How important is Customer Service to Natural Gas Pipelines?

Pipeline companies don’t care about customer service – unless it can make them a buck. That’s a bold statement any way you look at it. I would hasten to say that any pipeline company worth its salt would strongly disagree with it. Yet how many people could say that they’ve never heard that before? In my opinion, it depends on your definition of customer service. It’s one thing to complain about a pipeline just because they don’t do things your way – or resolve an issue to your complete satisfaction. However, do those people who complain try to look at the other side of the issue? Pipeline companies spend a lot of time trying to make sure they treat everyone consistently. Now, the amount of time and energy each pipeline spends is another matter.

Customer satisfaction surveys show that different types of pipelines value customer service at different levels. It seems that interstate pipelines care more about keeping their customers happy than do midstream and intrastate pipelines. At least that’s what the customer satisfaction surveys show. Certain interstate pipelines take great pride in touting their rankings that come out each year. However, midstream companies seem to still have a lot of work to do. EnergyPoint Research’s latest Customer Satisfaction Survey of the midstream sector shows that the overall rankings of the industry as it relates to customer satisfaction leaves something to be desired. On a scale of one to ten, the mean rating of the sector stands at 6.46. That’s right around the rating of the Internal Revenue Service. Doug Sheridan, founder and managing director of EnergyPoint Research, the Houston-based firm states “Providers of unregulated gas gathering and intrastate transportation services clearly have plenty of room for improvement when it comes to customer satisfaction. The group’s aggregate ratings are some of the lowest EnergyPoint has collected since we began conducting our surveys in the oil patch in 2003.”

The question remains as to why these ratings are so low. Compared to interstate pipelines, could it be that the big interstates are backed by rate bases that allow for the expense of keeping customers happy? After all, with a guaranteed margin and the ability to recover these costs in rates, wouldn’t it be wise to make sure that business systems and processes took the extra step to develop more bend-over-backward functionality? The midstream sector doesn’t have that luxury. The money they spend on improving systems for the benefit of their customers is a direct expense. Now that doesn’t justify a non-caring attitude, but it could certainly figure into the equation when coming up with a budget. Disregarding customer service will come back to haunt you in the end, but can a company be faulted for dividing the budget pie a little unevenly – and allocating more to immediate revenue generating projects?

Secondly, could it maybe be the perception of the customers themselves? I would venture a guess and say that an average producer or marketer views interstate pipelines as a basic requirement, much like interstate highways. They are necessary to move product, and a producer or marketer certainly would not think of building a pipeline to a major downstream market on their own. However, when it comes to the midstream sector, they are often viewed as necessary evils standing between the wellhead production and the mainline pipes. In fact, many assume that if they did not have more important designations for their dollars – like drilling for production, they would build their own midstream facilities.

With that type of attitude on behalf of many of their customers, can midstream pipelines ever catch a break when it comes to customer satisfaction? Maybe not. But focusing a little more on efficient business systems, business processes, and giving consistent and detailed data to their customers could only help. Certainly enough to be thought of in a kinder sense than the IRS.

Robert W. Young

The debate on disclosure continues

The debate on how much information pipeline companies should be expected to make public regarding their equipment and location of pipelines continues. The latest story is on seattlepi.com.

What's at issue in the public-records dispute is information such as the operating pressure, thickness of pipeline walls and the locations of features such as pressure regulators and the spots where pipes are tested for strength.

There are numerous articles on this topic lately. I've just listed a few here. Are there any other opinions that haven't already been stated?

From the Olympian.

How Much Security does Pipeline Software need?

Well, this is my first post on this blog. In the interest of full disclosure, I will introduce myself: my name is Richard Wagner, and I am a Product Manager working for Energy Solutions, the sponsor of this blog site. I am working with the development team on PipelineTransporter for liquids scheduling, PipelineOptimizer for pump and energy optimization on liquids pipelines, and GasLoadForecaster, which predicts natural gas demand based on historical data and available weather forecast data.

I joined Energy Solutions about two months ago, having spent many years working for software companies serving the pharmaceutical industry. I must admit, I wasn't quite sure what to expect when I joined, since the pharmaceutical industry is quite different from the petroleum and gas industry. Interestingly enough, the challenges we face as a software provider are quite similar across the two industries. Our biggest challenge, like most software companies, is to listen to the industry to determine what their biggest challenges are, and deliver really helpful applications without getting too caught up in the technology.

That being said, one interesting difference I have noticed between pharma and oil & gas is in the area of software security. Due to the incredibly tight scrutiny from the FDA, pharma companies have very demanding audit trail and security requirements for virtually all their software systems. On the other hand, I have noticed that many applications in oil and gas have little or no built-in security measures; many of them depend simply on the network administration team to determine who can or cannot use them. In many ways, this can simplify the management of the applications. But I am hearing and reading about increasing concerns concerning the vulnerability of the energy industry in America to radical groups who might want to attack energy assets, including pipelines.

The question is, what should be done to mitigate this potential threat? Dealing with the threat of physical attack on the pipelines is the most obvious place to start. This could include increased security patrols and surveillance, as well as more sophisticated sensors and leak detection software and emergency response teams. But is there anything we need to do to protect pipelines against cyber-attack? With a central control room able to control valves, pumps, compressors and more for hundreds, or even thousands of miles, and millions of barrels at stake, what measures are appropriate to record and protect the software systems that manage this complex interaction?

