Estratégias De Negociação Com Acesso Parcial Ao Mercado De Derivativos

Glossário da Indústria Absorção A absorção é a capacidade de líquidos e sólidos absorverem água ou outros fluidos, incluindo gases indesejáveis, no processamento de gás natural. Access Access é um sistema ao abrigo do qual os operadores do mercado podem utilizar a capacidade de um gasoduto, rede, armazém de gás ou outra instalação de gás. O acesso é central para a implementação da liberalização do mercado de gás e contrasta, portanto, com o modelo tradicional onde os proprietários de sistemas de transporte, lojas etc possuem todo o gás que flui através de seus equipamentos e atuar como comerciantes exclusivos para ele. Veja também Transporte comum. Acesso limitado . Acesso Negociado. Acesso de Terceiros. Gás Ácido Gás Ácido é Gás Natural contendo uma proporção de gases como o dióxido de carbono ou sulfeto de hidrogênio que, quando combinados com umidade, formam compostos ácidos. Quantidade Anual de Contrato A Quantidade Anual de Contrato (ACQ) é o volume de gás que o Vendedor deve entregar eo Comprador deve levar em um determinado ano de contrato. Pode ser expresso como um número discreto ou como um múltiplo da quantidade diária do contrato. Na prática, muitos contratos são escritos em formulários que permitem que o comprador tomar consideravelmente abaixo do ACQ indicado. Consulte também Tolerância de quantidade para baixo. Programa Anual de Entrega O Programa Anual de Entrega (ADP) é um cronograma de volumes de gás a ser entregue em certas datas ou dentro de determinados períodos em um próximo ano de contrato em um contrato de longo prazo. Na prática, esta prática irá frequentemente assumir a forma de um calendário detalhado que abrange os primeiros meses, com números mais frouxos para o resto do ano, que são então confirmados às vezes estabelecidas no contrato. Aqüífero Um aquífero é um corpo de rocha porosa saturada com água. Os campos de gás são geralmente subjacentes por um aqüífero que muitas vezes fornece pressão conhecida como Water Drive para auxiliar a produção de gás. O armazenamento subterrâneo de gás pode ser conseguido bombeando o gás para baixo em aqüíferos abaixo das rochas impermeáveis ​​da tampa assim fazendo eficazmente um reservatório do gás. Ver também Reservatório. Armazenamento Subterrâneo. Arbitrage Arbitrage está comprando e vendendo o mesmo produto em dois locais ou mercados diferentes para aproveitar as diferenças de preço. Associated Gas Associated Gas é um gás que coexiste com o petróleo em um campo de petróleo predominantemente. Pode ser gás Cap ou gás solução. Cujo comportamento e tratamento são diferentes. O gás associado será normalmente vendido como gás de indicação de vendedores, ou seja, o vendedor indica os volumes de gás disponíveis. Nos mercados tradicionais de gás, esse gás teria um preço inferior ao do gás não associado. Autogeneração A autogeneração é a geração de eletricidade por uma preocupação industrial principalmente para atender às necessidades de suas próprias operações. Veja também Combinação de calor e energia. Backhauling Backhauling é o transporte de gás aparentemente no sentido inverso ao fluxo principal do pipeline. Isso geralmente é obtido por acordos de swap em vez de por movimentos físicos. Também conhecido como Fluxo Reverso. Os Contratos de Equilíbrio de Contrato de Equilíbrio são usados ​​para definir procedimentos para o uso de capacidade em dutos ou produção de um campo de gás: 1) Pipelines: Um acordo de equilíbrio para um gasoduto é um acordo entre um proprietário de pipeline e outros usuários do pipeline sobre os procedimentos para Ser adoptadas para garantir que os volumes de gás que são introduzidos e retirados do oleoduto são iguais durante um determinado período de tempo. Pipelines comumente exigem balanceamento diário, mas alguns exigem equilíbrio em períodos mais curtos, até uma hora, especialmente onde há uma carga de geração de energia pesada na tubulação. Outros podem permitir períodos mais longos, e. 3 dias até mensal. O balanceamento mensal só é apropriado quando as cargas de terceiros são muito pequenas (algumas percentagens) em relação às cargas dos principais usuários. 2) Reservas: Um acordo de equilíbrio para reservas é um acordo entre os proprietários de um campo de gás que estão comercializando suas ações do gás, independentemente uns dos outros. Uma vez que cada comprador pode ter um padrão de demanda diferente, os proprietários concordam entre si que não irão retirar reservas a uma taxa que irá causar desequilíbrio na propriedade das reservas remanescentes exceder determinadas tolerâncias acordadas. O acordo também define os remédios que devem ser tomados se essas tolerâncias forem excedidas. O objetivo é garantir que a participação de propriedade das reservas remanescentes permaneça constante para todos os propósitos práticos. Carga Base Carga Base é a taxa de entrega (ou demanda) abaixo da qual não é esperado que o envio (ou demanda) caia durante um determinado período. Preço da praia O preço da praia é um termo usado principalmente no Reino Unido para definir o preço pelo qual o gás offshore é transferido pelo produtor na saída da estação de tratamento onshore, momento em que a propriedade é transferida antes da transmissão ou uso posterior. Gás de alto-forno Gás produzido como produto do uso de coque em altos-fornos tradicionais. Este gás era de baixo valor calórico (cerca de um quarto a um terço do de gás natural), mas foi usado misturado com gás fabricado nos dias antes do gás natural. Bloco Um bloco é uma área geográfica definida em um Contrato de Concessão, muitas vezes prefixado por Exploração, Desenvolvimento ou Produção. Muitas vezes definido em termos de latitude e longitude, mas também pode ser definido por referência a um sistema de grade local, por exemplo, no Golfo do México. Blowdown Um método de produzir um reservatório de condensação de gás deixando a pressão do reservatório cair à medida que o gás é produzido ao longo do tempo sem re-injectar qualquer gás. Com este método de produção, um condensado pode condensar-se dentro do reservatório, onde a sua recuperação já não é uma proposição prática. Ferva fora do gás (BOG) Ferva fora é um termo usado em projetos do GNL. No entanto bem isolados tanques de armazenamento de GNL pode ser, o GNL está sempre em seu ponto de ebulição, e pequenas quantidades continuarão a ferver fora. Nas fábricas de liquefação, é necessário um pequeno volume de gás de ebulição para garantir que o flare da planta esteja operacional. Ferva fora não é necessário para esta finalidade será normalmente usado no sistema de combustível de baixa pressão próprios plantas. Nos navios de GNL movidos por turbinas a vapor, o gás é normalmente utilizado como combustível para conduzir os navios. Preço de fronteira O preço pelo qual o gás é vendido na fronteira entre dois países. Normalmente baseado em dados alfandegários ou outros dados oficiais de importações. Frequentemente utilizado, especialmente na Europa, como ponto de referência nos contratos de gás. Gás engarrafado GPL. Geralmente butano ou propano armazenado no estado líquido a pressão moderada em recipientes de aço para uso em pequenas aplicações residenciais e comerciais. Fornecido A prestação de vários serviços, tais como transporte, armazenamento, etc em um pacote obrigatório que o comprador deve aceitar no total, sem ser capaz de escolher quais os elementos que exige. Veja também Unbundling. Butano Um membro do grupo alcano de Hidrocarbonetos com quatro átomos de carbono na sua molécula (C4H10, frequentemente abreviado para C4 em uso não técnico). O butano é um gás incolor e inflamável a temperatura e pressão normais, mas é facilmente liquefeito por pressão para armazenamento e transporte. Existem duas formas isoméricas, normal e iso-butano. À pressão atmosférica, o iso-butano liquefaz a 1200 ° C e o butano normal a -100 ° C. Valor Calorífico (CV) O Valor Calorífico é a quantidade de calor produzido pela combustão completa de um combustível. Isto pode ser medido seco ou saturado com vapor de água e líquido ou bruto. Veja também Valor Calorífico Bruto. Valor Calorífico Líquido. Cap 1. Uma cláusula de um contrato de fornecimento sob a qual o comprador é assegurado que ele não terá que pagar mais do que um determinado preço máximo. Este tipo de contrato é análogo a uma opção de compra. 2. Num contrato de fornecimento em que o comprador tem flexibilidade no volume que pode solicitar, o máximo ao qual tem direito por um período (por exemplo, um ano) ou durante a duração do contrato. Cap Gas Gas encontrado em um Gas Cap em associação com o petróleo, mas não misturado com ele. Capacidade de carga Uma carga de capacidade é o pagamento feito para a reserva de capacidade em um gasoduto, uma loja de gás ou outra infra-estrutura. Muitas vezes usado de forma intercambiável com Demand Charge. Capacidade de Negociação A compra e venda de direitos adquiridos para mover gás através dos oleodutos de um Transporter. Seqüestro e armazenamento de carbono A captura de emissões de carbono para a atmosfera e seu armazenamento em sumidouros de carbono, que podem ser naturais, ou podem ser esgotados campos de hidrocarbonetos. Carbon Trading Um procedimento sistemático para trocar permissões para produzir emissões de carbono. Ver ETS da UE. Carry Forward Uma cláusula dentro de um Contrato de Compra e Venda a Longo Prazo segundo o qual um Comprador que tenha mais de sua Quantidade Anual de Contrato em qualquer ano é permitido, nas condições definidas no contrato, compensar isso contra realizar em anos subseqüentes que de outra forma poderiam ter incorrido Alguma forma de sanção, como Take or Pay. Às vezes conhecido como Advance Make Good. Cabeçote Cabeça Espírito de Petróleo (CHPS) Um nome alternativo para Condensados ​​e especialmente para aqueles que caem fora ou perto da cabeça do poço. Usado principalmente na América do Norte. Churning Churning é um termo usado no comércio de gás para indicar o número de vezes em média que o gás é negociado entre a venda inicial eo consumo final. Cidade gás O gás da cidade é um termo usado em algumas partes do mundo, por exemplo, Egito, Índia, Japão, Coréia, para se referir ao gás distribuído aos clientes através de um sistema de distribuição local, a jusante do Portão da Cidade. Tais clientes serão uma mistura de residencial, comercial e industrial dependendo de circunstâncias locais particulares, mas, normalmente, excluir geradores de energia. No passado gás de cidade pode ter sido gás fabricado a partir de carvão e petróleo, mas agora é predominantemente gás natural. Veja também Town Gas. Portão da cidade O ponto em que um sistema de distribuição local, muitas vezes baseado em uma cidade ou cidade, aceita gás de uma empresa de transmissão ou sistema. Um preço de transferência neste ponto é chamado de Preço de Portão da Cidade. Metano de cama de carvão (CBM) O metano de carvão é o metano que é ou pode ser recuperado de costuras de carvão. Também conhecido como Coal Seam Gas. CBM é recuperado perfurando poços em costuras de carvão adequadas e, em seguida, reduzindo a pressão na rocha, geralmente por bombeamento de água, que pode ser salina e questões ambientais presentes, até que o metano pode ser dessorvido do carvão. CBM, ao contrário do gás natural convencional, não é prendido sob um selo mas é adsorbed no carvão. Portanto, pode ocorrer em depósitos de carvão que são lateralmente muito extensos. As taxas de produção são tipicamente muito menos do que para o gás convencional. As taxas de depleção são tipicamente bastante lentas e os poços podem produzir por muitos anos. O CBM também pode ser produzido como uma medida de segurança antes que o carvão seja extraído para reduzir a incidência de misturas de gás potencialmente explosivas durante as operações de mineração. Veja Metano de Mina de Carvão. Gás de Carvão Gás de Carvão é o gás produzido pela destilação destrutiva do carvão betuminoso. Os componentes principais são hidrogênio (mais de 50), metano (10 a 30) monóxido de carbono e hidrocarbonetos mais elevados. O vapor de água no gás de carvão manteve juntas de tubos velhas apertadas, minimizando assim a perda de gás. Se o gás natural for introduzido nos mesmos tubos sem medidas corretivas, poderão ocorrer perdas substanciais. O monóxido de carbono é naturalmente venenoso. Inalar o gás de carvão era uma maneira favorecida de cometer suicídio em cidades com distribuição de gás de carvão. Metano de Mina de Carvão (CMM) Metano recuperado das minas de carvão, quer activo quer depois de abandonado, que pode ser utilizado na produção local de electricidade ou calor. Raramente está disponível em quantidade suficiente para justificar o processamento para a qualidade do pipeline para entrega em um sistema de dutos. Veja: Metano de cama de carvão. O gás do forno do coque O gás do forno do coque é produzido como um subproduto do coque do carvão e era no uma vez um ingrediente principal do gás manufacturado. Turbina a Gás de Ciclo Combinado A Turbina a Gás de Ciclo Combinado (CCGT) é um tipo de usina de geração de eletricidade em que o calor gerado pela combustão dos gases é usado duas vezes. Primeiro, o gás é queimado para conduzir uma Turbina a Gás. Em seguida, os gases de escape quentes passam através de um permutador de calor para elevar o vapor