AltaGas Ltd T.ALA

Altagas mid-stream facilities

[rfguysd]

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

[bttmfischer]

Thnx, RFG. What is the source of this info?

[bttmfischer]

If I understood the hedging process you described in your post, it is a rather sophisticated insurance against cathastrophic  losses, not as a means of making profit.

[Capharnaum]

If you look at it from a midstream point of view, meaning you own pipelines or means of transportation to get nat gas or propane from point A to point B, what you do is you hedge the price at both point A and B at the same time which guarantees a spread between those points (and your profit). That's how energy marketers make their money, in general.

[bttmfischer]

Why would AltaGas do that? The transport gas/proane. They do not produce natural gas, do they?