Midstream Natural Gas Companies are in the business of moving natural gas from production fields to consumers, primarily through pipelines. They make money in this business by buying and reselling natural gas, or by charging transportation fees, or tariffs, based upon the volume transported. In both cases, it is essential to measure the gas that enters into the system and the gas that exits the system so that the invoiced charges can have accounting credibility. But prior period adjustments persist, pointing to variances in how gas is measured one month then retroactively corrected when results change, sometimes months later.
Pervasive Measurement Uncertainty
A portion of the natural gas being transported, fuel gas, is used to power the system of compressors used to move methane. Fuel gas is often, but not always measured to account for this loss, and it is accounted as an operating expense to the enterprise.
Another portion of the natural gas being transported is lost to the atmosphere, in the form of unburned methane, through necessary operating evolutions in which the pipeline is “blown down” or through leaking valves and compressor equipment. Sometimes the unburned gas that is blown down may be recovered and re-inserted into the pipeline to lower emissions of methane and recover the gas volume that would otherwise be lost. Today, there is ever increasing financial and environmental pressure to minimize the volume of gas lost to the atmosphere.
Excess gas that the system is not equipped to handle and transport through the processing plant or pipeline networked is sometimes “flared” or burned off. Flaring also has environmental consequences, although not as significant as unburned methane releases, but it is readily observable by the public, and thus has become a target of regulatory concern and control. Flare gas is often, but not always, measured, but it is a difficult measurement and is often uncertain to +/- 10–20% of the true volume.
All of these uses and losses of volume are measured or estimated then reported to regulatory authorities, and the financial impacts of these uses and losses are factored into operations as a cost of doing business. Ultimately, these costs are borne by customers, or in competitive markets such as the USA, the costs erode the bottom-line profits of the transmission company.
Once all these uses and known losses are estimated and accounted for, the remaining difference between the inputs and outputs of the system are known by a variety of terms, including Lost and Unaccounted For (LAUF) gas, Lost and Unaccounted (L&U), and other terms. This value includes the result of errors in measurement and estimation of the used and lost gas but is overwhelmed by errors in the measurement of the inputs and outputs of the system.
There is a premium placed on maintaining accurate volume measurement at each input and output of the system. If there are many inputs and outputs, the law of large numbers tends to average out the errors and the total error approaches zero for the system, even if the errors may be exceptionally large at any given input or output. However, the individual customer or supplier to the system is also highly interested in having an accurate measurement in and of itself, so the transportation company is also interested in making accurate measurements at each and every point because their business reputation, competitiveness, and profitability are also at stake. Federal Express would not last long if they routinely lost four out of every 1000 of the packages they were entrusted with transporting as a “cost” of doing business!
Reliability and Control
Natural gas pipeline operators recognize the need to employ the best equipment, best practices in design and installation, and maintenance to protect their reputation and bottom line. At the same time, a balance must be struck between cost and performance, as the cost to attempt to achieve perfection may also erode profits, with diminishing returns in the competitive landscape.
Each transportation company has measurement teams of engineers, analysts, and technicians whose job is to detect and correct errors in measurement on a daily, monthly, and annual basis. They continue to optimize their use of flow measurement technology and human resources to achieve its financial and customer satisfaction targets to sustain a profitable business.
Optimizing with new technology is a very lengthy and capital-intensive process. The adoption of today’s ultrasonic flowmeters is a good example. Pioneering work on multi-path, custody transfer class ultrasonic meters began in the 1960’s, but the technology was not accepted for use in natural gas custody measurement until about 30 years later in 2000. After acceptance, the full adoption rollout did not reach maturity until a full 20 years later, after much learning was accomplished with respect to calibration, standards, field use and maintenance, etc. The arc of development of the use of Coriolis meters has followed a similar path, about a decade behind the Ultrasonic meter story.
An Urgent Imperative to Improve
There is real urgency and opportunity to meet the following challenges head on with improved gas measurement analysis and error catching sensitivity.
Corporate Performance
A workforce shortage is creating urgency to better optimize how dwindling resources are deployed. By automating gas measurement analysis, teams can focus on the small number of meters that actually need their attention.
Customer Retention and Growth
Competition is fierce – you cannot afford to lose product or tariffs/fees. Accuracy is critical to showcase added value vs. competitors and avoid under- or over-charging customers which result in endless PPAs.
Methane Fees and Emerging Markets
The Inflation Reduction Act’s methane fee starts in 2024, making it imperative to better measure your emissions baseline. Uncertainty also limits your ability to trade in new markets, such as responsibly sourced gas and carbon credits.
Augmented Intelligence (AI)
AI-driven automation is helping teams cut net costs, which is mandated by lower tariffs, higher labor costs, inflation, and the free-market. If you are not moving into AI in 2024, your competitors will eat your lunch
Next Level Measurement Performance,
Given all the competing pressures and market forces, gas pipeline operators can’t afford to wait through another cycle of measurement innovation, which based on the last major evolutions in USM and Coriolis meters will take decades. However, the next phase of measurement improvement is one of digital transformation leveraging the data you already have and technologies, like C-SMART Analytics, which are available now. When it comes to meeting your corporate performance, customer growth, carbon intensity, and AI adoption goals, C-SMART checks all the boxes!