para uma unidade de turbina a vapor secundária. As usinas de ciclo combinado têm uma eficiência térmica aproximadamente 50 maior do que uma turbina normal simples ou aberta. Combinada de calor e energia (CHP) Combinada de calor e energia (CHP) é o uso de um único sistema unificado para fornecer os requisitos de calor e energia de um projeto, minimizando o desperdício de calor. O poder é produzido através de Turbinas a Gás ou outro motor principal. O calor de exaustão é aproveitado para outros requisitos além da geração de eletricidade. Também conhecida como Cogeneração e Energia Total. Commodity Charge Duração da tarifa por uma taxa cobrada por cada unidade de gás realmente tomada ou transportada. Pode ser em unidades volumétricas ou de calor. Distinguir-se de Carga Permanente e Carga de Demanda. Transporte Comum O Transporte Comum é um termo usado muitas vezes de forma intercambiável com Acesso Livre e Acesso de Terceiros, mas que é de fato mais específico. Em um sistema de transporte comum, todos os requerentes de capacidade (por exemplo, em um gasoduto ou loja) têm acesso em igualdade de condições. Se o volume total solicitado exceder a capacidade disponível, o uso de todas as partes é reduzido pro rata: a capacidade é racionada entre os usuários. Sob o Open Access, se os candidatos buscam mais capacidade do que a disponível, a capacidade é distribuída em um primeiro a chegar, primeiro a ser servido ou um sistema de pay-to-book que permite que a capacidade seja contratada e negociada como alugar e subarrendar espaço em um prédio . Um gasoduto ou dono de loja que também deseja usar alguma capacidade para si mesmo deve, sob o Open Access, fazê-lo através de uma filial de longa distância, cujas relações comerciais com o provedor de capacidade são transparentemente idênticas às de outros usuários. O Open Access é exigido nos pipelines interestaduais dos EUA, onde é conhecido como Contract Carriage. Na Europa, o termo Acesso Aberto é por vezes utilizado vagamente como sinónimo de Acesso de Terceiros, para definir o direito de terceiros a utilizar o gasoduto ou equipamento de outra empresa. Na sua forma geral abrange o Acesso Aberto, Transporte Comum, Acesso Negociado e Acesso Regulado. Um aspecto do Acesso de Terceiros é que, por si só, não implica qualquer solução para a questão da discriminação entre as partes que utilizam as instalações. Consulte também Acesso limitado. Gás Natural Comprimido (GNC) GNC é gás natural comprimido em cilindros de gás, usado principalmente como uma alternativa para combustíveis líquidos em veículos rodoviários. GNC continua a ser um gás independentemente da quantidade de pressão. Não confundir com gás de petróleo liquefeito. Compressor Station O gás perde pressão enquanto viaja longas distâncias através de dutos. Para garantir um fluxo uniforme, e uma pressão adequada no ponto de tomada, deve ser recompressed em estações de compressor, normalmente localizado a cada 60 km a 100 km ao longo de condutas de transmissão onshore. Offshore e em áreas remotas, pode ser conveniente e preferível manter pressões mais altas e permitir distâncias maiores entre as estações de compressão. Em grandes condutas, os compressores são normalmente conduzidos por turbinas a gás. Pipelines menores podem usar motores diesel. Concessão Licença concedida por uma empresa estatal ou estatal. Define uma área, muitas vezes referida como um bloco. Concedida a uma empresa ou grupo de empresas para a exploração, produção ou transporte de petróleo e / ou gás, em determinadas condições e por um período fixo. As áreas de concessão são freqüentemente concedidas inicialmente para exploração. Se isso for bem-sucedido, então uma área menor será definida, dentro do bloco de exploração, como um bloco de produção. Pode também ser aplicado a permissões para construção de condutas, centrais eléctricas, etc. Condensado O condensado é um líquido de gás natural com baixa pressão de vapor, produzido a partir de um reservatório com alta pressão e temperatura. Condensado irá separar naturalmente em uma pipeline ou separação planta através do processo normal de condensação. Pode referir-se a qualquer mistura de hidrocarbonetos relativamente leves que permanecem líquidos a temperatura e pressão normais. Haverá algum propano e butano dissolvido nele. Diferentemente do petróleo bruto. Contém pouco ou nenhum dos hidrocarbonetos pesados ​​que constituem óleo combustível pesado. Existem três fontes principais de condensado: a) Os hidrocarbonetos líquidos que são produzidos a partir de um reservatório de condensação de gás. Estes podem ser apenas ligeiramente distinguíveis de um petróleo bruto estabilizado à luz. B) Os hidrocarbonetos líquidos que são recuperados na superfície a partir de gás não associado. C) Os hidrocarbonetos líquidos que são separados quando o gás bruto é tratado. Este condensado consiste tipicamente em C5 a C8. Caldeira de condensação Uma caldeira de condensação é um dispositivo de aquecimento de água projetado para aumentar a eficiência através do uso de gases de combustão ventilados de outra forma na atmosfera para pré-aquecer a água na caldeira. Taxa de conexão Às vezes usado como um sinônimo para Standing Charge, mas mais corretamente definido como um montante a ser pago pelo cliente em um montante fixo ou por parcelas para uma conexão com o sistema de fornecedores. Contratante Um termo que tem um significado específico em um Acordo de Partilha de Produção. O Contratado é a empresa (geralmente uma empresa produtora) que se compromete a explorar e / ou produzir para o governo anfitrião em troca de volumes definidos do gás ou óleo produzido. Convergência Um termo vagamente definido que se refere ao uso crescente de gás natural na geração de eletricidade. Quando a geração passa a depender total ou amplamente do gás natural, os interesses do fornecedor de gás e do gerador de energia convergem e surge a possibilidade de trocar gás entre geração e fornecimento direto, dependendo do preço disponível para cada saída. Os preços convergem quando não há benefício na mudança. Custo Gás O custo do gás é o gás que um contratante adquire ao abrigo de um acordo de partilha de produção para cobrir os custos das suas operações ao abrigo do contrato. Normalmente, o Contratante opera a seu próprio risco e, se nenhum hidrocarboneto for descoberto, os custos são inteiramente para sua conta. Veja também Gás Lucro. Pressão crítica A pressão mínima que deve ser aplicada a um gás antes de poder ser liquefeita. Temperatura crítica A temperatura acima da qual um gás não se liquefará, independentemente da pressão aplicada. Óleo Bruto Uma mistura de hidrocarbonetos que existe como um líquido em reservatórios subterrâneos naturais e permanece líquido à pressão atmosférica depois de passar por instalações de separação de superfície. Crude é a matéria-prima que é refinada em gasolina, óleo de aquecimento, combustível a jato, propano, petroquímicos e outros produtos. Cryogenics O processo de produção, manutenção e utilização de temperaturas muito baixas (abaixo de -46C - 50F). Relevante no negócio de GNL. Almofada Gas Gasco almofada é gás deixado em uma loja de gás para fornecer a pressão necessária para produzir gás armazenado, mas que por si só permanece un-produzido. É tipicamente da ordem de 50 do volume armazenado total para um Aquifer e campos esvaziados, mas menos para outros tipos de armazenamento. Quando a loja é inicialmente estabelecida Gás de Almofada, a menos que seja reservas não produzidas deixadas em um campo parcialmente empobrecido, pode ser uma grande parte do custo de capital. O gás de almofada pode finalmente ser usado quando a loja é desarmada. Também conhecido como gás de base. Envio Diário Médio Envio Volume total de gás entregue durante um período de tempo, dividido pelo número total de dias no período. Quantidade diária de contrato (DCQ) A quantidade de gás que um Comprador se compromete nominalmente a comprar e um Vendedor se compromete a entregar em um período definido de 24 horas. Embora apresentando em muitos contratos, na prática essa expressão tem pouco significado em si mesma. Pode servir como um meio de expressar a Quantidade Anual de Contrato se esta última for expressa como um número de dias multiplicado pela DCQ. Também pode definir a taxa em que o vendedor deve ser capaz de fornecer gás. Veja também: Taxa de Entrega Diária. Taxa Diária de Entrega A Taxa Diária de Entrega (DDR) é a taxa na qual as instalações do Vendedor devem ser capazes de fornecer gás, expresso como um volume de gás por dia, ou como um múltiplo da Quantidade Diária de Contrato. Também conhecido como Quantidade Máxima Diária. Daily Peak Daily Peak é o volume máximo de gás que pode ou deve ser entregue necessário em qualquer dia durante um determinado período (geralmente um ano). Contrato de Dedicação Um Contrato de Dedicação é o termo correto para um Contrato de Esgotamento. Sob o qual toda a produção de um campo de gás é comprado e vendido. Grau Dia Um grau dia é uma medida da temperatura média ao longo de um dia, e geralmente está relacionado com um limiar de temperatura. Por exemplo, uma temperatura média real de 5C em um dia é de 2 graus dias mais quente do que uma temperatura média esperada de 3C. Também pode ser usado para medir o tempo frio acumulado durante um período. Assim, se a temperatura normal sazonal para um mês é 18C ea temperatura média real através do mês é esperado para ser 8C, o mês será 10 x 30 300 dias grau mais frio do que o normal. Entregue Um termo usado principalmente em contratos de transporte de GNL para um acordo sob o qual o vendedor é responsável pela organização e pagamento do transporte do gás, eo título passa no porto de entrega. Geralmente, os riscos dos vendedores são maiores em uma transação entregada porque o comprador paga somente pela qualidade do landedquantity, eo Boil fora do gás é a responsabilidade dos sellers. O vendedor é responsável pelo desembaraço aduaneiro e pagamento de todos os deveres, a menos que o contrato prevê o contrário. Um nome alternativo para um contrato entregue é Ex Ship. Muito semelhante a Entregue é custo, seguro e frete (CIF). Este é um acordo sob o qual o Vendedor organiza e paga pelo transporte e seguro, como para um contrato entregue, mas o risco eo título são transferidos do vendedor para o comprador de uma maneira definida no contrato (por exemplo, no embarque ou na entrega do Conhecimento do comprador). CIF e Entregue são freqüentemente, mas erroneamente, tratados como se fossem idênticos porque os custos para o vendedor são os mesmos. Sob um contrato CIF, no entanto, o vendedor pode evitar estar na posse da carga dentro da jurisdição do governo do comprador countrys. Isso pode ser importante por razões fiscais ou legais. O terceiro arranjo freqüentemente encontrado na expedição de GNL é Livre a Bordo, (FOB), que é usado para denotar entregas onde o comprador organiza para o transporte e há uma entrega e mudança de título no momento em que a carga é carregada no Navio de carga. Taxa de pedido Uma taxa mensal ou anual paga por um Comprador para um pico reservado ou nomeado ou para o volume de pico real de gás tomado em uma hora ou dia em um determinado período. Assim, uma expressão típica pode ser Dólares por mil pés cúbicos de capacidade horária máxima por mês. Freqüentemente utilizado de forma intercambiável com Capacidade de Carga, embora se possa argumentar que, em estrita lógica, a Carga de Demanda deve aplicar-se a uma venda de gás ea Carga de Capacidade para um acordo de transporte. Contrato de esgotamento Um contrato de esgotamento é um contrato de venda de produção em que os volumes de venda são essencialmente regidos pelas características de desempenho do campo de gás em particular. Um padrão de acumulação, um Planalto esperado e um método para determinar os volumes de declínio serão definidos inicialmente, mas podem ser alterados à medida que as capacidades de produção do campo são melhor compreendidas através da experiência operacional. O comprador assume assim uma grande parte dos riscos de produção. Veja também Contrato de Dedicação e Contrato de Fornecimento. Depletion Drive Reservoir Um gás Reservatório a partir do qual o gás é recuperado por expansão como a pressão do gás cai com a produção de gás originalmente no lugar. O reservatório pode, portanto, ser tratado como se fosse um tanque fechado. Podem ser obtidos factores de recuperação de até 90% do gás no local. Nesses reservatórios, não há Drive Water. Desregulamentação A desregulamentação é a redução do papel dos organismos reguladores normalmente associada a um aumento da concorrência aberta, e conseguida pela simplificação do quadro regulamentar. A desregulamentação não deve ser confundida com a liberalização, que pode exigir a introdução de processos regulamentares transparentes. Derivativos Derivados são instrumentos financeiros baseados na negociação de uma commodity física, incluindo gás e outras formas de energia. Veja também Futures. Swaps. Ponto de Orvalho As temperaturas abaixo das quais os hidrocarbonetos (ponto de condensação do hidrocarboneto) ou a água (ponto de orvalho da água) começarão a condensar-se de um dado fluxo de gás. Condensação reduz a precisão da medição e cria o incômodo de slugs líquido em pipelines, que terá de ser limpa periodicamente, passando um porco embora