CHAPTER 11 NATURAL GAS PURCHASING FROM THE PERSPECTIVE OF INDUSTRIAL GAS USERS

• Jurisdiction: United States

Natural Gas Marketing II
(Apr 1988)
CHAPTER 11
NATURAL GAS PURCHASING FROM THE PERSPECTIVE OF INDUSTRIAL GAS USERS
Mary Ann Hutton
Northwest Industrial Gas Users
Woodburn, Oregon

The whole premise of my discussion is based on a fallacy. There is no single "perspective" of industrial gas users. This may be the most important fact to keep in mind when marketing to industrial users: Each user is different, with different needs, different cost considerations, different supply requirements, and different priorities. Successful marketing to industrial users comes from taking the time to learn and understand these differences, and in having the flexibility to respond to them.

Having said this, I will spend the rest of my time making gross generalizations about the perspective of industrial users in today's tumultuous gas market — and in particular the industrial users of the Pacific Northwest with which I am most familiar.

Until recently, most industries have had little or no choice in acquiring natural gas. Their local distribution company (LDC) offered two or three industrial rate schedules. The prices were determined by a hierarchy of federal and state regulations. The industrial users were simply ratepayers, not customers.

The availability of nondiscriminatory, open access transportation has given industrial users access to a new competitive market for natural gas. With it has come many new choices. These choices mean more opportunities, and more risks. More control, and more responsibility. More potential economic rewards for making the right choices, more potential economic losses for making the wrong choices: sales or transportation? whose gas? from where? purchased direct or through a middleman? long-term or short-term? how secure? how to reserve transportation capacity? firm or interruptible? how interruptible is interruptible? what about a back-up? at what cost? what are the "hidden" costs? are the quotes comparable (wet or dry? Btu conversions? fuel and shrinkage? GRI?) what's it costing me just to figure all this out? who pays the taxes? what's my alternate fuel look like by comparison? can I get back out of this? what's this deal going to look like in a different market? what's going to happen in the pipeline's next rate case, or in my LDC's rates, or in state utility commission policies on transportation that will affect the attractiveness of this deal? can I get back onto LDC sales if I want to change my mind? what's that going to cost me?

No industrial customer can avoid making a choice in this new market. Doing nothing is a choice. And its more than a little unnerving.

The industrial plant managers, energy managers or purchasing V.P.s making these...