The physical security that controls access to the control room is part of the answer. The other part will need to be an assessment of the required system security built into the software. SCADA security has already been recognized as an area where improved controls are required, and vendors and independent industry organizations are both working on this. The question I have, and which I need to explore as a product manager, is whether we need to tighten security and auditing controls in our software. Does scheduling software require the same level of user control and auditing as SCADA or other systems?

This is my question to the readers of this blog: what security measures (if any!) do you require, or might you require in the next five years, from the software systems that interact with SCADA, like pipeline scheduling, leak detection, load forecasting, etc. Any and all feedback is welcomed!

Richard Wagner

Is ROI a factor in selection of a leak detection system?

Leak detection systems seem to be viewed by some pipeline companies as a necessary evil. Companies look at how much it will cost to install and operate a leak detection system not at the longer term benefits.

Such systems come in many flavors – with a wide performance range: some systems can detect small leaks quickly while other systems cannot detect small leaks at all and even for larger leaks these systems will take a while to alarm. While most pipeline companies take leak detection performance into account when selecting a system, few companies seem to translate the additional benefits gained by installing a high performance leak detection system into financial benefits.

Recently a customer decided to purchase a very basic leak detection system. The detection capabilities of this system are likely very limited (long detection time, not very sensitive and not much in terms of leak location capabilities). The decision makers seem willing to take a higher risk on not detecting a leak for the purpose of saving money up front. However, when the next leak occurs, the added cost resulting from the relative poor performance of a weaker leak detection system will far outweigh the money saved.

It is possible to calculate the return on investment (ROI) from a leak detection system. Obviously some assumptions must be made in order to make these calculations – the most unknown being: when will I experience my next leak? Then there is the question: how much will a leak detection system actually save my company in terms of avoided lost product, avoiding/reducing fines and clean up costs, reduced damage to public image, etc.

The question is: is ROI considered when selecting a leak detection system and if not why? Is it because we all like to think that leaks won’t happen – therefore it is purely an expense with no financial return? Statistics tell us that it is not that unlikely that a randomly selected pipeline will experience a leak within the next 5 years – whether caused by internal factors (corrosion etc.) or external factors (3^rd party interference). For most pipeline companies, it is just a matter of time, and the sooner an incident happens, the higher the ROI…

Comments anyone?

Morten Kristiansen

March 2007 Update

American Gas Association

• Natural Gas Is the Cornerstone of Solution to Climate Change
• Budget Proposal Would Delay Delivery of America’s Cleanest Natural Fossil Fuel

American Petroleum Institute

• Industry outlines policies to enhance energy security

Energy Information Administration

• Oil and Gas Field Code Master List 2006 (02/27/2007)
  Comprehensive listing of U.S. oil and gas field names as of 2006.
• Monthly Energy Review (02/26/2007)
  EIA's primary report of recent energy statistics
• Annual Energy Outlook 2007 with Projections to 2030 (02/20/2007)

Federal Energy Regulatory Commission

• February 5, 2007: FERC submits its FY 2008 Congressional Performance Budget Request
• February 15, 2007 Commission to assess the adequacy of financial forms data; acts to ensure compliance with reporting requirements Press Release
• February 15, 2007 Commission clarifies its jurisdiction over natural gas gathering facilities Press Release| Clarifiying Policy |
• Assessment of Information Requirements for FERC Financial Forms, here.
  

National Energy Board Canada

• Amendment to National Energy Board Rules of Practice and Procedure, 1995 - Request for Comments (14 February 2007) [HTML]
• Hydrocarbons and Canada's Energy Future - Presentation to the Association Pipeline - Gaétan Caron - 22 February 2007 [HTML]

Pipeline & Hazardous Materials Safety Administration

• Secretary Peters Announces DOT's Budget Request of $67 Billion for Fiscal Year 2008
• PHMSA announces a Hazardous Liquid Pipeline Safety Standards Committee Meeting. For more information please visit: http://ops.dot.gov/init/TAC/thlpssc.htm

Transportation Security Administration

• FEDERAL EFFORTS FOR RAIL AND SURFACE TRANSPORTATION SECURITY
  

U.S. Department of Energy

• DOE Selects Six Cellulosic Ethanol Plants for Up to $385 Million in Federal Funding Funding to help bring cellulosic ethanol to market and help revolutionize the industry more>

In the news...

• Alaska Would Kick in $500M for Pipeline Whoever wins the right to build a multi-billion dollar natural gas pipeline in Alaska will get as much $500 million from the state under a proposal from Gov. Sarah Palin.
• Longtime FERC Official Leaving Daniel Larcamp, who has been chief of staff for the Federal Energy Regulatory Commission for 20 years, is leaving Feb. 28 for a career in the private sector.
• Pipeline review panel told to block oilsands from using Mackenzie natural gas EDMONTON (CP) - Environmentalists want Alberta's booming and greenhouse-gas-spewing oilsands blocked from using natural gas flowing through a proposed $7-billion pipeline from the Mackenzie delta.