CHAPTER 1 OVERVIEW OF PIPELINE SYSTEMS
| Jurisdiction | United States |
(Jan 1995)
OVERVIEW OF PIPELINE SYSTEMS
Texas Gas Transmission Corporation
Owensboro, Kentucky
1.0 Introduction
Pipeline systems, regardless of the medium they are designed to move, share certain fundamental design and operational properties. In general, these common properties are related to the unalterable laws of physics. As we examine individual pipeline systems, however, it is evident that a multiplicity of environmental, economic, and regulatory factors have resulted in the development of widely divergent systems designed to accommodate unique supply and market conditions. The purpose of this paper is to provide a basic overview of the pipeline systems utilized in the oil and gas industry today. Technical as well as regulatory distinctions will be identified with particular emphasis on the catalysts for change that have shaped pipeline systems over the course of time.
2.0 History of Pipelines in the U.S.
The utilization of pipelines to transport oil and gas was merely a logical extension of a process that had been in place for centuries to move other non-hydrocarbon fluid or gas products. As commercial production of oil and gas accelerated in the late 19th century, it became apparent that pipelines would play a vital role in determining the economic viability of this evolving industry. Initially these systems were limited to a regional scale due primarily to economic considerations; but as technology advanced and markets evolved, there was systematic increase in the capacity and distribution of these energy pipeline systems. Concentrated industrial and residential growth in the Midwest and Northeast spurred "long line" construction from production areas located largely in the southwest. In addition to these market forces, interstate pipeline construction was also prompted, particularly during World War II, by uncertainties surrounding tanker derived supplies of crude.1 Further developments that led to the maturation of the pipeline industry included the incorporation of gas compressors on transmission systems and the establishment of LDCs, which are municipally owned gas distribution systems. Ultimately,
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however, it should be recognized that the impetus behind energy pipeline development was and continues to be the need to link supply with demand in the most cost effective manner available.
3.0 Types of Natural Gas Pipeline Systems
Natural gas pipeline systems fall into one of three generic categories: gathering, transmission, or distribution. Through the integrated use of these distinct operational units, natural gas is transported from its point of origin to its point of consumption. Gathering systems are generally defined as localized pipeline and auxiliary facilities contained within the production areas that are utilized to accumulate and transport unprocessed natural gas to a central collection point. Transmission systems are employed to receive gas from the gathering system and to provide the transportation link between supply area and market. Market areas are generally serviced by localized gas distribution systems where the gas is ultimately consumed. The operational and regulatory complexities associated with the operation of these integrated pipeline systems are significant and are influenced by such factors as geography, environment, economy, and public necessity.
3.1 Natural Gas Gathering Systems
Attendant to natural gas production is the need to accumulate the produced volumes in a manner that facilitates the efficient and economical movement of gas from supply area to market. Natural gas gathering systems are utilized to systematically concentrate production volumes to a point of transferal to downstream distribution systems.
3.1.1 Exploration and Production
Ultimately, gathering system design and configuration are determined by the location of production wells and the proximity of processing facilities and transmission systems to the production area. Given the uncertainties surrounding the completion and development of commercial gas prospects, it is evident that gathering system design is often dictated by forces offering little symmetry or uniformity.2 This has led to intricate networks of onshore and offshore pipeline systems that have evolved concurrent with various exploration initiatives.
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3.1.2 Gathering System Flow Dynamics
Most gas production is derived from reservoirs encountered at a depth of several thousand feet. Gas encountered at these subsurface horizons is generally produced initially at pressure sufficient to effect movement through the gathering system to either a processing facility or a gas transmission system. In other words, a supplemental source of energy such as a compressor is generally not a required component of a gas gathering system during primary phases of production. As production declines, however, there is a systematic decrease in the flowing pressure of a given gas supply source, and compressors may be employed to extend the production life of a field. This decision is driven by economics and is a function of recoverable reserve versus capital and operating costs associated with compression.3
Gathering system flow dynamics are also influenced by gas composition. Typically, gas that is received at the wellhead contains varied hydrocarbon constituents in both fluid and gaseous form. This two-phase flow necessitates design accommodations that provide for the efficient movement of both mediums to a processing facility. These design considerations are complex given the diversity of flow characteristics that can be encountered such as slug, turbulent, and laminar. Through extensive computer modeling, however, two-phase pipeline systems have been effectively employed in both onshore and offshore production areas.4
3.1.3 Natural Gas Processing
To render the production areas gas stream marketable, the various hydrocarbon and inert constituents contained in this native gas must be removed. Typically, this segregation occurs at a processing facility centrally located relative to the gathering system.
3.1.3(a) Natural Gas Liquids
Hydrocarbon liquids in the gas stream are removed at the processing facility for remarketing. These hydrocarbon components are generally what is referred to as "heavy" hydrocarbons such as ethane, butane, and propane. Numerous factors must be considered in determining the economic viability of recovering hydrocarbon liquids, the most significant of which being gas composition and delivery pressure. Market conditions for
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these liquid hydrocarbons also vary and must be considered in developing appropriate processing strategies.5
3.1.3(b) Dehydration
Native gas also typically contains formation water which must be reduced or removed prior to its introduction into the downstream transmission system. These dehydration measures are necessary to ensure the quality of the final gas stream product and to preclude flow inefficiencies attributable to free liquids in the gas stream. Contractual specifications also dictate the level of fluids that can be contained in the volumes received into the downstream transmission system.
3.1.3(c) Desulfurization
Native gas may also contain unacceptable levels of sulfur when delivered to the processing facility. Hydrogen sulfide, a common inert found in many producing areas, is removed by desulfurization processes as determined by the relative percentage of sulfur contained in the gas stream. Other associated acids and inerts are also removed at this juncture to attain contractually defined gas quality specifications.6
3.1.4 Gathering System Regulatory Overview
Though obscured for a time by the more salient features of Order 636 such as unbundling and straight fixed variable rate design, the regulation of the gathering of natural gas production is now the focus of both the Federal Energy Regulatory Commission (FERC) and the various state regulatory agencies.7
Historically, the FERC's jurisdictional authority over gas gathering systems was designed to protect the gas consumers by ensuring that the cost of gas delivered adequately reflected the cost of the gathering system. The elimination of the pipeline as merchant, however, as a result of Order 636 coupled with the effects of unbundling have caused many pipelines to reevaluate the continued incorporation of gathering systems in their respective integrated pipeline systems.8 This reassessment has led many pipelines to conclude that gathering assets are more ideally suited to non-regulated affiliates or independent non-affiliated operators. It is argued, however, particularly by the production community, that absent some form of state or federal regulation, these independent
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gathering companies could impose gathering rates at their sole discretion and without regard to the "captive" nature of many production areas.
The regulation of gathering systems on a state level have traditionally been structured around the need to provide for conservation and correlative rights. Many industry participants now suggest that to ensure an adequate level of producer and consumer protection under Order 636, this state authority should now be expanded to provide uniform regulation of all gathering systems. The broad jurisdictional authority would encompass not only affiliated and non-affiliated systems but also those owned and operated by producers.9 The ultimate segregation or consolidation of regulatory control over gathering systems remains transitional as efforts continue to define a course consistent with the objectives of Order 636.
3.2 Natural Gas Transmission Systems
The conduit between gas producing areas and the ultimate area of consumption is the natural gas transmission system. These large diameter interstate pipeline systems have evolved into a complex...
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