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/OFREEHOUSTON, TX CF 20JUN2000

/OFREEHOUSTON, TX CF 20JUN2000

Who pays for the transportation charges from the transporting pipeline's pick-up to the city gate or distribution company's inlet, even if it includes more than one transporting pipeline, is negotiable between the seller or marketing company and the buyer. The marketing company selling the gas might quote a delivered price to the buyer, especially, if the seller is holding transportation rights with the pipeline handling the transportation. If the buyer has transportation rights, he might take the gas FOB (Free on Board, the point where title transfers and where transportation charges to that point are included in the sales price) at the transportation pipeline's inlet. These are all part of the marketing and negotiating in moving gas from the field to the city gate and/or the consumer.

What are typical prices for transporting natural gas from producing area to consumers in various parts of the country where there is no intrastate gas? The buyer can get detailed information from the pipeline tariffs which can be gotten from the FERC and other sources like trade letters and magazines.

Pipeline rates or tariffs are set by the regulatory agencies involved. There is some negotiation possible. Still, the gas in different locations will have a value based on market conditions regardless of transportation rates. This is called "basis differential." Some typical basis differentials between hubs and major markets are shown in Figure 21.8. These were developed from published prices given in trade publications for a several month period to get representative values.

For natural gas to be carried in transportation pipelines, it must meet certain conditions of quality and composition. This was previously referred to as "pipeline specifications." These standards include the heating content of the gas per unit volume; i.e. British thermal units per cubic feet (Btu/cf). Typically, pipeline quality gas will

Table 21.2 U.S. Major Natural Gas Intrastate Pipelines—Summer 2000
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