o pipeline. Além disso, a água pode reagir com dióxido de carbono ou sulfeto de hidrogênio na corrente de gás para formar ácidos, e com o próprio metano, em condições apropriadas, para formar Hidratos. Por conseguinte, na fase de tratamento, a água é normalmente removida da corrente de gás para reduzir o ponto de orvalho em algum lugar em torno de -10 ° C às pressões padrão da tubulação. Distribuição A fase final no transporte de gás (e eletricidade) e sua venda aos consumidores finais através de condutas de médio porte e redes de reticulação de pequeno diâmetro e baixa pressão. Diurnal Armazenamento Literalmente, armazenamento diário. O armazenamento a curto prazo ou de pico de gás em dutos ou suportes de gás, para atender às flutuações locais, dentro do dia da demanda, em oposição ao armazenamento sazonal. Factor de Diversidade A razão da soma das demandas máximas individuais de vários consumidores ou cargas, à sua procura simultânea máxima. Geralmente menos de 1 para refletir que nem todos os clientes são esperados para ter suas demandas máximas simultaneamente. Consulte também Fator de carga. A jusante As actividades da cadeia de gás mais próximas dos clientes finais. Veja Upstream. Tolerância de quantidade para baixo (DQT) A Tolerância de quantidade para baixo (DQT) é o montante pelo qual um comprador pode ficar aquém de sua quantidade total de contrato anual em um contrato de venda de gás Take or Pay sem incorrer em sanções. Se não houver nenhuma disposição que exija que o comprador tome volumes suplementares em anos subseqüentes para compensar a deficiência, a Quantidade de Contrato Anual torna-se efetivamente o ACQ menos o DQT. Veja também Make Good and Make Up. Dry Gas Um nome alternativo para Lean Gas. Não significa livre de água, embora em alguns casos pode ser. Campo de gás seco Um reservatório que produzirá gás seco e quantidades muito pequenas de condensado tipicamente menos de 10 barris por milhão de pés cúbicos. Isto é equivalente a 350 barrisMMcm ou 60 metros cúbicos de gás oilMMcm assumindo 0,159 barriscubo metros. Buraco seco. Um furo que não pode produzir volumes comerciais de petróleo ou gás. Convencionalmente o termo poço é restrito a um furo que pode produzir óleo ou gás. EFET A Federação Europeia dos Comerciantes de Energia. Um grupo de pressão das empresas europeias de comércio de energia dedicado a estimular e promover o comércio de energia. Eficiência Eficiência, ou Eficiência Térmica, é a relação entre a produção de energia ea entrada de energia em um processo. Uma das utilizações mais frequentes desta relação na indústria do gás é a utilização de gás para a produção de electricidade, em que a emissão de electricidade é expressa em percentagem do gás consumido, medida com base numa unidade comum, e. KWh. Deve-se ter cuidado para distinguir entre eficiência líquida e bruta. Veja também Valor Calorífico Bruto. Valor Calorífico Líquido. Utilizador final O consumidor de gás, no sector residencial, comercial ou industrial. O jogador final na cadeia de gás. Entry-Exit Um sistema de entrada-saída é aquele em que um carregador de gás é cobrado um preço de entrada para colocar gás em uma rede de transmissão ou distribuição em um ponto de entrada definido e um preço de saída para remover o gás em um ponto de saída definido. Os preços podem refletir o congestionamento nos pontos de entrada e saída, mas são os mesmos para qualquer usuário. O sistema pode ser contrastado com sistemas ponto a ponto, onde as taxas de transporte dependem da distância real ou teórica percorrida por cada remessa de gás. A entrada-saída é fortemente favorecida pela UE como um meio de promover a liberalização do gás. ERGEG Grupo de Reguladores Europeus de Electricidade e Gás. O ERGEG é o grupo consultivo formal das comissões europeias dos reguladores da energia. O ERGEG foi criado pela Comissão Europeia em Novembro de 2003 para assistir a Comissão na criação de um mercado único para a electricidade e o gás. Os membros do ERGEG são os responsáveis ​​pelas autoridades reguladoras nacionais da energia nos Estados-Membros da UE. Etano Etano (C2H6, muitas vezes abreviado para C2 em uso não técnico) é um dos principais elementos constituintes do gás natural, juntamente com o metano. Ferve a -84,4C. Em temperaturas normais é um gás seco, incolor e inodoro. Uma matéria-prima para a produção de etileno. Etileno Também conhecido como Eteno. Gás incolor (C2H4) produzido por cracking de hidrocarbonetos como etano ou nafta e usado como matéria-prima para produtos petroquímicos, como fibras e muitos plásticos. Ferva a -103,7C. EU ETS Sistema de Comércio de Emissões da União Europeia. O maior sistema multi-nacional de comércio de emissões no mundo, e um dos principais pilares da política climática da UE. Excesso de gás Excesso de gás é: a) Gás tomado a uma taxa superior à taxa de entrega diária a um preço premium ou b) Gás tomado em excesso da quantidade de contrato anual. Dependendo dos termos do contrato e do status das entregas, esse gás pode qualificar-se como Transporte. Faça bom ou compõem o gás. Federal Energy Regulatory Commission (FERC) Uma agência do governo federal dos EUA, cujas responsabilidades incluem a regulamentação da indústria de gás interestadual. Não tem jurisdição sobre gasoduto e abastecimento onde o comércio é inteiramente dentro de estados individuais. Feedstock Hidrocarbonetos utilizados como matéria-prima em um processo industrial, não como um combustível. As principais utilizações do gás natural como matéria-prima são o fabrico de amoníaco e fertilizantes à base de amoníaco e metanol. Um grande mercado potencial é o uso de gás para fazer produtos de petróleo sintético, tais como gasolina de motor e destilados médios (ver Gas to Liquid). Pode também ser utilizado para designar a matéria-prima utilizada para produzir electricidade, mas os resumos estatísticos do consumo de gás distinguem normalmente este uso dos usos químicos da matéria-prima. Ver também Síntese de Distillate Médio. Avaliação de Campo O processo de quantificação de níveis de reserva e potencial de produção de um reservatório de petróleo (petróleo ou gás) recém-descoberto, normalmente perfurando um ou mais poços de delineamento ou avaliação. Gás Firme Gás que um fornecedor se compromete a fornecer a um comprador em termos definidos no contrato, sem interrupção. Veja também: Interruptible Gas. Processo de Fischer-Tropsch Processo químico para converter gás de síntese em parafinas por polimerização. Originalmente desenvolvido no início do século 20 para fazer a gasolina de carvão. Uma pesquisa recente identificou catalisadores que aumentam significativamente a eficiência do processo criando produtos cerosos muito longos, que podem então ser transformados em combustíveis líquidos de muito alta qualidade por craqueamento convencional. Ver síntese de destilados médios. Limites de inflamabilidade As percentagens mínimas e máximas de gás no ar dentro do qual o gás irá inflamar. Para o gás natural estes limites estão aproximadamente entre 5 e 15. Flaring O processo de queimar o gás natural indesejado ou o óleo. In the case of gas, usually occurs when it is associated with oil and cannot be economically exploited or re-injected. Now less prevalent, as governments seek to profit from the increased value of gas and reduce the advert environmental impact of burning hudrocarbons. Floating LNG Floating LNG (FLNG) is the use of purpose built or converted ships to enable regasification of LNG (and liquefaction) to be carried out offshore. FLNG has the advantage that LNG production and importation can start more quickly than could happen onshore, where lead times are often lengthened by the local approval process. It also enables the processes to move location to satisfy short term demand. Force Majeure A contractual term used to define circumstances in which a party to a contract is not obliged to carry out its obligations because of major events outside its control. Force Majeure can mean very different things, depending upon the law under which the contract is written and the provisions of the clause, which can vary widely. Examples of force majeure could be war, extreme weather, industrial action. Forward Trading Buying and selling gas (and other commodities) to be delivered at a later date, not under a long term contract. See Futures . Fuel Cell Equipment used to generate electric energy directly from the reaction of hydrogen and oxygen in the presence of a catalyst, without combustion. Natural gas can be used as a feedstock from which to obtain the hydrogen. Carbon dioxide will then be produced in the reformation process. Fuel Gas Gaseous fuels, in particular low pressure natural gas used to fuel production or treatment facilities. Futures A future is a contract to buy or sell a specified quantity of gas (or any other commodity) for a specified price on a pre-arranged date. The contract is usually of standard form and can itself be traded at an exchange such as NYMEX or the IPE . Gas:Oil Ratio . The gas:oil ratio is the relationship between the volume of gas produced at atmospheric pressure and the volume of oil produced in a given field. This volume will normally vary considerably over the life of the field. May be expressed as a simple volumetric ratio e. g. 500:1 or as cu ftBarrel. See also Solution Gas. Gas and Electricity Markets Authority (GEMA) The body which determines strategy and takes major policy decisions for Great Britains gas and electricity regulation. Day to day management of policy, resources and operational issues is carried out by the Office of Gas and Electricity Markets ( OFGEM ). Gas Cap In a field where oil is saturated with gas, so that it can dissolve no more, some gas will collect at the top of the reservoir, where it is known as cap gas, and forms a gas cap. Cap Gas overlies the oil and thus provides additional pressure for oil production, but will therefore often be produced only after all the oil has been produced and will then be treated as Non Associated Gas . Unlike Solution Gas . it is not commingled with the oil. Gas Condensate Field A field consisting of one or more reservoirs containing a mixture of gases at reservoir temperature and pressure, but which at normal temperature and pressure separates out into natural gas and Condensates . A gas condensate field is richer in liquids than a Dry Gas field but there is no precise point at which one becomes the other. Sometimes a reservoir will be produced primarily to obtain the condensate the gas may be re-injected, used as a secondary product, e. g. for LNG production or, particularly in areas remote from the market, flared. The liquid in a gas condensate field is often more valuable than the gas. See also Gas Cycling . Gas Condensate Ratio The ratio of gas to condensate in a gascondensate reservoir, usually expressed in practice as the ratio of Condensate to gas. Typical units are barrels of condensate per million cubic feet of gas. Gas Cycling or Re-Cycling A process in which produced gas is re-injected into the reservoir after removal of the condensate. This is to maintain the reservoir pressure and prevent Condensate from condensing in the reservoir and then becoming difficult to recover. This contrasts with Blowing Down the gas condensate field. Gas Day A period of 24 hours starting and ending at a stated time (often 0600 hours). Gas Detector An instrument used to detect the presence of various gases, often as a safety precaution to guard against leakage of flammable or toxic gases. Gas Gathering System A gas gathering system is a network of pipelines from a number of fields, collecting gas and bringing it to a central point, often a processing system or the inlet to a major transportation pipeline. Sometimes built where individual fields are not big enough to justify investment in separate pipelines and processing plant. Gas Grid A gas grid or network is a connected set of pipelines for the transmission and distribution of gas in a region or country to industrial, commercial and domestic users. See Reticulation. Gas Holder Over ground structure used to hold gas for within-day Peak Shaving purposes in urban areas. Gas holders are relics of the manufactured gas era and are steadily disappearing, their function being largely usurped by Line Pack. Gas Lift Injection of gas into an oil reservoir in order to mix gas with oil, reduce the fluid density and so assist oil flow. Gas Marketer A company that supplies gas to end users. See also Shippers . and Local Distribution Companies . Marketers are also major users of transportation capacity. Gas Processing The separation of oil and gas, and the removal of impurities and natural gas liquids from natural gas to meet the delivery Specification of a gas transportation pipeline. Gas Supplier A company that sells gas to the end consumer (UK). Gas to Liquid Gas to Liquid GTL processes convert natural gas into Synthetic Gasoline or Middle Distillates . using the Fischer Tropsch synthesis method. Increasingly relevant where gas is found in fields remote from markets such that delivery by pipeline is likely to be uneconomic. Gas Turbine A turbine propelled by the expansion of compressed air, heated by the combustion of a fuel such as natural gas or gas oil. Widely used for power generation. See Combined Cycle Gas