[Oil & Gas White Paper] Best Practices Support Success in the Open Natural Gas Market

Best Practices Support Success in the Open Natural Gas Market Information management tools support responsiveness in today’s complex markets

March 23, 2010 / White paper

Make the most of your energy SM

Executive summary

The changes throughout the energy supply market that have resulted from business

globalization require natural gas transport operators to practice flexibility. Yet they

need to keep safety and security their highest priorities in this time of unprecedented

change. Reliable gas network information management systems and best practices

relating to commodity data are more important than ever to improve or even maintain

competitiveness and responsiveness in the open market environment.

One consequence of increasingly complex markets is the growing numbers of

gas flow, quantity and quality measurements involved—measurements that are

vital to financial accounting and subject to customer transparency. Best practices

recommend the operator’s gas measurement analysis system accurately and

completely collect data; validate per user-specified rules; properly flag, adjust and

estimate data where needed; rigorously identify measurement imbalances and

potential errors; and maintain audit reports.

One leading gas transmission company in Europe took advantage of Schneider

Electric’s experience in the North American deregulated gas market by implementing

a Schneider Electric-created turnkey information management solution to help

it comply with liberalization mandated in Europe. The resulting monitoring and

automated control system included several advanced applications for meeting

customer reporting procedures and processes required by the new mandate.

The system fully accepts third-party applications, eliminating costly proprietary

enhancements and maintenance needed for it to be reliable for the long term.

The system also provides another best practice for safety and security: real-

time, redundant backup of the transmission infrastructure’s main Control Center.

Finally, the solution provides logistics capabilities that enable accurate tracking

and reporting of allocations and delivery, to separate production and supply from

transmission operations.

The information management solution that offers these best practices related

to measurement accountability, operational flexibility and security helps the user

meet global and open market trends while efficiently satisfying regional or country-

specific requirements.

Adding value through enabling real-time business decisions

White paper on Best Practices in the Open Natural Gas Market | 01

Supporting Enterprise Financials, Decision Making, and the Global Environment

Introduction

Globalization is unraveling many of the paradigms relating to society, law,

business, economics, and the environment. As these issues reform with a

more global definition, businesses find they must move from ‘traditional’ to

‘capable’ to stay competitive in the more global markets that are evolving. This

paper describes some best practices that natural gas companies are using to

improve their competitiveness and responsiveness in an increasingly open—and

complicated—energy market. Included is a real-world example of operations and

business success based on these practices.


Supporting Responsiveness in Today’s Complex Markets

Be equipped for gas market deregulation and third-party usage



Agile systems for ready and accurate information

The open energy market presents great opportunities—and major challenges—

for the gas transport company. Worldwide deregulation and liberalization means

new partners, new clients, new pipeline connections between different countries,

new marketers, new shippers, new competition, new sources of supply, and

new procedures. Safety and security, more than ever, is a priority in this time of

unprecedented change.

Gas companies need an information management system that can be relied

on to help make a smooth transition to such an open and complex business

environment. Agile and reliable information management systems not only support

secure and efficient operation of a gas network, they also make real-time data

available to support operations-related decisions that contribute to customer

satisfaction and help the gas business remain competitive.

“Flexibility—the capacity to adapt—is

a must for every information system in

the gas business.”

Andoni Olaizola

Director of Oil and Gas Europe

Schneider Electric



What does ‘responsive’ mean?

The gas company adapting to these new business challenges needs to manage

information in such as way as to turn data into knowledge, in real time, to be

responsive and make the decisions needed to stay competitive. Such a powerful

system:

• Applies advanced technology and is capable of managing thousands

of data points from the pipeline with accuracy

• Easily accommodates updates and migrations to avoid system

downtime during such maintenance

• Is scalable to respond to growth; an extensible system will handle

network growth and expanded volumes without excessive

configuration costs

• Establishes integration of real-time system data into the enterprise

• Is highly secure and capable of avoiding cyber-security risks

and attacks

• Provides the redundancy necessary to back up any main system failure

and assure uncompromised flow of the resource relied on by all facets

of the community

See the sidebar this page describing the successful implementation of such an

information management system.

