<p>The main hypothesis tested in this work is:</p><p>“It is possible to operate future Norwegian natural gas transportation systems at a level that is approximately optimal, technically and economically, with major stakeholders duly attending to requirements specified in the Norwegian statutory framework and in the implemented “Gas Directive.”</p><p>In order to test this hypothesis a multidisciplinary systems approach has been applied that includes analyses based on fluidmechanics and thermodynamics, economic theory and constrained by the prevailing and future legislative requirements. Operational experiences and empirical data also support the analyses.</p><p>It is assumed in this work that the introduction of the European Union’s Gas Directive will result in some new or altered legal requirements for how to conduct future Norwegian natural gas transport operations. The work has identified these new requirements and the work has suggested realistic solutions for how to conduct future operations. The author therefore concludes that the main hypothesis above is true provided five recommendations are observed.</p><p>The first recommendation is to implement into the Norwegian legislation provisions that make possible two core requirements of the Gas Directive. The first provision is to allow domestic gas sellers to compete in the downstream market by marketing and selling their gas individually. The second provision is to allow access to the transportation systems for those stakeholders who according to the Gas Directive are defined as “eligible customers” and “natural gas undertakings”, i.e. the future shippers.</p><p>The second recommendation follows as consequence of the latter provision and it recommends the future Norwegian regulatory regime to incorporate three main features. First, the transportation system is to be operated by an organization unit that has a transparent account on its transportation services or alternatively by an organization (i.e. the operator) that is functionally separated from and does not participate in any gas marketing and sales activities.</p><p>Secondly, and due to the fact that the Norwegian natural gas transportation systems are highly physically integrated it is recommended to have one and only one transportation system operator. Only one operator will be in the best position to enhance cost efficiency in daily operations, energy efficiency, resource management in daily operations, optimized utilization and optimized gas blending.</p><p>Thirdly, new and altered transportation services must be designed to meet the future needs and requirements of the shippers and these services must be offered to all shippers. The latter feature is elaborated in the third recommendation.</p><p>The third recommendation is to redefine and develop new transportation services that support shippers’ elastic demands for transportation services, both during periods of sufficient capacity as well as during peak load periods.</p><p>The above recommendation will imply that the future transportation services must comprise firm services i.e. booked and guaranteed transportation, and interruptible services i.e. transportation being interrupted either during off-peak periods or during peak periods as well as peak load services i.e. transportation services offered during peak load periods. The services must be offered to all shippers in an equal and impartial manner and be supported by a transparent and feasible tariff and toll regime. The toll regime must feature several properties that ensure recovery of fixed costs, cost efficiency in operations and maintenance, and rationing efficiency and this work recommends that the future toll regime shall be reasonable and fair and cost-based.</p><p>This work has identified that the existing toll regime does not feature all of the above properties and this work therefore suggests that the existing toll regime is re-designed and extended to include new elements. The first recommendation is to re-design the existing toll formula so that it acts as a two-part toll for firm capacity.</p><p>The fixed part of the toll shall act as a booking charge or capacity charge and it shall cover the financial costs based on the historic investment costs for the pipeline systems. It shall also include the fixed (annual) operations and maintenance costs, and any new costs for incremental new investments. The variable part of the toll may be set equal to average marginal costs per unit of gas, or be paid “in kind” as done in the current regime.</p><p>Further, a unitization of the fixed part of the firm toll is suggested here. The unitization shall include all pipelines that comprise the dry gas system. This means that the fixed part of the firm toll shall be calculated as an average fixed toll based on the historic investment costs for all the pipelines included. The unitization schema shall include the existing ship-or-pay contracts and any new firm contracts in the dry gas system.</p><p>The unitization will accomplish a possibility for eliminating specific shipper’s preferences for where to physically route gas in the dry gas system. This will subsequently improve rationing efficiency at high levels of utilization of the system when there is a concurrent need for auctioning of spare capacity. This is due to the physical behavior of the integrated system as any “internal” pre-booked routing in the system effectively may reduce the total throughput and thus a rationing efficient utilization of the system.</p><p>The above recommendations mean that the firm toll shall be charged as a “postage-stamp” toll for all pipeline systems comprising the dry gas systems. This means in practical terms that the dry gas system is to be considered as one zone only and pre-defined entry points and exit points must be established.