Turbine. Gas Well A borehole sunk into the ground with the objective of bringing natural gas to the surface. GNL The French language acronym for LNG . stands for Gaz Natural Liquifi. Greenfield Often used to refer to a planned development which must be built from scratch on a new site, hence green field, without existing infrastructure. Gross Calorific Value (GCV) The heat generated by the complete combustion of a unit volume of gas in oxygen, including the heat which would be recovered by condensing the water vapour formed. The preferred value for expressing gas calorific quality in gas contracts. Also known as Gross Heating Value, Higher Calorific Value (HCV) or Higher Heating Value (HHV). See also Net Calorific Value. Heads of Agreement A non-binding statement of the main elements of a proposed agreement. See Memorandum of Intent (MOI). Heel LNG LNG left in ship and shore storage tanks to maintain their cryogenic temperatures. Henry Hub Henry Hub is the largest centralized point for natural gas spot and futures trading in the United States. The New York Mercantile Exchange (NYMEX) uses Henry Hub as the notional point of delivery for its natural gas futures contract. NYMEX deliveries at Henry Hub are treated in the same way as cash-market transactions. Many natural gas marketers also use Henry Hub as their physical contract delivery point or their price benchmark for spot trades of natural gas. Henry Hub is owned and operated by Sabine Pipe Line, LLC, which is a wholly owned subsidiary of ChevronTexaco. Henry Hub is based on the physical interconnection of nine interstate and four intrastate pipelines in Louisiana. Hexane A colourless gas (C9H14) naturally occurring in gas fields and normally left as part of the Condensate stream after separation. Boils at -69C. High Sulphur Fuel Oil (HSFO) The bottom of the oil barrel. The lowest priced oil product now, for environmental reasons, often banned or only allowed to be used where rigorous control of emissions is practiced. In some countries with developing gas-to-oil competition it may represent the marker for power station fuel. Hourly Peak The maximum volume of gas delivered or demanded in any one hour during a given period (usually 24 hours). Hub A term, met most frequently in the U. S. but also now used in Europe, for a geographical point at which several pipelines meet, storage is often available, and opportunities for gas trading can be exploited. There are many hubs in the U. S. of which the most important is Henry Hub . In Europe the largest hub is the National Balancing Point in the UK. Hydrates Ice-like solids in which methane molecules are held within the molecular spaces of the water molecule. Can form in pipelines and wells under certain conditions of near freezing temperatures and high pressures. Their formation is averted by ensuring that water vapour levels in the gas are kept below specified levels. See also Treatment . Dew Point . Hydrates are found naturally beneath the ocean at depths greater than 300m in many areas, where they are estimated to have locked up many trillions of cubic metres of methane. There is speculation that these hydrates may provide a commercial resource in the future. Hydrates have also been proposed as a means of transporting natural gas by sea, possibly competing with LNG. Hydrocarbon An organic compound containing only the elements hydrogen and carbon. Hydrocarbons exist as solids, liquids and gases. Impurities At the wellhead, natural gas will probably contain methane and various heavier fractions. It may also contain a number of non-hydrocarbons, some or all of which will need to be removed. There may also be substances introduced into the well as a result of drilling operations, such as inhibitors, mud etc. The principal harmful impurities in the gas itself are likely to be carbon dioxide and sulphur compounds, notably hydrogen sulphide, which can create corrosion in the pipelines in the presence of water and can seriously damage chemical plant units built of aluminium. Hydrogen Sulphide is also extremely toxic. Excessive water vapour can lead to the formation of acids and Hydrates . Some impurities, such as sulphur or helium, can be recovered economically as by-products if in sufficient concentration in the gas. Other impurities, such as inert gases and nitrogen cause no directly harmful effects but dilute the Calorific Value of the gas and mean that pipeline capacity is being wasted. Whether or not they should be removed is simply a question of economics. See also Treatment . Natural Gas Liquids . Condensates. Independent Power Plant (IPP) An IPP is an electric power generation plant owned and operated independently of the major national or regional entity, producing electricity for an industrial complex andor for sale to the electricity grid. Inert Gas: A chemically inert gas, resistant to chemical reactions with other substances. Integrated Gasification Combined Cycle (IGCC) A means of generating electricity from coal and other low grade hydrocarbons by gasifying them at the electricity generation site thereby gaining some of the efficiency of Combined Cycle Gas Turbine generation. While the chemical amp engineering principles are well understood it has yet to be demonstrated as a commercial proposition. International Energy Agency A Paris-based organisation which co-ordinates the energy policies of its member countries. The IEA also compiles detailed energy statistics and country reports, including countries outside the organisation itself. An autonomous wing of the Organisation for Economic Co-operation and Development (OECD). International Gas Union The International Gas Union (IGU) was founded in 1931. A worldwide non-profit organisation of national gas industry associations whose objective is to promote the technical and economic progress of the gas industry. Organises the triennial World Gas Conference. International Petroleum Exchange The IPEis an energy futures and options exchange based in London. Gasoil futures have been traded since 1981, Brent crude futures from 1988, and natural gas futures since 1997. Absorbed into ICE, the InterContinental Exchange in 2005. See also New York Mercantile Exchange. Interruptible Gas Gas made available under agreements permitting the supplier to terminate, or interrupt deliveries, usually for a limited number of days in a specific period. Usually sold at a reduced price and used to boost salestransportation in slack seasons (normally the summer). Important in load balancing because (by reducing gas demand) it is an alternative to using stored gas. The converse of Interruptible Gas is Firm Gas. Into Plant Price (IPP) The price charged for gas at its entry to the plant. Joint And Several A contract term relating to responsibilities under a contract, usually for payment, often misunderstood. Where, for example, there are several buyers in one contract, a joint responsibility does not mean an equal or pro rata responsibility. It means that if one buyer defaults on its liabilities the other buyers will be liable to make good that default. Where responsibilities are several, each party is responsible only for its own default. Kyoto Japanese city which was the location for an international agreement on the need to reduce the level of emissions of greenhouse gases into the Earths atmosphere. Lean Gas Lean gas is gas high in methane content (typically 95 or more) and with few higher fractions. Hence of relatively low Calorific Value . Also known as Dry gas. The converse of Rich Gas. Liberalisation A term often confused with Deregulation but often meaning quite the reverse. Liberalisation is the process of freeing a market from what are perceived as undue monopolistic forces, to achieve which a high degree of regulation may be required, at least in early years. Limited Access Limited Access refers to a gas distribution system in which the host pipeline owner moves its own merchant gas under different rules to those applying to outsiders contracting for spare capacity. The system applies to local distribution companies and intrastate pipelines in the US and is analogous to but not identical with Negotiated Access . See also Common Carriage. Limited Liability A provision in very large gas contracts under which limits are set to the amounts payable by a defaulting party in a contract. Line Pack Line pack is a procedure for allowing more gas to enter a pipeline than is being withdrawn, thus increasing the pressure, packing more gas into the system, and effectively creating storage. The packed gas can subsequently be withdrawn when needed. A useful method of meeting short term (hourly or diurnal) peak demand requirements. In some areas, where there is a particularly high peak demand, a series of additional pipeline loops may be laid near the entry to a network to provide additional line pack. Such systems are effectively a modern version of the traditional Gas Holder. Liquid Market A trading market characterised by the ability to buy and sell with relative ease, usually because there are many buyers and sellers. Liquefied Petroleum Gas Liquefied Petroleum Gas (LPG) is Propane . Butane . or propane-butane mixtures which have been liquefied through pressure, mild refrigeration, or a combination of both. Usually a derivative of refinery operations but often stripped out of natural gas streams, if rich enough. Conventionally sold in steel containers as Bottle Gas . Not to be confused with LNG. LNG (Liquefied Natural Gas) LNG is Natural Gas which has been cooled to a temperature, around the boiling point of methane (-162C), at which it liquefies, thus reducing its volume by a factor of around 600. The exact boiling of any gas mixture and the reduction in volume will depend on its composition. The process of Liquefaction is carried out in a liquefaction plant. Mostly these are very large scale plants built for projects transporting gas by sea, but in many countries small LNG plants have been built to liquefy gas during the seasons of low demand to provide Peak Shaving when required. LNG Plants consist of one or more LNG Trains, each of which is an independent gas liquefaction unit. It is more cost effective to add a train to an existing LNG plant, than to build a new LNG plant, because infrastructure built for early trains, such as ship terminals and other utilities, may be capable of being used or expanded for new LNG trains. The term Train is sometimes extended loosely to embrace the relevant shipping, storage and other facilities required to bring the resultant LNG to market. Liquefied gas is transported and stored as a boiling liquid under slight positive pressure until required for use, when it is warmed and allowed to re-gasify. In the case of Peak Shaving, the gas will normally be regasified at the plant itself or possibly transported for short distances by road, but large scale transportation is by sea, in specially designed insulated LNG vessels and delivered to LNG terminals, which have the requisite facilities for storage and regasification - the process by which LNG is warmed, usually through a heat exchanger, in order to become once more gaseous before emission into the Gas Grid. Load Duration Curve A visual and statistical expression of a number of (daily) demands over a long period, most often a year. Demands are normally ordered with the highest to the left and the lowest to the right, so that the horizontal scale bears no relation to calendar timing. Can be used, among other things, to measure volumes of demand (or supply) above a given threshold. The area beneath the curve and between horizontal thresholds represents the volume required to supply a particular market segment. The approach is used in both electricity and gas industries. Load Factor A measure of utilization for plant, or of the relationship between average and peak demand or supply, as determined by the formula: Average x 100 Peak. For supply and demand calculations average and peak most often refer to daily demand within a year, but any other periods are possible. The resulting figure is usually expressed as a percentage but, where the period covered is a year, the percentage is sometimes multiplied by 8760, so that the load factor is expressed as a number of hours. Thus a 50 Load Factor can also be expressed as 4380 hours. See also Swing. Local Distribution Company (LDC) A company that distributes natural gas primarily to small, residential and industrial end-users. Looping Increasing the capacity of a pipeline system, by adding parallel piping along part or whole of the route. Does not apply to the addition of compression facilities. Low Sulphur Fuel Oil (LSFO) Fuel oil with a low sulphur content. Usually less dense than High Sulphur Fuel Oil . In new markets with gas-to-oil competition this often represents the marker fuel for large segments of the industrial market. Madrid Forum The Madrid Fotum, otherwise known as the European Gas Regulatory Forum, set up to discuss issues regarding the creation of a true internal European gas market. The participants include national regulatory authorities, Member State governments, the European Commission, transmission system operators, gas suppliers and traders, consumers, network users, and gas exchanges. Make Good Make Good Gas is gas which a buyer must