Best technology practices put to work A leading gas transmission company in Europe realized its information systems needed significant upgrade to comply with the liberalization mandated in Europe’s 2001 Natural Gas Market Law. This legislation required detailed measurement, operational control, and customer reporting procedures and processes. To comply, the company’s business model underwent a total transition; since 2003, it has been operating with, and relying on, a comprehensive information system solution enabling business responsiveness.

“The system we implemented offers the benefits of the vendor’s experience with the deregulated gas market in North America and its expertise in delivering a full scope, turnkey solution,” affirmed the company’s Operations Manager. “Schneider Electric has provided us with automation, monitoring and control of the supply network, and several advanced applications for meeting liberalization requirements.

“We needed a system with an open architecture and one technically flexible enough to be adapted to our national market. Also, we appreciate how third-party systems have been easily integrated into the Schneider Electric solution.” He added, “We wanted a solution that would be with us for the long term and believe we have it. We have secured full operation of our infrastructure with backup of our main Control Center. The Backup Center is running in real time and can take over operations in case of an emergency.”



Integrated Gas Measurement Analysis System

Reliable collection and reporting of accurate measurement data

Transforming a data control system to a gas business information management

and knowledge support system requires advanced functionalities that specifically

target industry business practices. Such a system recognizes that accurate

measurement of gas flow is critical to financial accounting and closes the gap

between the field and the office.

A best practice gas measurement analysis system will continuously collect real-

time measurements to optimize daily operations and generate accurate reports

that will withstand intense financial and regulatory scrutiny. It should:

• Configure measurement devices properly to eliminate reading errors

• Accurately and completely collect data

• Confirm data accuracy through different validation processes

• Efficiently adjust and estimate to free up analysts for other tasks

• Rapidly and rigorously identify measurement imbalances and alert

operators to potential errors

• Close functions to simplify end-of-month accounting responsibilities

and save time with immediately produced reports



Flexibility saves implementation and training costs

In the multi-user, or third-party, open environment, business models

must be adaptable; a flexible information system helps achieve that goal.

According to Andoni Olaizola, Director of Oil and Gas Europe for Schneider

Electric, “Flexibility – the capacity to adapt—is a must for every information

system in the gas business. Although the trend worldwide is towards an

open market, specific issues in each region and country exist, and it is vital

that the information systems managing this industry accommodate these

specific requirements.”

The Operations Manager at the European gas transmission company noted

earlier puts it this way: “Our old gas measurement system had been developed

in-house and was expensive to maintain. Today, our system measurement

potential and capabilities are greater, and flexibility allows practical adaptations.

Flexibility results in cost savings.”

Validation processes assure accounting integrity

The liberalized market environment is seeing ever-increasing numbers of

measurements, and an automated validation system flexible enough to apply

user-specified rules—from simple limit checking to more complex parametric

data comparisons—assures only validated data are forwarded for further

business application. Further, only data that fail the specific rules are flagged,

minimizing the time an analyst must devote to checks. The best practice

validation process must include rigorous audit information.

See the sidebar on this page for input from a Schneider Electric client on its

best practice validation process.

Enhanced and adapted measurement and analysis solution helps company stay current Today’s market requires management of more

extensive and detailed information than was

needed prior to deregulation: energy values

(through calculation), gas quality data, balance

data, calculated volumes (per ISO formula),

gas meter classification (Daily Metered Daily

Updated, Not Daily Metered, Daily Metered

Monthly Updated, and Daily Metered Monthly

Updated Calculated) and the spreading

of monthly volumes to daily volumes. This

information now is required not only for

regulatory compliance but also to remain

competitive in this complicated market.

“Before liberalization, we owned an in-house

SCADA system that collected basic volume

measurements and generated reports. After the

market deregulation, the gas authority seriously

addressed new information requirements,”

affirmed a Schneider Electric client’s

Operations Manager.

He added, “The authority report includes

measurement parameters and values (daily/

monthly volume and energy) and daily gas

quality data related to the customer device.

Today, we are required by law to keep this

kind of report in case of audit request, and

the Schneider Electric Gas Measurement and

Analysis solution helps us accomplish this.

We also send this report to the customers on

a monthly basis. Without having adopted this

solution, we would still be spending a lot of

time and effort in compiling this information;

today, we are not.

“Also the system gives us the capability

of storing historical measurements (mainly

volumes and gas quality) used to generate a

five-year authority report. We have significantly

improved the overall efficiency of the

measurement data validation process for the

information sourcing from our 1,300 kilometres

of pipelines.”



