Shell NA LNG LLC is protesting Florida Gas Transmission’s (FGT) proposed tariff revisions related to the interchangeability of Btu-rich regasified liquefied natural gas (LNG) and conventional dry gas on its pipeline system, saying the changes are biased against LNG and would close off the Florida gas market to LNG supply sources.

FERC in mid-June ordered FGT to make the tariff changes after AES Ocean Express complained that the pipeline was placing “unreasonable and onerous” conditions on the company in its pursuit of an interconnection with FGT’s system. Ocean Express said FGT was frustrating its plans to construct a proposed Bahamas-to-Florida pipeline to deliver regasified LNG to the southern Florida market. FGT and Ocean Express currently are negotiating the matter at the Commission.

Shell urged FERC to suspend FGT’s proposed tariff revisions for the maximum five months, calling them “unnecessary and arbitrary quality standards that would, if allowed to go into effect, significantly reduce the number of LNG supply sources that could serve Florida markets.”

When FERC ordered the changes, “Shell LNG understood the Commission to mean that FGT’s tariff should be revised in order to avoid unreasonably excluding regasfied LNG from its system,” but that isn’t what it did, Shell told the Commission [RP04-249-001].

FGT’s proposed tariff “would unnecessarily inhibit the efficient development of LNG as a supply source to Florida markets,” Shell LNG said. “Regasified LNG should not have to meet additional quality requirements over and above the requirements for any other gas introduced into FGT’s pipeline system.”

The company took particular issue with FGT’s inclusion of a “modified” Wobbe Index in its tariff to measure the ability of conventional gas to be substituted with regasfied LNG. “Shell LNG is a strong advocate of the use of the Wobbe Index, which, when properly applied, has gained widespread industry acceptance in the United States and around the globe…Unfortunately, FGT has selected a modified Wobbe Index, rather than the more widely used and accepted Wobbe Index,” it said.

“Because the Wobbe Index addresses interchangeability concerns, several of the additional factors that FGT has proposed to add to its tariff (i.e., nitrogen, propane and Btu content) are unnecessary and, as set by FGT, would significantly reduce the number of LNG supply sources that could serve the Florida market,” Shell LNG noted.

At a FERC technical conference earlier this year, Shell pressed the Commission to promote the use of interchangeability indices, particularly the Wobbe Index, over heating value specifications currently found in the gas tariffs of interstate pipelines [PL04-3].

“The Wobbe Index provides a more meaningful measure of the ability to substitute one gas supply for another. It is…used throughout the world by gas system operators familiar with the issues surrounding multiple gas supplies of varying composition. Adopting the Wobbe Index will broaden the choices of gas supplies available to consumers in the U.S.,” and it “will not result in increased safety concerns for gas consumers,” said John Hritcko, vice president of strategy and development for affiliate Shell U.S. Gas & Power, during the conference.

In explaining the Wobbe Index, Hritcko noted that current specifications found in most gas pipeline tariffs are based upon the overall heating value of the natural gas, but he added that heating value alone is not a true indicator of interchangeability since it doesn’t address the important aspects of burnertip performance. The Wobbe index, which adjusts the heating value for the relative density of the gas, does address burnertip performance, which he said makes it a “much more meaningful indicator for end-users than the current specifications based upon heating value.”

He said that “practically all global gas markets (and even some regions of the U.S.) have adopted the use of interchangeability parameters in their contractual terms and conditions,” with the most commonly used index being the Wobbe Index.

Absent the adoption of the Wobbe Index in the U.S., Hritcko believes the flow of LNG supplies will be limited. “Currently only one existing Atlantic Basin supply source can be directly delivered into most gas markets along the East Coast of the U.S. However, if the U.S. pipelines were simply to translate their current heat content specification into a corresponding Wobbe Index, most LNG supplies throughout the world, when blended with an inert gas such as nitrogen, would meet the tariff specification for interchangeability.”

Shell is actively involved in the LNG field as a producer and importer. It also has filed a proposal to build and operate an LNG storage and regasification facility offshore Louisiana, and has begun construction of a regasification terminal at Altamira, Mexico, and is involved in a joint venture with Sempra Energy to build a regasification terminal in Baja California, Mexico.

FERC also should avoid seeking a “uniform, across-the-board” resolution of how to adjust quality specifications so that Btu-enriched regasified gas can substitute for conventional dry gas, without changing the burnertip performance or safety of the product, said Hritcko.

The Commission “should allow interchangeability standards to be set on [a] case-by-case basis rather than establishing well-meaning generic provisions that may not be suitable to the market circumstances.”

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