take in a later year because it has failed to take its full Annual Contract Quantity obligation in an earlier year, but has not used its full Downward Quantity Tolerance . It must nevertheless take excess gas in subsequent years to make good its deficiency, before it is entitled to claim any Make Up Gas to which it is entitled through shortfalls greater than the Downward Quantity Tolerance. Make Up Make Up Gas is gas for which a buyer has paid under Take or Pay obligations but not taken, and may have rights to receive in subsequent years for no further charge or at reduced prices after it has taken gas in excess of an agreed threshold volume. This is commonly the Annual Contract Quantity but may, for example, be ACQ minus Downward Quantity Tolerance . Make up gas should not be confused with Make Good Gas. Memorandum of Intent (MOI) Also known as Confirmation of Intent and Letter of Intent. A half way house to the signing of a full contract. Its legal status is rather unclear and its value lies largely in how it is viewed by the parties concerned. It will normally be a fairly brief document setting out the principal framework of the contract and specifying a date by which it is expected that a full contract will be completed. An MOI will often have a relatively brief validity, but in some cases they have served to govern active operations over a period of years. Also known as a Memorandum of Understanding (MoU) and Heads of Agreement (HoA). Merchant Pipeline A pipeline system which itself buys and sells part or all of the gas it transports, in contrast to a pipeline which simply carries gas on behalf of others. See also Open Access . Negotiated Access . Common Carriage. Meter Measuring devise, usually located at a point where ownership is transferred, for example at the entry to a customers premises, city gate, national border or gas processing plant. Note that to determine the energy content of the gas it will be necessary to monitor the composition amp hence calorific value of the gas. This is done at high pressure meter stations but not normally downstream of a city gate. Depending on the size of flow, meters may be: Flow meters, measuring gas throughput using a rotor which is made to revolve by the gas flowing through them Ultrasound meters, more sophisticated, based on the principle that sound waves travel faster with than against the flow. By measuring the difference in travelling time between the two sets of measurements the gas flow rate can be measured to an accuracy of more than 0.5 Orifice plate meters, older, and less accurate than other meters. Calculate flow rates by measuring the drop in pressure over a pierced obstructing plate placed in the pipeline. See also Telemetry. Methane A colourless, odourless flammable gas, lighter than air under normal conditions (CH4, often abbreviated to C1 in non technical usage). Methane is the first member in the alkane (paraffin) series and is the chief constituent of Natural Gas . At atmospheric pressure, it liquefies at -162C. Methanol Methyl alcohol, produced from natural gas via Synthesis Gas . Used as a chemical in the resin and paint industry and in the manufacture of Methyl Tertiary Butyl Ether, (MTBE) and acetic acid, but also of interest as a possible total or partial substitute for motor gasoline in cars. Very toxic. Middle Distillate Synthesis (MDS) A chemical process using the Fischer-Tropsch synthesis method for making synthetic middle distillates (principally naphtha, kerosene and gas oil) from natural gas. Midstream Those activities in the gas chain concerned with moving gas between the source and local distribution. See Upstream. National Balancing Point (NBP) The NBP is an imaginary (notional, or virtual) point at which all gas that has paid the entry charge to enter the UK National Transmission System is deemed to be located. The point at which most UK gas trading takes place, and the largest gas hub in Europe. See Entry Exit. Natural Gas Natural gas (NG) is a mixture of generally gaseous hydrocarbons occurring naturally in underground structures. Natural gas consists mainly of Methane and variable proportions of Ethane . Propane and Butane . There will usually be some condensate andor oil associated with the gas. More specifically, the term is also used to mean treated natural gas which is supplied to industrial, commercial and domestic users and meeting a specified quality. Natural Gas Act (NGA) Seminal example of deregulation liberalisation in the USA. Natural Gas Liquids (NGLs) Heavier hydrocarbons found in natural gas production streams and extracted for disposal separately. Within defined limits ethane, propane and butane may be left in the gas to enrich the Calorific Value . Whether to extract them or not is largely a commercial decision. Heavier fractions which are liquids at normal temperatures and pressures will be removed. The terms Natural Gas Liquids and Condensates are in practice used virtually interchangeably. Rather confusingly, there is no agreement on whether the term NGLs includes or excludes LPGs and both usages are current. Natural Gasoline Butanes and heavier fractions extracted from rich natural gas which, after stabilisation (removal of the lighter fractions) may be blended into motor gasoline. Negotiated Access Negotiated Access is a restricted form of Third Party Access, which excludes the requirement for the access terms to be transparent or applied equally to all applicants. It has been proposed in the European Union as a compromise by opponents of Open Access. Sometimes abbreviated to nTPA. Broadly defines access by one party to another partys facilities through negotiation, the result of which is, by implication, confidential, and not necessarily consistent with negotiations between the facility owner and other parties. See also Access . and Limited Access. Net Calorific Value, (NCV) The heat generated by the complete combustion of a unit volume of gas in oxygen, excluding the heat which would be recovered by condensing the water vapour formed. Net Calorific Value is usually seen as a measure of the effective heat produced rather than the total heat in the gas. Also known as Lower Calorific Value or Lower Heating Value. For natural gas, typically 10 lower than the GHV or HHV. See also Gross Calorific Value. Netback The price or value of a gas, at e. g. the border or the wellhead, calculated by deducting the costs associated with getting it from that point to the eventual point of sale from its competitive value at that point of sale. Used to estimate the comparative value of selling gas to various markets, and the worth of producing gas at all. Network Code A detailed contractual regime governing access to a gas grid. Network Codes exist or are being developed in several countries, especially in Europe. In North America the rules of the system are referred to as The Tariff. In particular, the contractual regime for the gas grid in Great Britain operated by National Grid. It is continually amended through rules approved by the GB energy regulator, ( Ofgem ). See also Tariff and Rates. New York Mercantile Exchange (Nymex) The worlds largest physical commodity futures exchange. Has existed for 130 years and pioneered the development of energy futures and options contracts in the 1970s. Nitrogen Oxides Oxides of Nitrogen (NOx) resulting from the combustion of fuels, causing atmospheric pollution in the form of smog. Non Associated Gas Non-Associated is gas found in a reservoir which contains no crude oil, and can therefore be produced in patterns best suited to its own operational and market requirements. See also Associated Gas. Odorants Strong smelling chemicals injected into natural gas, which otherwise is odourless, in order to make its presence more easily detectable. See Mercaptans. Odorisation The process of giving odourless natural gas a smell for safety reasons by injecting small quantities of organic sulphur compounds, such as Mercaptans . typically at the rate of 30 ppm. Usually carried out at the city gate or at the exit from the high pressure transmission system. OFGEM Office of Gas and Electricity Markets, (OFGEM) The regulator for the gas and electricity industries in Great Britain. Governed by the Gas and Electricity Markets Authority . Its powers are provided by the Gas Act 1986, the Electricity Act 1989 and the Utilities Act 2000. Successor organisation to OFGAS and OFFER, the former separate Gas and Electricity Regulators. Offtake Point The point in a gas system where gas is taken by supply pipe to a consumer. Oil Gasification The conversion of oil or naphtha into gas to be used as a fuel. See also Manufactured Gas. On the day Commodity Market (OCM) System of within-day gas trading introduced into Great Britain in 1999. A screen-based system designed to allow shippers, traders and the system operator (then Transco, now National Grid) to resolve within-day demand and supply imbalances in an orderly fashion. Open Access A system offering all applicants access to specified infrastructure. See Common Carriage. Open Cycle Gas Turbine (OCGT) A gas turbine, often derived from aero-engines, used for peak generation of electricity. Also used in conjunction with a steam turbine in a combined cycle power plant. When only the gas turbine is used it may be termed single cycle. Open Season A procedure for demonstrating to a regulator that capacity is offered on a transparent basis. It is used principally where pipelines are required by regulation to offer only transportation services, for example in North America and the Southern Cone of South America. It is also being used elsewhere as a means of gathering information about potential interest in a pipeline. LNG, storage etc project to help the sponsors decide how and when to size the project. Off-Peak The period during a day, week, month or year when the load being delivered by a gas system is not at its maximum volume. Over the Counter Trading (OTC) Trading that takes place outside a formal Exchange. Peak Day The day in the year on which the demand for gas is highest. In temperate areas this is normally a cold day in mid winter. In warmer areas it may occur midsummer, when there is a high air conditioning load met either directly by gas or by gas-fired power. A crucial indicator in planning and sizing gas infrastructure. Peak Hour The hour in the day in which demand for gas is highest. Chiefly relevant to distribution systems. Is normally around the midday or evening meal time Peak Load The maximum load produced or consumed by a unit in a stated period of time. In some tariff systems it is an important component of the tariff design, since it defines the capacity that is booked in the gas delivery system and must be paid whether or not used. Peak Shaving Peak shaving is a means of reducing the Peak Load on the gas transportation and supply system by supplying some gas from sources at or close to the point of ultimate consumption, thus improving the average Load Factor . Peak shaving may be daily or seasonal and will be handled in a variety of ways: - Underground storage . peak shaving LNG plants, Line Pack . Gas Holders . propane-air plant and, occasionally, special peak shaving supply contracts. A non-storage alternative to peak shaving is to interrupt I nterruptible Gas supplies. Permeability A measure of the ease with which liquids or gas flow through a reservoir rock. Compare this with Porosity . Gas will flow more easily than oil, and so can be recovered from rocks with lower permeability. Permeability is measured in Darcies. Gas reservoirs may have permeabilities of only a few millidarcies. Petrochemical An intermediate chemical derived from petroleum, hydrocarbon liquids, or natural gas, such as ethylene, propylene, benzene, toluene, and xylene. Pig Equipment used to clean or flush out liquids and other accumulated and unwanted items from the inside of an oil or gas pipeline. It is inserted into the pipeline and carried along by the flow of oil or gas. An intelligent pig includes measuring and sensing equipment which can be used to inspect a pipeline internally, which is useful after it has been buried underground Pipeline A tube for the transportation of crude oil or natural gas between two points, either offshore or onshore. Pipeline Capacity The amount of oil or gas that can be passed through a pipeline over a given period of time. Plateau In long term gas contracts the period of years for which the Annual Contract Quantity remains flat. The Plateau will normally be preceded by a build up period, during which the volumes increase and, in the case of a Depletion Contract will be followed by a period of decline until further production is no longer economic. Porosity The proportion of a rock volume (expressed as a percentage) that is occupied by the voids between mineral grains. Used to help estimate the volume of hydrocarbons in a field. Compare this with P ermeability . Power Purchase Agreement (PPA) A contract between a power station and the electricity purchasing organisation for the sale of electricity. Primary Energy The gross amount of energy used, measured in the quantities of the original fuel produced (e. g. crude oil) before conversion to other forms (e. g. refined petroleum products or electricity). Thus hydroelectric power and