Page 226 - Hydrocarbon Exploration and Production Second Edition

Reservoir Dynamic Behaviour 213

If the distribution of gas in a country is run by a nationalised or state owned
company, there is effectively a monopoly on this service, and prices for gas
distributed through a grid system will have to be negotiated with the distribution
company. If the market for distribution is not regulated then opportunities arise
to sell gas to other customers and directly to consumers, perhaps including a tariff
payment for transport through a national grid.
This situation has arisen in the UK where competition for gas sales has been
encouraged. Gas producers can enter into direct agreements with consumers
(ranging from power stations to domestic users), using the national distribution
grid if necessary. Such a de-regulated market increases competition between the
distribution companies and thus regulates prices.
When a contract is agreed with a consumer, some delivery quantities will usually
be specified such as

Daily contract quantity The daily production which will be supplied; usually averaged
(DCQ) over a period such as a quarter year.
Swing factor The amount by which the supply must exceed the DCQ if the
customer so requests (e.g. 1.4 DCQ).
Take or pay agreement If the buyer chooses not to accept a specified quantity, he will
pay the supplier anyway.
Penalty clause The penalty which the supplier will pay if he fails to deliver the
quantity specified within the DCQ and swing factor
agreements.

Figure 9.10 shows the relationship between DCQ and the swing factor. If, for
example a swing factor of 1.4 is agreed, then on any one day the customer may

Production peak demand accepted under agreed swing factor
rate
(MMscf/d)
daily contract quantity
actual quantity
(an average)
delivered

minimum take or pay quantity

Time (month)
Figure 9.10 Typical delivery quantities speci¢ed in a gas sales contract.