Altagas mid-stream facilities How does Altagas mid-stream facilities make revenue?
This is not as straight –forward as one would think but quite complex. The revenues on a daily basis would vary due to the fact that processing faciliities have the ability to remove or keep the "heating component" of natural gas in the stream based on market conditions for the day/week or month. If one leaves the propane in the gas stream , than the stream has more value due to the heat content of propane verus the market value of raw propane. The decision to keep or removal is reviewed constantly. However, most of the revenue originates from fees collected from gas producers to bring the NAT gas to specification and delivered to market. A much smaller amount comes from hedges.
1)Processing fees: There are 3 parts to the processing fees.
a)Gathering charge: In most cases, Altagas transports the gas from the field to the gas processing facility
b)Extraction Charge: Natural gas has several components . Some components are dangerous and others are beneficial. For Each NAT gas stream, the process engineer will determine which component will be extracted for disposal or stored for re-sale . The extraction is a fixed charge for each component since they required different techniques to removed. are:
Methane --- low heat content
Ethane ----- moderate heat content
Propane -----medium heat content
Butane ------high heat content
Water Vapor/water ----remove
H2S ---remove
N2 --- remove
CO2 ---- remove.
c)Transportation Charge: The gas is “Cleaned” to specification, it now needs to be delivered via pipe to the storage . The gas is analyzed for heating content and price is determined based on GigaJoules.
Before we discuss hedging ,,,, I would stress a few engineering points that should be understood
a)This is no 100% yield in processing . For some reason , it is always assumed that there is 100% yield since calculations are easier if one does. But in fact, yields are between 75 to 85% and this affects volumes and tonnage. The processing plants does shutdown maintenance periodically to keep yields as high as possible.
b)The gas input stream is constant and the NAT Gas components do not change over time. It is always assume that this stream is a constant over time but that’s hardly the case. If the percentage of NAT GAS components change so will the amount of NAT GAS components extracted over time change
HEDGING:
Natural GAS Hedge/LPG Hedges. therre is likely 3 types of hedges(but many within each area).
a)Gas Producer and ALTAGAS jointly agree on a hedge. The hedge would take into account the current yield and current % component composition and adjust for the current variability of the process and stream. (GAs producer)
b)In order to protect against large plant variations and stream disruptions a larger term hedge would be made. This would be adjusted over time as parameters remain good. (like insurance policy against diasters). (Altagas)
c)A third hedge would be made as an adjustment to the hedge made in a). If yields and composition are better than assumed, there would be excess supply which could be hedge. The converse is also true. So, it is up to ALTAGAS to ensure yields remain high and composition streams are carefully moinitored, Who owns the excess or the deficiency? Likely both ALTAGAS and the gas producer shared equally.
GLTA
RFguy