06.24.11Divya Chauhan, Senior Business Analyst, Wipro Technologies Limited

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Gas scheduling is a very important and complex activity in the energy trading business. It is an expensive and time-consuming operation which has to be carried out round the clock. Some of the complex activities involved in scheduling are optimizing long and short positions through trading or storage contracts, nominating and re-nominating gas via multiple pipelines while adhering to pipeline and market constraints, and ensuring that gas flows on the gas day in the most optimal and profitable way.

Scheduling is a challenge in Continental Europe as the countries have operating pipelines that differ from one another in business requirements, ways of communicating gas nominations, their formats, tariffs levied, and gas receipt and delivery options. Also, the pipelines follow different balancing regimes. Each country can have single or multiple balancing zones which can be balanced daily or hourly. For example, France and Italy follow a daily balancing regime, where a shipper's flow into and out of the transport system must be balanced by the end of a gas day, whereas Germany and Netherlands follow an hourly balancing regime where a shipper's flow must be balanced by the end of every hour. Other factors adding to the challenge are different time zones, tolerance limits, maximum number of re-nominations, minimum interval for re-nominations, balancing at the pipe or zone level, delay time of the balancing zone, presence of regulatory frameworks et al.

Calculation of imbalance charges is very challenging in the European markets due to a number of reasons. The relevant published index prices for calculating imbalance charges are not available in these markets. Also, the application of tolerance levels is not very straightforward. Some levels are applicable to an hour and some to a day. Intra-day and end-of-day tolerance levels also differ. Added to the existing complexity, some European balancing regimes allow for the trading of imbalances while others do not.

The unit of energy in which gas is traded may differ across the European markets. Since the entry and exit capacity is traded in volume units, a conversion of volume to energy is required to determine the amount of energy that can be transported using the booked entry and exit capacities. Calorific value of the gas has to be used for this conversion and this value may vary with time and place.

Balancing zones across Europe may be in different time zones. For example, the U.K. Interconnector has a one-hour time difference between the entry and exit points.

These challenges in gas scheduling across the European gas markets can be eased if the schedulers use a well-designed and flexible gas scheduling system.

An attempt is now made to list the expectations from such a system along with their justifying reasons.

The gas scheduling system, henceforth referred to as "it" or "the system", should have a built-in high availability feature to ensure continuity of service to the schedulers in case of any planned or unforeseen outages. It should respond quickly for nominations to be performed before the critical nomination deadline and penalties to the service providers to be avoided. It should enable schedulers to quickly perform nominations at peak trading times in order to ensure maximum profits. It should also have a reliable audit tracking feature that tracks every transaction in the system, its originator and the time of transaction.

The system should offer a single and simple user interface for creating nominations. On a single screen, it should display all the possibilities like buy and sell trades, storage contracts, interconnects. It should also display the imbalances for a given gas day and a balancing zone. It should support automatic calculation of fuel quantity and volume-to-energy (and vice-versa) conversion efficiently by using the best available calorific value. A single system should be able to support nominations across different pipelines. This eliminates the need to have multiple means to enter nomination data and to generate multiple reports to reconcile that data. This reduces the operational risk and enables better auditing.

An ideal system should be able to handle balancing regime differences and should consider time zone differences across Europe's balancing zones, while sending the nominations to the pipeline.

The system should be integrated in real time with energy trading and risk management systems for keeping the scheduling process in sync with the trading positions. Deal information should be captured rapidly and accurately to enable schedulers to act on that data. The system should have real-time interfaces with the pipelines and also the ability to send nominations and receive confirmations using various communication media like fax, telex, and electronic data interchange, as well as communication-friendly formats like XML (Extensible Markup Language). It should discourage schedulers from using any spreadsheets and should automate any repetitive nomination-related tasks.

A good system should provide senior management with accurate and timely reports that help them in quick and accurate decision making. It should be able to alert the schedulers of exceptional situations (like late nominations) so that they can take timely action.

It should enable the shippers to buy entry, exit and transport capacity in volume units and should enable tracking of capacity utilization so that instances of capacity overrun can be checked in advance.

The system should be able to track any imbalance between received and delivered gas, calculate the cumulative imbalance and handle the cash-out and cash-in fees of these imbalances with the pipeline. It should support management of storage balances, and maintenance of the storage tariffs. It should be able to track the traded quantity by a unique parameter till the life cycle of a trade, like a shipper code for example (as each pipeline across Europe has its unique shipper code).

A good scheduling system should offer forecasting capabilities. Accurate prediction of the actual flow of gas will help in avoiding the penalties which shippers have to pay to the pipelines whenever there is a difference between the nominated energy and the consumed energy.

Conclusion

Scheduling is a complex function and a good scheduling system should be able to support this function efficiently. It should empower schedulers to perform various scheduling tasks with relative ease.

In the context of energy companies with operations across Continental Europe, an ideal scheduling system should support peculiarities of different European markets and should allow schedulers to support scheduling of all markets using a single system.

There are many third-party solutions being offered in the market which support some of the expectations listed above but they come at a huge cost. Many European energy companies with operations across Europe look for in-house systems that meet the above expectations, keeping in consideration time and cost constraints.

References

http://ch4solutions.com/GasSchedule.htm

http://www.tpt.com/articles/commnow12_06art.pdf

http://www.olf.com/news/articles/2006/articles_20060701.aspx

http://www.tpt.com/articles/cnmarch06.pdf

http://www.olf.com/news/pdf/maximizing_your_gas_network.pdf

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Reader's Comments

Date	Comment
Harry Valentine 6.24.11	The North American natural gas distribution network includes a massive amount of storage in underground caverns. These caverns occur in regions where oil, coal and natural gas occur. There are an estimated 500-giant salt caverns deep in the coastal bedrock around the Gulf of Mexico. The availability of storage capacity close to major markets is essential when it comes to scheduling the movement of natural gas during times of peak demand. Salt caverns do occur in some parts of Europe, such as the Ruhr region of Germany. However, many more such caverns may be hidden onder the bedrock of the North Sea and difficutl to access. It will be interesting to see how Europe expands natural gas storage capacity over the next several years.
bill payne 6.28.11	Natural gas publicity on front page of NY Times, Sunday June 26, 2011 Insiders Sound an Alarm Amid a Natural Gas Rush http://www.nytimes.com/2011/06/26/us/26gas.html?_r=1 We are participating in New Mexico Gas Company 2011 IRP. http://www.prosefights.org/nmgco/nmgco.htm#casey
Malcolm Rawlingson 7.4.11	I agree Harry . These vast natural gas storage facilities are key to North American gas distribution however there are other method available. One method is to store the gas in LNG form. In years past there were LNG storage facilities in Canvey Island in Essex England and in Milford Haven in Wales. Another method is to use man made non liquid storage facilities or "gasometers" as they used to be called. North America is very fortunate to have these subterranean geological structures at its disposal although like you I am sure that they exist elsewhere. They just need to be located. Malcolm

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