nuclear power are Primary, but power from generating stations consuming fossil fuels is not. Production Sharing Agreement (PSA) An agreement between an international producing company and a host government or state oil company under which the international company acts as risk-taking contractor investing in exploration andor production facilities in return for the right to export or sell a quantity of gas or oil that may be produced from the Concession or Block . Sometimes known as a Production Sharing Contract. The terms are interchangeable and the use of one or the other depends on the country. Profit Gas Frequently used to signify the gas received by a Contractor in a Production Sharing Agreement to provide the profit in the operation. Normally the Contractor will receive Cost Gas to cover its costs and, after other minor provisions, the remaining gas will be split with the host government in agreed proportions. In some countries profit gas is also subject to income tax, in other jurisdictions the State Oil Company is assumed to pay the income tax liability of the contractor. The proportion of profit gas is adjusted depending on local practice. May be used to signify the totality of gas remaining after Cost Gas, Royalty and similar items, including therefore both the Governments and the Contractors shares. Project Financing A method of financing in which the lender makes loans directly to a project and may claim repayment only out of that project. In theory, the lender has no recourse to the project sponsors other assets (non-recourse financing) but in practice this is rare. More commonly the extent of the sponsors liability is strictly defined (limited recourse financing). Propane A member of the alkane (paraffin) group of hydrocarbons with three carbon atoms in its molecule ( C3H8, often abbreviated to C3 in non technical usage). A frequent component of natural gas, also sold as a form of Bottled Gas . Liquefies at -42C. Proven Reserves Those quantities of petroleum which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current economic conditions, operating methods, and government regulations. Proven (proved) reserves can be categorised as developed or undeveloped. Where probabilistic methods have been used to estimate reserves, proven reserves are those with a better than 90 chance of being economically recoverable. Sometimes abbreviated as P90. Reserves with a greater than 50 chance but less than 90 chance are defined as Probable, or P50. Reserves with a greater than 10 chance but less than 50 chance are Possible or P10. Reserves may be classified as proved, if facilities to process and transport them to market are operational at the time of the estimate or there is a reasonable expectation that such facilities will be installed. Reasonable expectation is usually taken to mean that a developer has taken the decision to build the necessary facilities and the development plan has been approved by the relevant authorities. Thus large resources, such as those known to exist in North Alaska, are not classified as proven because there is no route to market. Different countries have adopted many different definitions of reserves, but gas contracts often refer to the Society of Petroleum Engineers (SPE) definitions. These and similar definitions from the World Petroleum Council were harmonised in 1997. Public Service Obligation A Public Service Obligation (PSO) is a requirement imposed by government on a company or companies to provide services which might not otherwise be profitable but are judged to be in the public interest. These could, for instance, include supplying gas to small or poor consumers, ensuring that appliances and other infrastructure is operating efficiently and safely, and ensuring that there are sufficient back-up gas supplies to cover emergency interruptions in supply. Public Utility Commission (PUC) State commissions in the USA responsible for regulating gas, and other utilities that operate within the boundaries of the state. See Regulation. Ramping Rate The rate at which the level of production can be increased after a partial or complete interruption. Rates North American term for the charges for the use of pipeline and storage capacity, referred to in other parts of the English-speaking world as Tariff. The North American definition of Tariff is more nearly equivalent to Network Code. Raw Natural Gas Natural gas still containing impurities and unwanted substances, such as water, nitrogen, carbon dioxide, hydrogen sulphide gas and helium. See also Impurities . Treatment. Recovery Factor The percentage of gas or oil in place in the reservoir which can be economically recovered. Gas Recovery factors may be around 60-70 in reservoirs with water drive from an Aquifer and up to 90 in Depletion Drive Reservoirs. Regasification The reconversion of LNG into gas suitable for pipeline transportation. See LNG. Regulated Access Access to infrastructure under terms and conditions set by or agreed with a Regulator . Such access will usually be open to all qualifying customers. See Common Carriage. Regulator (1) A mechanical device for controlling the pressure of gas within acceptable limits. Typically installed when has enters a low pressure distribution system for final use by small customers. (2) The person or body appointed to oversee the operation of the regulated parts of a gas industry. See Regulation. Regulation Regulation is a substitute for free market operation typically, in the gas industry, where all or part of the operations are carried out by institutional or natural monopolies. Provides a temporary or permanent counterweight to the economic power of the monopoly. Often exercised politically by government departments, but in many countries independent regulation is thought preferable. In any case the rules governing regulation will normally have been laid down explicitly by government legislation. Regulation can be economic restricting the revenue and profits of operators - or legal policing legislation. Regulators are normally closely involved in the setting up of liberalised market systems, when they may use their central position to interpret and rule on the applicability of legislation either ex-ante or ex-post. See Common Carriage. Renewable Energy An energy form, the supply of which is partly or wholly regenerated in the course of the annual solar cycle. Thus solar and wind energy, hydropower and fuels of vegetable origin are regarded as renewable mineral fuels and nuclear power are not. Reservoir A reservoir is an accumulation of oil andor gas in a permeable and porous rock such as sandstone. A petroleum reservoir normally contains three fluids (oil, gas and water), which separate into distinct sections, owing to their varying specific gravities. Gas occupies the upper part of the reservoir as it is the lightest, oil the middle section, while water occupies the lower section. See also Permeability . Porosity . Gas Cap . Aquifer . Solution Gas . Proven Reserves. Reticulation A reticulation network is a small diameter, low pressure gas system serving residential and commercial customers. (From the Latin word reta, meaning net). See also Distribution. Retrograde Condensate A gas condensate which, in the reservoir, is close to the Dew Point of the fluid. A small reduction in pressure, by production of the field, leads to the condensation of higher hydrocarbons in the reservoir, causing a lower Recovery Factor . Royalty A tax on production volumes, often paid in kind, which is levied as a percentage of production. It is therefore not related to the profitability of the production project, merely to the volume of gas (or oil) produced. R:P Ratio The Reserves: Production Ratio is the number of years that current reserves would last at current production levels. Thus reserves of 100 divided by consumption of 20year gives an R:P ratio of 5, and implies a life of 5 years for the reserve. RPI-X A regulatory formula by which a regulated monopoly is allowed to increase its prices each year by the retail price index (RPI) minus a defined amount or percentage x (x is a variable). Gives consumers falling real prices and forces the utility to reduce costs if it is to maintain its level of profitability. Sales Gas Raw gas, after processing to remove LPG, condensate and carbon dioxide. Sales gas usually consists mainly of methane and ethane and is odorised. See Odorisation. Salt Cavity Storage The storage of gas in caverns leached out in gas-tight salt strata. Such caverns may be generated during the recovery of salt for commercial purposes, or may be purpose-built for gas storage. Scrubbing The process of purifying a gas or liquid by washing it with suitable chemicals in a contact vessel. Seal The layer of rock overlying a gas field which prevents the gas escaping from the reservoir. It is therefore of low Permeability . Salt and fine clays can provide good seal. Seasonal Normal The average (or normal) result for the time of year. Thus Seasonal Normal Temperature (SNT) is the average temperature on a calendar day, where the average has been measured over a suitably long period. Likewise Seasonal Normal Demand, Seasonal Normal Weather. SNT is an important factor in developing forecasts of gas usage. See Weather Correction. Seasonal storage Storage designed to be filled at times of low (season) demand and emptied at times of high demand, over months rather than days. Security of Supply Security of supply is a term with several meanings including: the provision of adequate infrastructure to cope with annual and peak demand the provision of sufficient gas to meet annual and peak demand ensuring that a country or area does not rely exclusively on one, or very few sources of supply. Seismic Survey A technique for establishing the presence of underground geological strata using sound waves. There are two main techniques - reflection or refraction. In the oil and gas industry by far the most common is reflection. In a reflection survey sound waves are sent into the ground and the echoes from boundaries between rock with different properties of density and sound velocity are recorded. The sound waves recorded at the surface can then be used to create maps of the rock layers in the subsurface to reduce the risk of drilling dry holes. A reflection seismic survey may be either 2D, in which the reflections are recorded along a line or 3D, in which the lines are very closely spaced to deliver a three dimensional view of the subsurface. A refraction seismic survey is a different technology in which the sound waves are refracted along rock boundaries rather than reflected from them. Send-Out The quantity of gas delivered by a plant or system during a specified period of time. Shipper A party negotiating for the transport of gas on its own behalf or as an agent for another. In liberalised markets shippers may not be allowed to operate transportation systems. Slug Catcher Plant installed in a gas pipeline system or gas processing plant to catch slugs of liquid. Usually this takes the form of a long section of pipe, inside which the pressure is allowed to drop by a controlled amount. See also Pig. Solution Gas Solution Gas, unlike Cap Gas is Associated Gas dissolved in oil. Produced inevitably with the oil and separated from it at the well-head. Solution Gas production is thus a function of oil production and of the GasOil Ratio . which changes over the life of the field. It is therefore an unreliable gas supply and difficult to market, unless the buyer or seller have large alternative sources. Has in the past largely been flared or vented but this is becoming less acceptable, largely for environmental reasons, although is still not uncommon in remoter areas. Separation is often carried out in two or three stages to maintain the gas pressure for pipelining as far as possible. Gas from the final stage separator is at low pressure and is normally used in the field or on the platform during production. The gas may be re-injected into the reservoir if it will not break through into the oil wells. Sour Gas Gas containing a high level of Carbon Dioxide or Hydrogen Sulphide, which are corrosive in the presence of water. They may therefore require drying or removal to preserve the pipeline. The converse of Sweet Gas. Spark Spread The spark spread represents the difference between the cost of fuel and the price of electric power produced. A positive spread indicates that the price of the power is higher than that of the fuel, and the spread is profitable. The spread can be calculated for any input fuel, such as natural gas, coal, or heating oil. Specification The technical description of the allowable limits of the chemical composition of gas which may be admitted into a pipeline or process. Specific Gravity The ratio of the density of gas to that of air, or the ratio of the density of a liquid to that of water, in both cases at the same temperature and pressure. Spot Trading A loose term covering the buying and selling of gas other than under a long term contract. Generally in trading parlance spot delivery means immediate delivery. Standing Charge Tariff term for a fixed charge, typically per quarter or per year, irrespective of the amount of gas actually taken. Synonymous with Connection Charge but to be