Who Does What in the Gas Industry?The natural gas marketplace combines a volatile commodity market with a complicated array of regulated utility services and contracts delivered through a complex supply chain. It requires several players with unique roles to deliver gas to your organization reliably and cost effectively. Understanding who those players are and what they do will help you meet the unique challenges of natural gas procurement.
Gas Producers Canada is the world's third largest producer of natural gas. Most is produced in the Western Canadian Sedimentary Basin (WCSB), an area that stretches from northeastern British Columbia, through much of Alberta and into southern Saskatchewan. Gas is also produced offshore of Nova Scotia, and gas reserves are known to exist in the Mackenzie River delta, the Beaufort Sea, and in the high Arctic, although these are not produced at present. Currently, shale gas deposits are providing new gas supply opportunities both inside the WCSB and in non-traditional gas production areas such as the St. Lawrence lowlands. These will grow in importance as yields from conventional deposits in the WCSB continue to fall. The major Canadian exploration and production companies are EnCana Corporation, Talisman Energy, Canadian Natural Resources Limited and Suncor. Foreign-owned companies such as Devon Energy Corporation, Shell Energy North America and BP Canada Resources are also major players. Some large natural gas producers have their own marketing arms and sell gas directly to end-users. Those that do, typically prefer to sell large volumes to the largest users (gas utilities or very large industrial users). However, many producers focus on the exploration and production business, and sell their gas production to gas marketing and trading companies. Gas Marketers and Trading Companies In 2009, over 10 trillion cubic feet of Canadian physical natural gas was traded on the NGX trading system. In addition to making a profit on the spread between purchases and sales in normal trading, these companies also offer more exotic products such as over-the-counter options, which offer buyers other ways to control their commodity price risk, while generating additional profits for the seller. Major marketers and traders of gas in Canada include BP Canada Energy, Shell Energy North America, Navicomm and Direct Energy. We are also seeing bank-related companies such as RBC Capital Markets, TD Securities, Scotia Capital, Barclays, JP Morgan and Goldman Sachs becoming more active with their natural gas trading arms. Pipelines To get from the production area to market, gas flows in large transcontinental pipelines. TransCanada PipeLines stretches from the Alberta border across the Prairies, through northern Ontario to Toronto, then east to Montreal. There, it connects with the TransQuébec & Maritimes Pipeline, which runs to Québec City then north to the Lac-St-Jean region. Great Lakes Gas Transmission is wholly-owned by TransCanada and takes gas from an interconnection on the Manitoba/Minnesota border south of Winnipeg, and runs south of the Great Lakes, re-entering Canada just south of Sarnia, Ontario. Alliance Pipeline originates in northern BC and runs through Alberta into the US, where it terminates near Chicago. Vector Pipeline connects with Alliance and runs to southern Ontario, also entering near Sarnia. In the east, the Maritimes and Northeast Pipeline takes gas from the production fields offshore of Nova Scotia, travels across New Brunswick and Maine, and connects with US pipelines in Massachusetts. There is also the Emera Brunswick Pipeline which opened in 2009 and which brings natural gas from New Brunswick's Canaport liquefied natural gas terminal into markets in Canada and the northeastern US. The high degree of interconnectedness between North American producing and consuming regions means that gas flows are constantly shifted as prices rise and fall in different regions, and market forces shift supply to meet demand. Growing oil sands production in Alberta is leading to an increase in natural gas use within the province, at the same time as conventional Alberta gas production is declining. This is resulting in a decline in the volumes of gas being exported on traditional routes out of Alberta, most notably on the TransCanada mainline. Gas Utilities Distributors play an important role in balancing the gas delivery system by using large storage facilities. Gas received by the distributor in the summer that exceeds local demand is stored until winter. They must allow the pipeline to deliver gas at a steady rate, while providing end-use consumers with gas as they need it and not when they don't. Gas utilities provide both sales and delivery services. If a consumer has bought his or her own gas supply from a marketer, the distribution company will deliver that gas to the end-use location. Or, the consumer can buy gas from the utility, in which case the utility charges for both delivery and gas supply. The utility has a delivery monopoly and is not permitted to charge different delivery rates to its gas supply customers. Gas supply costs, themselves, will rise or fall in response to market forces. The Regulators
Retailers
Agents, Aggregators and Brokers
Customers of aggregators and brokers usually get a better than retail price and have the opportunity to customize their portfolio to match their tolerance for price risk. However, participants will pay a price reflective of the group's characteristics rather than just their own. Typically, aggregators can also act as the buyer's agent. Advisors and Consultants Advisors are free to help clients find and buy from the best suppliers with the lowest price, and are able to provide objective advice about how and when to hedge energy price risk. Aegent Energy Advisors operates purely as an advisor/consultant. We work exclusively for energy buyers. We do not buy, sell or trade energy for our own account and we are not affiliated with any energy marketers or utilities. |
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Control energy costs is five simple stepsBuying energy is unlike buying other goods and services. Natural gas and electricity markets are a unique hybrid of volatile commodity markets and complex regulated utility services. Subscribe to Aegent Energy Update
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