  We are here to assist your teams through the entire procurement process.  We can help you identify options in the natural gas world that you are not aware of.  Give U.S. Energy a call and allow us to assist your team.