Monday, July 23, 2007

The Business of Pipelines

In many cases, pipeline companies do not actually own the products they are transporting. The oil or natural gas that is pumping through miles of their piping interstate is actually owned by producers or shippers. These companies pay pipeline corporations to transport their product from the oil rigs to the refineries, manufacturers, and distribution centers. Similar to the trucking and train transportation systems, pipelines are an invaluable intermediary, and a very profitable business.
The FERC, or Federal Energy Regulatory Commission, regulates the fees charged by common carrier interstate pipeline companies. Some states also have regulatory commissions that control the costs of intrastate pipeline transportation. Within these guidelines, shippers engage in a nomination process in order to reserve a specific volume on the pipeline transport. Shippers must also meet the product safety specifications in order to utilize pipeline transportation.
By transporting in batches, many liquid fuel pipelines can ship several different types of liquid petroleum. Batches are transported with scheduling system that describes when the product was shipped, how much, and where it was shipped to and from. The product is measured at the receipt point as well as upon delivery in order to properly document the amount that was transported. The customer (or shipper) is charged according to the amount transported, the distance transported, and the number of delivery points. The process is very similar to the Postal Service. Once a carrier is confirmed, the amount to be shipped is accounted for, and a fee is determined. However, when something causes a delay or unexpected delivery change, tracking down a specific quantity of oil or natural gas can be much more complicated than located a letter or package. There is still most definitely a paper trail to follow, but batches of liquids often continue directly to a customer may even be used before it can be found, depending on the pipeline system and final destination.
The United States has the most complex and vast pipeline system in the world and distributes liquid and gas fuels to millions of customers every day. Pipeline transportation is vital player in the fuel economy, providing America with the standard of living it enjoys. Although there are regulations controlling the fees and profits collected by pipeline companies, it remains a business that is increasingly in need as civilization progresses. Even if there is a shift if fuel source, pipelines companies will continue to thrive, transporting whatever liquid or gas is necessary for the people producing it to the people who use it.

About the Author: Bob Jent is the CEO of Western Pipeline Corporation. Western Pipeline Corp is a successful, private independent producer of oil and natural gas.