distinguished from Demand Charge. Storage For natural gas storage facilities fall into several categories. Seasonal storage comprises depleted gas fields Aquifers S alt Cavity Storage mined caverns and disused mines. Peak storage includes Gas Holders . Line Pack . lengths of pipeline buried specifically for storage use, and LNG storage used either for base-load or peak-shaving duties, depending on the market. Increasingly used in liberalised markets to enable gas to be trade at any time of the year for reasons not related to peak demand. See also Peak Shaving . Straddle Plant A gas processing plant that straddles a gas transportation pipeline to remove NGLs from the gas stream. Because it is often more economic to transport Rich Gas a straddle plant is required to process the plant to final sales specification. The alternative location of a gas processing plant is close to the producing field. NGLs are then transported as liquids away from the field area either by separate pipeline or other means. Supply Contract A contract under which the seller undertakes to supply gas in guaranteed volumes over a fixed period of time. A Supply Contract is therefore in sharp contrast to a Depletion Contract as the seller assumes the volume risks. Whilst certain fields may be envisaged in the contract, the seller will normally have the right to substitute other suitable gas if necessary. Swaps (1) Arrangements under which gas destined for a market is delivered elsewhere, and substitute gas is supplied to the final market. For instance, Nigerian LNG contracted to Italy is delivered to France, and other gas contracted to France is delivered to Italy. (2) In trading, the exchange of a fixed price for a floating price for a future delivery. Sweet Gas Gas containing little or no Carbon Dioxide or Hydrogen Sulphide. Converse of Sour Gas. Swing The inverse of Load Factor . defined as: Peak volume transported (sold) Average volume transported (sold) Expressed as a percentage. Thus a load factor of 60 is a swing of 167. Often used to describe the flexibility of supplies over a year. Synthesis Gas Also known as Syngas, Synthesis Gas is a mixture of carbon monoxide and hydrogen produced from methane or other hydrocarbons and steam and used to produce various chemicals, notably methanol. It is also the basis for the Fischer Tropsch process. See also: Middle Distillate Synthesis. Synthetic Gasoline Motor gasoline produced from coal (by the Fischer Tropsch process) or from natural gas (by the Fischer Tropsch process or via methanol). See also Middle Distillate Synthesis. Take or Pay Take or Pay (TOP) is a common provision in gas contracts under which, if the Buyers annual purchased volume is less than the Annual Contract Quantity minus any shortfall in the Sellers deliveries, minus any Downward Quantity Tolerance . the Buyer pays for such a shortfall as if the gas had been received. The Buyer may have the right in subsequent years to take the gas paid for but not received, either free or for an amount to reflect changes in indexed prices. See also Make Up Gas. Tariff A schedule of rates or charges offered by a common carrier or utility. Tariffs are commonly available for all parts of the gas industry where third party access is enforced or offered, for example for gas transmission in pipelines, for the use of gas stores, for gas sales to residential customers. Telemetry A technique used in the gas industry for recording information at a distance from the Meter or other recording device, typically by radio transmission of the data. Temperature Demand Analysis The statistical analysis of the causal relationships between weather (and other) factors and the demand for gas. An essential prelude to forecasting demand. See Seasonal Normal and Weather Correction. Temperature Correction The process of adjusting actual gas usage to what it would have been at Seasonal Normal Temperatures, to allow comparisons to be made between results for different time periods, typically years. See weather correction. Title Transfer Title transfer is the transfer of which ownership of gas from the seller to the buyer. Typically this may occur somewhere between the well head and entry into the transmission system, at national border crossings, at the City Gate etc. In the world of traded gas, possible points of transfer become more numerous. A special case is the transfer of LNG at some specified point on the high seas. See Delivered. Trading Volume The number of contracts that change hands during a specified period of time. See also Churning. Transit The transportation of gas through a country or gas system en route to the final customer. For example, Russian gas may transit through Ukraine en route to customers in western Europe. Transmission The transportation of large quantities of gas at high pressures, often through national or regional transmission systems. The gas is then transferred into local distribution systems for supply to customers at lower pressures. Transmission Company The company responsible for operating a transportation system. In liberalised markets there is increasing pressure for such companies to be restricted to offering capacity in pipelines for sale, and to be barred from selling gas itself. The companies are also commonly known as Transmission System Operators (TSOs) a title which reinforces their restricted role. See Unbundling. Transmission Pipeline A network of pipelines moving natural gas from a gas processing plant via compressor stations, to storage centres or distribution points. Transparency A general term meaning open publication of information. In the gas industry it is generally used in relation to costs, prices and capacity, where information has traditionally been considered commercially confidential. Costs and prices generally reflect a number of elements, such as production, transportation, storage, service. Transparency generally involves separating out or U nbundling these elements, usually as a result of regulatory requirements. A further step towards transparency involves the publication of the methodology used to calculate the different elements of costs and prices. Transporter A gas pipeline company transporting gas belonging to other companies. Also the operator of LNG vessels. See Transmission Company. Trap A configuration of reservoir and seal rocks that can confine gas (or oil) which are lighter than water normally contained in the reservoir rock. Structural traps are formed by a closed structure of R eservoir rock overlain by a sealing formation (the Seal ). May also be formed by stratigraphic changes within a reservoir rock in which case it is known as a stratigraphic trap. Treatment Any gas purification process, but most generally applied to the treatment of gas immediately after production, to bring it to acceptable standard for the market in question andor to extract valuable components for separate sale. This may involve the removal of LPGs and will certainly involve stripping out Condensates . Carbon Dioxide and Hydrogen Sulphide and other sulphur compounds (see also Acid Gas ) mercury and excessive water which may be in the raw gas. Other impurities are occasionally encountered. Whether other inert gases such as nitrogen, helium etc are extracted will be a matter for economic evaluation. UKCS United Kingdom Continental Shelf. Unbundling Unbundling is a term with several meanings for the gas industry but more accurately, and originally, it was used to denote the separation of different services and the charges associated with them. Originally used in the US in restructuring the telephone industry. it was adopted in the gas industry to denote the separation of gas sales from transportation and storage services. This is still the most usual meaning of the term, particularly in North America, where large customers are now free to purchase gas and services separately. However the European Commission uses the term Unbundling to mean the financial disaggregation of different functions within integrated companies, such as transmission and marketing. Where companies perform multiple functions, the Commission has sought to require separate accounting for the functions. Its aim is therefore much more related towards Transparency and eliminating the potential for anti-competitive cross subsidisation activities. Underground Storage The storage of gas, for strategic or peak shaving reasons, in underground reservoirs. Depleted gas fields are often suitable. Other possibilities include depleted oil fields, Aquifers and Salt Cavity Storage . In the context of LNG, underground storage refers to normal LNG storage tanks which are, however, buried to provide greater safety in the event of leakages. Unitisation Agreement When a gas field extends over two or more production licences or leases with different ownership, most countries require that the field owners unitise their holdings i. e. decide how the reserves and production of the total field will be shared between the licensees, thus enabling the efficient depletion of the reserves. The Unitisation Agreement normally provides for the appointment of a field operator, a method of determining the reserves underlying each licence or lease and the frequency of reserve re-determination. Upstream Upstream, Midstream and Downstream are imprecisely defined terms used to separate activities along the gas and oil chain into homogenous groups. Upstream typically refers to exploration, development amp production of oil amp gas. Sometimes also defined to embrace Midstream, which typically covers transmission (as opposed to distribution) LNG shipping etc. Downstream typically refers to activities associated with delivery to final consumers, such as distribution systems and connections to customer premises. Water Drive In a porous rock, as gas is withdrawn from the reservoir, water expands into the region formerly occupied by the gas as pressure is released. This often has the result of trapping volumes of gas so that they cannot be produced, thus reducing the recovery of gas. Not a problem with a D epletion Drive Reservoir . See Aquifer. Water Gauge A measure often used to express the pressure of gas in distribution systems, using water instead of mercury. The gauge records how far up a gradated tube gas will lift a column of water. Distribution systems normally operate at about 300mm (12 inches) water gauge (i. e. 300mm above atmospheric pressure). For comparison, atmospheric pressure is a little above 10 metres of water. Wayleave The strip of land around a gas pipeline or other utility to which the utility has legal right of access for building and maintenance. Weather correction A procedure for estimating what customer demand would have been in S easonal Normal weather conditions. Thus in a cold year seasonal normal demand will be lower than actual demand and vice versa. Well A hole drilled into the ground, mostly by rotary rigs, in which a drill bit, which actually cuts the rock, is turned on the end of a drill string, made up of lengths of hollow steel pipe which are added to the string as the bit drills deeper into the ground. Wells have various descriptions depending on the stage of the production process at which they are drilled. Exploration wells are drilled to discover if gas (or oil) can be found Evaluation or appraisal wells are drilled to obtain more information about a previous discovery Development wells are drilled to produce gas from a field which is being developed, and are called Producing wells when the field enters commercial production. Wheeling Physically redirecting gas from one pipeline system to another at a Hub as opposed to changing the title by swap arrangements. Wobbe Index Occasionally referred to as the Wobbe number. A measure of the rate at which gas will deliver heat on combustion and hence of the compatibility of a gas with gas burning equipment. Working Gas In a gas store, the total volume of gas present less C ushion Gas . In other words the gas available for normal working. Hence working gas capacity - the total capacity of a storage facility minus cushion gas. GLOSSARY OF UNITS Absolute Pressure The sum of Atmospheric Pressure and Gauge Pressure i. e. pressure by reference to a vacuum Atmosphere: A measure of pressure, now largely superseded by the Bar to which it is nearly identical. Originally equal to 760 mmHg it has now been redefined as 101,325 pascals and consequently 1 atmosphere 1.01325 bars. Atmospheric Pressure The pressure of the weight of air and water vapour on the surface of the earth. Bar The most used unit for expressing gas pressure. It is equal to 100,000 pascals (Nm2), which is the official SI unit. 1 Bar is approximately atmospheric pressure. bbl A US barrel, 1 barrel 0.159 cubic metres 42 U. S. gallons (approx35 imperial gallons). The abbreviation is also sometimes written as B or b. bblday Barrels per day. Usually used to quantify a refiners output capacity or an oilfields rate of flow. Bcm Billion cubic metres (i. e milliard or 109 cubic metres). Billion In the US 109. Although elsewhere billion often signifies 1012, the Natural Gas industry has generally adopted the US usag e. Boe Barrels of oil equivalent - a frequently used number to quantify general energy requirements for practical purposes. One boe is