Local distribution company (LDC) and large industrial gas consumers have learned a lot over the years about managing their assets more efficiently from gas marketing companies, but the shale boom has created a new challenge.

What’s to be done by a Northeast utility with long-haul pipeline capacity from the Gulf of Mexico when the Marcellus Shale is right next door, said gas marketing veteran Vinny McConnell, who recently became senior vice president for gas marketing with Houston-based Asset Risk Management LLC (ARM). He’s a veteran of Dynegy Inc.’s gas marketing business and most recently was a consultant to end-users and LDCs.

“They’re trying to figure out how to fulfill their utility obligations and manage this long-haul [pipeline] capacity that they’ve signed up for different periods of time,” McConnell told NGI. Demand charges for long-haul capacity from the Gulf region — the traditional natural gas breadbasket — can be a headache today if a utility is “taking gas from the Marcellus or has some coming across from the Rockies.”

That creates an opportunity for marketing companies to segment the unneeded long-haul capacity and mitigate the impact of demand charges on the utility, McConnell said. He gave utilities credit for learning a lot about asset optimization from natural gas marketing companies over the years. “They fully understand a lot of the optionality that’s involved in storage, a lot of the optionality that’s involved in the different segments of the transportation assets,” he said. “…I just think they’ve learned over time based on what they’ve seen in the asset management deals that they’ve done.”

But what’s going to happen to that long-haul capacity from the Gulf when the contracts held by utilities expire?

“If I had the answer to that, I wouldn’t be working right now,” McConnell said. “That’s kind of the thousand dollar question. You kind of stare at it: Where are all these liquids going to go; where is all this gas going to go, and where’s all this — for lack of a better word — all of this interim transport going to go?”

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