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Competition in Natural Gas Pipeline Wellhead Supply Purchases

Harry G. Broadman

Year: 1987
Volume: Volume 8
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No3-6
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Throughout most of the last three decades, interstate natural gas pipeline companies-operating mainly as private carriers, buying gas supplies in the field and reselling them downstream'-have competed primarily on the basis of nonprice terms. Under the regime of wellhead regulation stemming from Phillips,' in upstream (field) markets binding price ceilings meant thatinterpipeline competition in gas purchases was governed principally by the attractiveness of take-or-pay provisions pipelines offer in their contracts with gas producers.' In downstream (city-gate) markets the chronic excess demand induced by wellhead regulation meant that pipelines competed for gas sales to local distribution companies and direct wholesale consumers (large industrial end-users and electric utilities) largely on the basis of the maximumquantity of gas that could be delivered.

Gas Supplies for the World Market

James T. Jensen

Year: 1994
Volume: Volume 15
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-NoSI-13
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The ability of natural gas to compete with other energy sources is increasingly favored by environmental and technological developments. Front a worldwide perspective, the gas reserves needed to satisfy this growing market are large (relative to gas demand) and are growing more rapidly. However, gets, unlike oil, is expensive to transport and many of the world's present gas reserves are in deposits that are too small or too remote to be of commercial value at present price levels. As a result, much of the supply will prove difficult to deliver to the markets that most need it, and the price consequences of market growth will vary from market to market.

Secondary Market and Futures Market for the Provision of Gas Pipeline Transportation Capacity

Ricardo B. Raineri and Andres T. Kuflik

Year: 2003
Volume: Volume 24
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol24-No1-2
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The natural gas pipeline transportation industry has a long history of regulatory interventions limiting the market power of the pipeline owner. Most studies, however, focus on the static efficiency of the corresponding contract structures. For more realistic results, we consider transportation capacity as a durable good and analyze the dynamic efficiency of structures such as leasing and the selling of tradable rights with or without secondary markets and futures markets. Compared to a lease contract structure where the pipeline owner controls the transportation capacity at all periods the selling of tradable rights with a competitive secondary market dissipates the monopolist's market power and leads to higher social welfare. However, the monopolist's articipation in the futures market can reduce welfare by providing him with a credible way to restrain production in future periods, thus restoring the market power he enjoyed in a lease situation.

Modeling Optimal Economic Dispatch and System Effects in Natural Gas Networks

Kjetil T. Midthun, Mette Bjorndal and Asgeir Tomasgard

Year: 2009
Volume: Volume 30
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No4-6
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In this paper we present a modeling framework for analyzing natural gas markets, taking into account the specific technological issues of gas transportation. We model the optimal dispatch of supply and demand in natural gas networks, with different objective functions, i.e., maximization of flow, and different economic surpluses. The models take into account the physical structure of the transportation networks, and examine the implications it has for economic analysis. More specifically, pressure constraints create system effects, and thus, changes in one part of the system may require significant changes elsewhere. The proposed network flow model for natural gas takes into account pressure drops and system effects when representing network flows. Pressure drops and pipeline flows are modeled by the Weymouth equation. A linearization of the Weymouth equation makes economic analyses computationally feasible even for large networks. However, in this paper, the importance of combining economics with a model for pressure drops and system effects is illustrated by small numerical examples.

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