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Natural Gas Quality & Interchangeability Docket No. PLO4-3

Natural Gas Quality & Interchangeability Docket No. PLO4-3. Jay Ellzey, Director Production Services & Regulatory Affairs Chevron Natural Gas May 17, 2005 Technical Conference. Discussion Points. Obstacle Recommendation Practical application Policy Objective Public Interest.

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Natural Gas Quality & Interchangeability Docket No. PLO4-3

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  1. Natural Gas Quality & InterchangeabilityDocket No. PLO4-3 Jay Ellzey, Director Production Services & Regulatory Affairs Chevron Natural Gas May 17, 2005 Technical Conference

  2. Discussion Points • Obstacle • Recommendation • Practical application • Policy Objective • Public Interest

  3. Obstacle: Regulatory Uncertainty • Wasted Energy Capital Investment • Unnecessary Supply Loss Risk • Inefficient Supply Response World Consumption = 251 Bcfd FSU – 35% 1953 Tcf North America – 5% 256 Tcf Europe – 4% 203 Tcf Middle East – 36% 1980 Tcf Africa – 8% 418 Tcf Africa3% Middle East8% Asia Pacific – 8% 445 Tcf North America29% South America – 5% 250 Tcf Asia Pacific 12% FSU24% South America 4% Europe 20% Resources (Tcf) Source: U.S. DOE – EIA (2003 figures)

  4. Recommendation • Grant the Petition for Rulemaking Filed Yesterday • Adopt Nationwide Gas Quality and Interchangeability Regulatory Specifications • CHDP 15 Degrees Fahrenheit Minimum • 1400 Wobbe Index • 4% Maximum Inert • 1.5% Maximum Butanes Plus • Create Non-Discriminatory “Safe Harbor” Tariff Mechanism Maximizing Supply

  5. Practical Application • Adopt Nationwide Specification for Certainty • Require Tariff Safe Harbor Concept for Supply Flexibility • Require Tariff Language Establishing the Use of Aggregation, Blending and Pairing on a Non-Discriminatory Basis • Maintain Tariff OFO as Safety Mechanism • Use Economic Analysis to Determine Appropriate Remedial Action on As-Needed Basis • Ensure Availability of Natural Gas Quality Data

  6. Policy Objective • Maintain Infrastructure Safety and Integrity • Continue Supply Flexibility • Increase Regulatory Certainty • Position U.S. to Safely Access New Domestic and Imported Supplies • Develop Flexible and Various Supply • Deploy Energy Capital Efficiently • Avoid Distorted Market Signals for Processors

  7. Maximize SupplyRegulatory Certainty National Specifications Tariff Safe Harbor Economical Remedial Action Safety OFO Mechanism Conclusion: Satisfy Public Interest With Workable Regulatory Solution

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