e-commerce standards: a strategic imperative ian anderson electronic commerce for oil & gas...

E-COMMERCE STANDARDS:A STRATEGIC IMPERATIVE

Ian Anderson

Electronic Commerce for Oil & Gas

London, January 28, 1999

January 28, 1999 E-Commerce Standards: A Strategic Imperative

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OUTLINE

Focus on Natural Gas: Concepts applicable to oil (and other products and

services).

Background. The Standards:

Business Practices. Electronic Commerce.

Accomplishments. Q & A.


3

GasEDI (1)

Sponsored by CAPP, SEPAC, CGA, CEPA: Canadian Association of Petroleum Producers (CAPP)

and Small Explorers and Producers Association of Canada (SEPAC) - represent Canada’s natural gas and crude oil producers.

Canadian Gas Association (CGA) and Canadian Energy Pipeline Association (CEPA) - represent Canada’s natural gas transporters and distributors.


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GasEDI (2)

Mission: Promote the development and implementation of

North American business and electronic information standards to improve the competitive position of natural gas. We believe all participants in the gas industry - including end

use consumers - are best served by a vibrant, efficient, industry - from well head to burner tip.


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GISB

Gas Industry Standards Board (US). Mission:

Develop business and electronic commerce standards for the gas industry: Applicable across North America. Participation by Canadians and Mexicans.


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FERC (1)

Federal Energy Regulatory Commission (US). Public Conference - Sep 21 95:

Too many differences in basic services. Difficult and labour intensive to manage gas.


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FERC (2)

Examples: Company managing “energy” - coal, heavy fuel, electricity,

gas: customer effort to manage gas = 6 times the customer effort to manage equivalent amount of other energy types.

Nomination: Instruction to transport gas from point A to point B. Only 21 data elements required (Apr 90 industry

consensus report). Without standards - over 80 different data elements

required to transport gas across daisy chain of pipelines.


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US GAS: 1967-1997

0

5

10

15

20

25

1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997

0

2

4

6

8

10

<= Consumer TCF/YR

Wtd Avg US$/MCF =>

<==Tight Control==> <=Competition=>


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STANDARDS SUMMARY (1)

GISB has developed business practice and electronic commerce standards. US interstate pipelines must implement most

standards: FERC mandate.

Optional, but often being implemented: Other US pipelines. Other gas industry participants. Canada. Mexico.


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STANDARDS SUMMARY (2)

Transacting in Energy. Gas Day. Nominations. Flowing Gas / Invoicing. Capacity Release. Electronic Delivery Mechanisms. Internet. Contracts.


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TRANSACTING IN ENERGY

Standard units of measure: US: Dekatherms (Dth).

1 Dth = 1,000,000 Btu(IT).

Canada: Gigajoules (GJ). 1 Dth = 1.055056 GJ.

Mexico: Gigacalories (GC). 1 Dth = 0.251996 GC.

Btu(IT) = International Btu (British Thermal Unit).


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GAS DAY

GISB standard gas day: Beginning and ending at 9:00 am central clock time. Winter: Standard time. Summer: Daylight time.


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NOMINATIONS (1)

All times are Central Clock Time:

Cycle Nomination Deadline Scheduled Quantity Flow Start Bumping

Timely 11:30 am, Day before GasDay

4:30 pm, Day beforeGas Day

9:00 am NotApplicable

Evening 6:00 pm, Day before GasDay

10:00 pm, Day beforeGas Day

9:00 am Allowed

Intra-Day 1 10:00 am, Gas Day 2:00 pm, Gas Day 5:00 pm Allowed

Intra-Day 2 5:00 pm, Gas Day 9:00 pm, Gas Day 9:00 pm No


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NOMINATIONS (2)

Firm Evening and Firm Intra-Day 1 Nominations have priority over (can bump) scheduled interruptible service.

Firm Intra-Day 2 Nominations do not have priority over scheduled service.


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NOMINATIONS (3)

Use electronic transactions: The gas industry can only meet the GISB nomination /

confirmation schedule through the use of standard electronic transactions.

Fax is not electronic, because an inbound fax is not automatically computer processable.


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NOMINATIONS (4)

Concerns: Feasibility of concurrently nominating on many

pipelines. This concern relates to both human issues (dealing with a multitude of “last minute” decisions) and communication issues.

Pipelines’ ability to complete all tasks necessary to provide timely shipper scheduled quantity statements.


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FLOWING GAS / INVOICING (1)

GISB Standards: Measurements by the 5th business day. Allocations before or with the invoice. Invoice by the 9th business day. Settlement not standardized (anti-trust issue). Prior period adjustments limited to 6 months.

Settle within 3 more months.


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Clarify the predetermined allocation methodologies currently in place at interconnects between pipelines to ensure the best choices are in place.

Implement OBAs (Operational Balancing Agreements) at more interconnects.


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Gas production: US:

Well owners produce gas. Production per individual owner instructions. Unmarketed gas stays in the ground.

Canada: Wells produce gas. Production in working interest shares. Unmarketed gas carried with marketed gas.


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CAPACITY RELEASE

US: FERC:

Pipeline spare capacity released and bid for using complex, open, offer / bid process.

Canada: National Energy Board, Feb 2 95:

“Secondary market … working well without regulatory oversight … continue to evolve according to the needs of the parties involved …”.


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ELECTRONIC DELIVERY MECHANISMS

GISB’s standard formats for transferring electronic documents: EDI = Electronic Data Interchange.

Data transfer over the internet.


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INTERNET (1)

Already in use for data gathering and sharing. Communication layer for transferring EDI

documents. EDI = computer application to computer application

exchange of ordinary business documents (purchase orders, invoices, etc) in a public standard electronic format.


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INTERNET (2)

FERC regulated pipelines must migrate from proprietary EBBs (Electronic Bulletin Boards) to the internet.

Developing electronic contracting - expect to implement in early 2000.


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CONTRACTS (1)

Not mandated by FERC. Developing usage “momentum”. Trading Partner Agreement (EDI):

On paper, signed in ink. Parties agree to be obligated to perform per electronic

documents.


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CONTRACTS (2)

Short Term Gas Purchase / Sale Agreement: On paper, signed in ink. Standardized contract designed for gas purchase /

sale up to 1 month. Actually being used for gas purchase / sale up to 1

year. Could be used as basis for electronic contract.


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CONTRACTS (3)

Electronic Contracting: Under development. Initially intended for executing proforma gas

transportation contracts - largely non-negotiable. Digital signature. Usage expected early 2000.


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ACCOMPLISHMENTS

North America wide consensus on: Over 200 business practice standards. EDI Implementation Guides.

Extensive training. Adoption - both per FERC mandate and

voluntary.


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SUMMARY

Focus on Natural Gas: Concepts applicable to oil (and other products and

services).

Background. The Standards:

Business Practices. Electronic Commerce.

Accomplishments.


29

Q & A

Questions?

E-COMMERCE STANDARDS:A STRATEGIC IMPERATIVE

Ian AndersonPrincipal Consultant - I. S. Anderson & Associates Limited

Business Reengineering Electronic Commerce EDI

100 - 1039 - 17 Avenue SW, Calgary, Alberta, Canada T2T 0B2

Tel: 403-243-1079 Fax: 403-243-0546 http://www.isanderson.com

Cell: 403-860-5941 Email: [email protected]

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