</p><p>As a consequence of unitizing the toll for firm capacity either a unitization of the ownership structure must be done or a payment mechanism must be in force that secures the pipeline owners no extra profit or loss due to the introduction of unitization.</p><p>A new two-part toll formula that in its form is equal to the firm capacity toll is recommended for covering interruptible off-peak services. It is recommended to set the fixed part of the toll lower than the fixed part of the firm toll.</p><p>A new toll must be developed and be based on auctioning principles for allocation of spare capacity in the system during peak load periods. In order to facilitate the auction a tool is required for predicting the level of spare capacity that is available from time to time. This tool is also needed for optimizing the total throughput based on the different auction bids. In a similar manner as for the firm toll, the auction bids shall refer to a unitized dry gas system and the bids shall refer to transportation requests between any of the pre-defined entry and exits points. No shipper shall thus have a right to specify “internal” routing in the dry gas system.</p><p>The total revenues for the pipeline system owners shall not yield higher profits than the allowable regulated return and the balance shall be levied – at least in theory – the firm transportation shippers only. It is recommended to conduct such reallocations of revenues periodically.</p><p>The fourth recommendation is related to the necessity of changing documents and requirements, altering organizational forms and working processes, and how current incentive structures will be affected. All these issues will be influenced by an implementation of the Gas Directive. The work has briefly discussed these issues, but due to the many uncertainties no detailed assessments are conducted or recommendations given. The work has however indicated that a majority of the documents assessed in this work must be revised and updated to reflect the new requirements caused by liberalization. It is recommended here that the governing documents more clearly specify which new responsibilities the independent transportation system operator shall be assigned. A vital area of concern is how the transportation system operator and the shippers’ and sellers’ dispatching representatives shall communicate and perform their duties in the future. To day these functions are highly integrated, but liberalization will make them counterparts.</p><p>Further, a detailed specification of the future working processes for the independent transportation system operator must be clarified. This applies especially for the how to optimize the operations in a liberalized context. New and carefully designed incentives are needed for enhancing optimal usage of the network during capacity constraints.</p><p>The last recommendation regards allocative and dynamic efficiency in a liberalized context. In the prevailing regime the individual company acts normally both as shipper and pipeline system owner. This regime ensures proper incentives for cost efficient development of new capacity and cost efficient operations and this regime may continue to exist in a liberalized context. This regime will continue to create proper incentives for allocative and dynamic efficiently in a liberalized context as well.</p><p>Further, in order to enhance allocative and dynamic efficiency on the Norwegian Continental Shelf a centralized planning and development system must be in force in order to secure resource management and utilization of the significant conditions for economy of scale. The transportation system operator must have a close liaison with these functions in order to share information about operational experiences, capacity constraints and shadow prices on capacity of constraints.</p><p>Finally, the work has provided several observations that show how a systems approach is quite attractive for finding solutions to complex and multidisciplinary problems as considered in this work. The systems approach applied here consists of two engineering processes comprising well-defined activities. These activities comprise assessment of information, definition of effectiveness measures and creation of information models. Trade-offs are identified between contradicting requirements and the outcome of the processes is accurate descriptions of the systems operations in the prevailing context and to some extent also in a future context. The systems engineering processes have included several methodologies to solve specific tasks. Several analyses based on economic and technical theories are included, as imperative activities required for solving the problems.</p><p>The ultimate results of a systems approach are solutions that go beyond traditional and non-disciplinary approaches. This is particularly true if the objective is to find concrete and sound solutions applicable in a “real-world” context where specific stakeholders’ needs and legal requirements are present and well defined. Several observations are provided in the work showing how economic analyses are improved by combining them with technical theory, empirical data, operational experiences and last but not least: legal requirements.</p>
| Identifer | oai:union.ndltd.org:UPSALLA/oai:DiVA.org:ntnu-552 |
| Date | January 2001 |
| Creators | Dahl, Hans Jørgen |
| Publisher | Norwegian University of Science and Technology, Faculty of Engineering Science and Technology, Fakultet for ingeniørvitenskap og teknologi |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Doctoral thesis, comprehensive summary, text |
| Relation | Dr. ingeniøravhandling, 0809-103X ; 2001:34 |
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