APPENDIX 33
Supplementary memorandum by National Grid
Transco
INTRODUCTION
1. National Grid Transco Group (NGT) gave
oral evidence on 26 January. At that session NGT was asked to
provide supplementary evidence on:
— the expected frequency of LNG
tankers supplying LNG sites in Great Britain; and
— some of the issues to be addressed
in order to provide greater information to the gas market.
LNG SUPPLY TO
GB
2. The LNG supply chain usually consists
of a large remote gas source, associated upstream facilities,
liquefaction plant(s), LNG tankers to ship the gas and a re-gasification
terminal(s). The total costs of a project can run into many $billions.
Current total project costs are about $700 million per bcm per
year of delivered gas, though it should be noted that there are
numerous variables here notably the number of ships required and
other upstream costs. The biggest cost items are usually the upstream
facilities and liquefaction plant then ships then re-gasification
terminals.
3. With investment of this magnitude it
is essential that LNG is delivered to markets and any slippage
in project timescales can impact break-even costs, hence LNG should
be considered as a consistent supply, especially in terms of ships
leaving the liquefaction plant(s). Where LNG can be considered
a less consistent supply is in its ability to reach alternative
destinations. This market opportunity is difficult to quantify
but should not be discounted particularly given the relatively
low cost of re-gasification terminals and the volatility of localised
markets, notably the US. To some extent this should enhance UK
security rather than undermine it as Europe has numerous LNG terminals
and only the UK has a fully functioning gas market.
4. Making calculations according to some
assumptions of what is known about the capacity of Milford Haven,
the capacity that has been signalled is required and the current
capacity of LNG ships, NGT would estimate that ships would arrive
to unload LNG between every 1.5 to 4.5 days. At the Isle of Grain
the initial shippers (BP/Sonatrach) have contracted for baseload
capacity which, if utilised fully, would on average see around
one ship per week unloading at the facility. If the terminal were
to be expanded, as planned, the frequency of ships could increase
to a maximum of one ship every two days.
ISSUES SURROUNDING
GREATER INFORMATION
PROVISION IN
THE GAS
MARKET
5. Transco played a leading role in the
DTI's Information Initiative and continues to work with the wider
industry to gain an understanding of what additional information
provision might be considered beneficial to the market. The first
two phases of the Information Initiative were completed by summer
2004 and it is expected that the third phase will be fully implemented
by Q3 2005.
6. For clarity, the three phases cover:
— Phase 1—the improved provision
of information (standardisation of Delivery Flow Notifications
(DFN's) and Storage Flow Nominations (SFN's) from upstream parties
to Transco.
— Phase 2—further provision
of detailed planned maintenance and outage data by upstream parties
to support Transco in refining its annual Transporting Britain's
Energy (TBE) process.
— Phase 3—the four categories
within stage 3 are:
1. Real Time flows into the NTS at sub-terminals—to
be published from 1 July 2005.
2. Forecast flows into the NTS at sub-terminals—to
be published from 18 March 2005.
3. Deliverability with respect to planned
maintenance—published Q4 2004.
4. Sub-terminals "End of day" flow
data—published Q4 2004.
7. During the development of phase three
various confidentiality, data ownership and liability issues have
arisen (explained below) which mean that category 1, 2 and 3 information
will be published on an aggregated (North/South zone) basis. In
addition, due to physical and operational limitations, agreement
has been reached that Transco will publish category 1 and 2 data
on an hourly, rather than "real time" frequency.
8. Concern relating to the publication of
further information fall into two categories. The first area concerns
data ownership, commercial confidentiality and liabilities whilst
the second relates to the telemetry equipment, accuracy, timing
and delivery of data. In order to release further information
to the market, these issues will need to be resolved.
DATA OWNERSHIP,
COMMERCIAL CONFIDENTIALITY
AND LIABILITIES
9. Transco has access to instantaneous physical
flow rate data, often via telemetry, at the majority of the sub-terminals.
The Delivery Facility Operators (DFO's) generally own the metering
equipment and provide the flow data to Transco for use in its
operational control activities, on a non-contractual basis. Where
Transco does not have access to flow data at a sub-terminal it
utilises data derived from Transco owned equipment downstream
of that point.
10. During the DTI Information Initiative,
the position of Transco was discussed in respect of the ownership
and publication of the sub-terminal flow data, and the following
position was reached:
— where the terminal operator
owns the metering equipment and provides Transco with access to
the real-time flow data, this data belongs to the terminal operator
and the ability by Transco to disclose that data to others is
restricted by the provisions of Section 105 of the Utilities Act
2000 and the provisions of any relevant Network Entry Agreement;
— where Transco owns the metering
or has installed duplicate metering, Transco would be utilising
its own equipment to derive the data and would therefore, own
the data. However, this data would still be covered by the terms
of Section 105 (as it is information relating to the affairs of
a particular business and was obtained by virtue of the Gas Transporter's
Licence) and Transco would not be able to disclose that information
to others except as set out in Section 105; and
— when Transco aggregates sub-terminal
flow data it then has legal ownership of the aggregated figure.
However, the provisions of Section 105 will still apply to that
aggregated figure to the extent that information relating to a
particular business entity could be identified from it.
11. Transco can only publish information
consistent with relevant legislation and its Gas Transporters
Licence. Transco took the view that publishing the sub-terminal
flow data on an aggregated North/South basis would afford protection
from any action under Section 105. This was agreed to by DTI,
Ofgem and UKOOA as primary data owners will be protected from
any risks pertaining to commercial confidentiality or liabilities.
METERING ARRANGEMENTS
AND DATA
ACCURACY
12. As explained earlier, Transco does not
own the majority of measurement equipment that is used to monitor
flow data. The measurement equipment used by producers is fit
for purpose according to its particular situation so there is
no consistency over the types of metering used, the parameters
measured or the accuracy of the metering. In addition, certain
metering can be inaccurate in real time. In order for market participants
to correctly interpret the data it would be necessary to publish
the various parameters associated with each specific meter eg
the type of metering (instantaneous or integrated), pulse rates,
quantities, meter accuracy and meter tolerances. Of further consideration
is that several of these parameters can be affected by factors
such as the physical operation of the pipeline or mechanical failure.
13. This currently makes the provision of
real time information very difficult as flow data is not strictly
comparable or easily interpreted. This coupled with the potential
risk of inaccurate data in real time could provide misleading
signals to the market and be costly for market participants to
analyse individually. The problem is overcome through the aggregation
of data and it is why data will be provided hourly, rather than
in real time. Replacement and standardisation of metering and
the associate telemetry would carry a cost.
February 2005
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