• Configure an aggregation of gas meters for the purpose of calculating

the network balance in volume and energy; see Figure 1.

• Allow gas company users to collect all the fiscal volume measurements

(either from fields or manually entered) and the gas quality

measurement, so as to use them to calculate the energy values for

each gas meter; see Figure 2.

• Generate reports, including data requested by the gas authority, to be

sent to the customers, as well as reports that fulfil the transporters’

obligations to maintain archives for audit purposes

• Allow the grouping of gas meters in those stations where volume

and energy information is transferred to upper business information

systems for commercial dispatching activities (allocations, billing,

invoicing, etc.)

Value-added functions of a gas measurement system in the open market

Figure 1 Gas measurement system aggregationThe aggregation engine of a gas measurement system continuously aggregates and maintains hourly and daily quantities based on 15-minute or hourly readings. Here, daily volumes are shown for a test gas meter in November 2009 (source: Schneider Electric Gas Measurement Euro Editor). Gas meter volumes and gas analysis of an associated Gas Quality Zone can be useful in building authority reports.

Figure 2 Real-time gas volume and quality measurementReal-time gas composition analysis identifies heating values and assures accurate energy content calculation for billing and transactional balancing. Here, daily gas analysis is shown for a test gas meter in November 2009 (source: Schneider Electric Gas Measurement Euro Editor).



Automating critical accounting and reporting tasks

Deregulation of the gas industry in the European community is opening

transportation pipelines to third-party transportation. The Third Energy

Liberalization Package adopted by the European Commission in September,

2007, effectively separates production and supply from transmission networks of

large, integrated energy firms.

Gas companies now need to account for third-party usage of their pipelines.

Operators are required to track the types and quantity of services, nominations,

and contractual allocations, as well as calculate and generate customer invoices

and plan for long-term pipeline usage.

The gas transmission company noted earlier has adopted Schneider Electric´s

Pipeline Operations, Logistics and Revenue Information Systems (POLARIS)

application as a best practice that supports maximized business efficiency; see

Figures 3 and 4 (next page) and the sidebar.

Integrated Pipeline Operation, Logistics and Revenue Information Systems

Critical and accurate information available faster than ever before The gas transmission company’s commercial solution integrates contracts, nominations, scheduling, allocations, invoicing, and revenue accounting – all to minimize entry and manual processes and add accurate, near-real-time response to reporting processes.

“We have more than 400 industrial and municipal customers using our pipeline and the national pipeline network grid to transport gas throughout the country,” reported the company’s Operations Manager. “Today, our commercial solution, completely web-based, allows our customers to conduct their transactions online. In the deregulated market where there are several traders, marketers, sellers, and others, sharing information in a timely and efficient manner is vital. The POLARIS tool helps us in minimizing manual entry and improves reporting accuracy, so we can improve service to several hundred industrial customers and municipalities across the country. With key information available faster than ever before, we are best equipped to make more informed— and better—decisions.”

“Full use of available technology and a relentless search for innovation are the traits that keep us on a path of ever-increasing quality of service in a cost efficient manner,” said the company’s Managing Director.



Figure 3 POLARIS gas accounting and reportingThe POLARIS commercial gas module is a web-based, secure environment providing an electronic workflow for new contracts, submitting and confirming nominations, actuals reporting, allocating volumes, and invoicing.

Integrated Pipeline Operation, Logistics and Revenue Information Systems (continued)

Figure 4POLARIS accounting of transfersPOLARIS transfer accounting is used by pipeline operators and third-party users (source: Schneider Electric POLARIS shipper allocation summary for transporters).

Conclusion



Best practice solutions in a nutshell:

• Companies adopting the best practices described here are equipped to face

gas market deregulation and third-party usage.

• The complete, integrated smart solution that delivers responsive information

management will guarantee reliability, accurate automated reporting, and the

best customer service.

• These applications are demonstrating they add significant value by making real-

time business decisions possible.

Best practices support flexibility and adaptability in a dynamic market

Schneider Electric USA

10333 Southport Rd SW, Suite 200 Calgary, AB T2W3X6 Phone: 1-866-338-7586Fax: 1-403-259-2926http://www.schneider-electric.com ©

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[Oil & Gas White Paper] Best Practices Support Success in the Open Natural Gas Market