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Building Natural Gas Consumer Markets
- 1. Building Local and Regional Natural Gas Markets Clean. Reliable. Abundant. Responsible. Value, Comfort, and Peace of Mind
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- 21. Natural Gas Value Chain
- 26. Developing Regional Markets Step 6: Initial Cost Estimate Project Cost estimation based on preliminary project design Identification of optimal capital structure Identification of required rate of return based on financial costs Estimation of operating costs Step 7: Regulatory Frame Clear and stable Legal and Regulatory Framework Clear market rules Investment guidelines and prudency tests Tariffs to cover costs Mechanisms to enforce payments and/or compensate for social protection Stable fiscal environment
- 27. Developing Regional Markets Step 8: Supply-Side Analysis Identification of gas sourcing options Comparison based on security of supply, timeframe, supply quantity, expected price and availability of transmission infrastructure Estimation of expected transportation, storage, and peaking costs Terms of the contract Step 9: Market Clearing Price Analysis of existing fuel for each customer segment View on likely price scenario of existing fuel Capital cost involved in switching to Natural Gas in each segment Appropriate discount determination on alternate fuel prices based on desired payback period
Editor's Notes
- In addition to HRX providing system connection and supply diversification for VNG, two utilities have shown interest in this project for gas distribution and power generation needs. Columbia Gas of Virginia has subscribed to capacity on the HRX and both Columbia and Dominion Virginia Power have subscribed to increased capacity on the VNG Joint Use Pipeline (JUP). Two new service agreements negotiated with these parties have required VNG to amend it’s application with the commission and request additional compressor stations. The incremental costs attributable to the additional compressor stations will be borne by Columbia, Dominion, and VNG. The inclusion of Columbia and Dominion as part of our overall HRX strategy provides us with additional revenue opportunity as these utilities subscribe to increased usage on our pipelines.