Companies led by Tejas Power Corp. (TPC), Houston, have formed a combine to set up a network of integrated gas marketing centers supported by salt cavern storage.
Market Hub Partners LP (MHP) at first will develop, own, and operate five marketing centers in Texas, Louisiana, Mississippi, Michigan, and Pennsylvania near high deliverability gas storage sites operated or under development by TPC. The combine's gas hub services are to include unbundled high deliverability storage, cash market trading, and real time title tracking.
Joining TPC as partners in MHP are four companies involved in unregulated gas distribution: Nipsco Industries Inc., New Jersey Resources Corp., the Miami Valley Leasing Inc. unit of Dayton Power & Light Co., and an undisclosed utility serving the U.S. Northeast. The four distributors in 1993 recorded combined gas sales of about $3 billion.
TPC will own a 66% interest in MHP and the four distributor partners combined the remaining 34%.
When complete by yearend 1998, facilities becoming part of MHP's market center network are expected to have combined working gas storage capacity of 46.3 bcf, injection capacity of 1.61 bcfd, and deliverability amounting to about 6 bcfd, about 20% of 1998 demand for storage deliverability in the eastern half of the U.S.
Full development of MHP hub and storage sites during 1995-98 is expected to require a capital outlay of more than $300 million.
MORE EFFICIENT MARKETING
Larry W. Bickle, TPC chairman and chief executive officer, said more partners and storage and hub facilities likely will be added to MHP.
Companies already operating individual hubs can become partners by contributing assets and operating activities to the partnership. Electronic affiliations also will be possible for companies seeking to use MHP facilities and services.
Bickle said development of integrated gas market centers, in which gas hubs in supply areas interact seamlessly with previously unaffiliated hubs in market areas, is the next logical step in continuing to improve North American gas market competition and efficiency.
By helping buffer supply and demand at either end of the gas market chain, an integrated system of marketing centers will give gas customers access to the cheapest, most reliable supply, gas producers the best available price in any market served by the network, and gas pipelines maximum system load factors, Bickle said.
"We think this will reduce the capital investment needed to find and produce adequate gas reserves, as well as the need for many pipeline expansions," he said. "We think the U.S. might be able to consume 26-27 tcf/Year of gas without any major pipeline expansions, while at the same time reducing the cost and improving the reliability of supplies to customers."
PARTNERSHIP DETAILS
MHP will not provide pipeline transportation or buy or sell gas. Rather, its customers-gas producers, marketers, local distribution companies, and end users-will be able to rebundle their own contracted gas supplies and transportation capacity at MHP market centers to more efficiently manage their gas marketing activities.
For its share of MHP equity, TPC is contributing its storage development plans; gas hub locations, assets, and facilities; permits; leases; and signed demand charge contracts with terms of 8-20 years for high deliverability storage services representing about $480 million in future revenue. The capacity reserved at TPC sites by storage contracts amounts to about one third of the projected combined storage capacity of MHP's first five hubs.
Each of the other four partners is to contribute $45 million cash by yearend 1996 to help develop facilities under construction.
The five TPC gas hubs and storage sites being contributed to MHP include Moss Bluff, operating in Liberty County, East Texas, since 1990. Moss Bluff presently has working gas capacity of 5.5 bcf and can withdraw as much as 900 MMcfd of gas from two storage caverns. Those capacities are to expand by September 1995 to 7.5
bcf and 1.5 bcfd, respectively.
TPC's Louisiana hub is to begin operating in fall 1995, and the other three storage facilities are to begin service during 1996-98. When fully operational, MHP's market center network is expected to have 12 bcf of storage capacity and 2.4 bcfd of withdrawal capacity in Louisiana, 9 bcf and 900 MMcfd in Mississippi, 5 bcf and 600 MMcfd in Michigan, and 10 bcf and 600 MMcfd in Pennsylvania.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
Issue date: 12/26/94