usually taken as representing 5.8 MMBtu gross. British thermal unit A unit of heat still widely used in the gas industry, notably in North America and in LNG. Originally defined as the amount of heat required to raise the temperature of one lb of water from 60 to 61 Fahrenheit, it is now defined in relationship to a fixed number of Joules (1055.056 to three decimal points). The most common multiple is one million Btu, normally abbreviated to MMBtu and U. S. dollarsMMBtu is perhaps the most frequently used unit for comparing gas prices on a common basis. See also Therm. Cal Calorie. Formerly the SI unit of energy, now no longer part of the system but still extensively used in Europe. The calorie was nominally the amount of heat required to raise 1 gram of water by 1C at 1 standard atmosphere and starting from 14.5C, but is now defined arbitrarily as: 4.1868 J. The most common multiple used is the Megacalorie (Mcal). Cf Cubic feet. Measure of gas volume, referring to the amount of gas needed to fill a volume of one cubic foot at 14.73 pounds per square inch absolute pressure and 600F. cm Cubic metres. Note however that cm is also the official abbreviation for centimetre. Deca Therm Also deka therm. A term sometimes used in the U. S. in lieu of one million Btu. Gauge Pressure The amount of pressure shown by a gauge, i. e. the amount by which the pressure exceeds atmospheric pressure. See also Absolute Pressure. GJ GigaJoule. One GigaJoule is approximately equal to 9.478 MMBtu. One million Btu equals 1.055 GJ. GWh GigaWatts per hour. J Joule - The unit of energy in the SI system and the unit approved by the International Gas Union for the expression of heat in the gas industry. Its definition is one Newton metre. In practice the industry has been reluctant to embrace the Joule for commercial purposes and it is only current in Australia and New Zealand. For practical purposes the multiples most in use are the MegaJoule (MJ) and the GigaJoule (GJ), although Petajoule ( PJ ) is also seen. For quick calculations 1 GigaJoule is very close in value to 1 MMBtu. Kelvin Measurement of temperature equivalent to 1273.16 of the interval between absolute zero and the triple point of water. The official unit of the SI system. The Kelvin is identical to 1 degree Celsius, which is the term most often used in practice, but the scale is different (0C273.16 K). Note incidentally that the Kelvin is itself the unit of measurement and references to 1 degree Kelvin are incorrect. kW KiloWatt One thousand Watts. kWh KiloWatt hour - Together with its multiples, rapidly becoming the most used unit for energy in gas, although its use is not strictly in accordance with the SI system or with IGU preferences. Since 1 Joule 1 Watt per second, the conversion factor 1 kWh 3.6 MJ is exact. Long ton 2240 lb. The most usual form of non-metric ton. Mcf Thousand cubic feet. Mcm Thousand cubic metres. Milliard Synonymous with US billion - 109. MM Widely used in the gas industry to mean a million (106), although this usage is incorrect, according to the SI convention. Similarly M is often used to represent a thousand (103). When the lower case letters m and mm are used, these usually denote a thousand and a million respectively. In everything else M is correctly used to mean Million as in MWh. MMbbl Million barrels. MMcf Million cubic feet. MMcm Million cubic metres. MMscm Million standard cubic metres. Mtoe Million tonnes of oil equivalent. Mtpa Million tonnes per annum, a widely used unit of volume in the LNG industry. MW MegaWatt - one million Watts. ncm Normal Cubic Metre - A cubic metre measured at 0 C and 1013 mbar dry. The most used metric unit for measuring the volume of gas. It differs from the Standard cubic metre ( scm ) in the temperature at which the measurement is made. The Normal cubic metre thus contains about 5 more heat content than the Standard cubic metre. PJ PetaJoule - Standard unit in the Australian gas industry, equivalent to 1 million (106) GJ and therefore roughly equal to 1 million MMBtu . It is therefore close to 1 Bcf or some 30 million cubic metres. ppm Parts per million. Pressure The force exerted by one body on another, measured as force over area e. g. newtons per square metre. Psi Pounds per Square Inch common USEnglish unit of pressure, 14.5psi 1 bar. scf Standard cubic foot - The conditions for measuring the scf are in fact very close to, but not identical with, those for the standard cubic metre ( scm ). Despite its name, there is no single accepted standard for the standard cubic foot but the one most used is 60F and 30 in Hg, dry. scm Standard Cubic Metre - A cubic metre measured at 15C and 1013.25 mbar, dry. The unit of volume recommended by the IGU but not in normal use. See also ncm. Short ton 2000 lb. Used in the US. SI Multiples The SI system uses the following prefixes for multiples of the base units: 103 kilo (k), 106 mega (M), 109 giga (G), 1012 tera (T), 1015 peta (P), 1018exa (E). tce Ton of coal equivalent - Like the barrel of oil equivalent ( boe ) a measure of general energy requirement but now largely supplanted by the boe. Generally taken to have a value of approximately 27 MMBtu. Tcf Trillion (1012) cubic feet. Tcm Trillion (1012) cubic metres. Therm 100,000 British Thermal Units is still occasionally used as a unit for pricing gas, particularly in the UK. Thermie A term virtually identical to 1 Megacalorie but having 15C as its base, used primarily in Spain. toe Tonnes of oil equivalent - A metric measure used to quantify general energy requirements for practical purposes, an alternative to the barrel of oil equivalent. usually taken as representing 10,000 kilocalories net. Ton (t) A term covering a variety of measures: The metric tonne (1000 kg) The long ton (2240 lbs) The short ton (2000 lbs). The metric tonne is the one increasingly used. W Watt - The basic unit of electrical power, defined as one joule per second. Water Drive In a porous rock, as gas is withdrawn from the reservoir, water expands into the region formerly occupied by the gas as pressure is released. This often has the result of trapping gas so that it cannot be produced, thus reducing recovery from the reservoir. Water drive is not a problem with a D epletion Drive Reservoir . See also Reservoir. Water Gauge A measure often used to express the pressure of gas in distribution systems, using water instead of mercury. Distribution systems normally operate at about 300mm (12 inches) water gauge (i. e. 300mm above atmospheric pressure). For comparison, atmospheric pressure is a little above 10metres of water. See also Gauge Pressure. Stock Order Types: Getting to Know the Basics Key Points Stock order types can have a significant impact on the time, price and manner of your transactions. Orders are affected by three main factors: time in force, qualifiers and types. Learn more about order types by reviewing some examples. During volatile market environments, prices tend to move faster and bidask spreads tend to widenso its critical to understand and use the appropriate order types to help control your trades price, timing, and manner of execution. While many market factors are beyond your control, if you have a clear understanding of how the order you place will be received in the marketplace, you will be much more likely to get the results you desire. Here are some stock order basics: Order types These are guidelines that modify the execution conditions of an order based on volume, time and price constraints. A market order is an order to buy or sell a stock at the best possible price available at the time the order is received in the marketplace. A market order for a New York Stock Exchange or NASDAQ listed stock will generally be filled at or close to the National Best Bid and Offer (NBBO). The NBBO is a term that refers to the U. S. Securities and Exchange Commission (SEC) requirement that brokers attempt to provide customers the best available bid price when their customers sell securities and the best available ask price when they buy securities. It is important to remember that factors such as the size of your order, significant news reports and rapidly changing market prices can result in execution at a price different from the NBBO. Additionally, if the size of your order exceeds the number of shares available at the time your order is entered, your order may be split and executed at several different prices until filled. Market orders are normally placed with a day-only time in force, which means they will trade only on the business day and in the trading session in which theyre placed. Market orders placed after 4:00 p. m. ET will be entered for the next trading day at 9:30 a. m. ET. Because market orders are typically filled very quickly, once they are entered, they generally cannot be canceled. It is important to rememberparticularly with large orders or in fast market conditionsthat you are never guaranteed the NBBO youre quoted at the time your order is entered. Limit orders are best when your primary objective is to obtain a specific price rather than a quick execution. You can use limit orders to ensure that: A buy order is not executed above the maximum price you are willing to pay. A sell order is not executed at a price that is below the minimum price you are willing to accept. Although a limit order allows you to specify a price, there is no guarantee of an execution, even if the market moves and reaches your limit price. Because limit orders are typically executed on a first-come, first-served basis, orders received before yours may execute and remove all available shares at your price. Limit order executions occur in a similar fashion as a market order, except that all executions will occur at the limit price (or better) you specify, at which point the remainder of your order (if any) is entered into the limit order book and becomes part of the displayed quote. Although your entire order will typically be executed with market orders, thats not always the case with limit orders. Also, keep in mind that even though executions may occur at your price level or better, your order still may not be executed. Generally this occurs due to industry trading exceptions, price corrections, or executions that may have occurred at different market venues. Stop orders come in three main varieties: standard stop order, stop-limit order and trailing stop order. Stop and stop-limit orders are entered and held in the marketplace, while trailing stop orders are held on your brokerdealers server until execution is possible. The table below shows a comparison of the three stop-order categories. Source: Schwab Center for Financial Research. Stop orders are typically used to protect an unrealized gain on a position in your account. Alternatively, if a stock moves down and a specified price is reached, stop orders also help minimize losses by selling the position at the market. For example, if the current price of a stock is 190 and you want to protect against a significant decline, you could enter a sell-stop order at 185. If the bid falls to 185 or an execution occurs at 185 or lower (at the same venue where your order resides), your stop order is triggered and a market order is entered to sell at the next available market price. Although stop orders are much more common when selling securities, stop orders can also be used to purchase stocks. Buy-stop orders are typically used to purchase stocks above a particular threshold where the investor believes an upward trend may be established. Stop-limit orders are typically used to buy or sell a security at a specified limit price once the security has traded at or through a specified stop price. Therefore, it has two components: the stop price and the limit price, which may or may not be the same. In most cases, the stop price on a sell stop-limit order will be equal to or above the limit price. As the stock declines in value, if the stock trades at or below the stop price, the order will trigger and it will become a limit order rather than a market order. Because the order is now a limit order, execution cannot occur unless the stock can be sold at the limit price specified (or better). To increase your chances of execution on a stop-limit order, consider placing your limit price below your stop price. The farther below the stop price you place your limit price, the better chance you have of receiving an execution in a rapidly declining market. A trailing stop order is an order in which the stop price will trail either the current ask or current bid by the number of points or percentage you specify. As mentioned above, this order is held on a brokerdealers server until the trigger is reached and then sent to the marketplace. The primary benefit of a trailing stop order is that it doesnt have to be cancelled and re-entered as the price of the stock increases. Time-in-force orders These specify how long an order will remain active before being executed or expired. Day-only orders are good for the current trading session only. This does not include any extended-hours sessions that occur before 9:30 a. m. or after 4:00 p. m. Eastern Time (ET). Extended-hours orders must be specified as such. Good-until-cancelled (GTC) orders are good for 60 calendar days at Schwab. Like day-only orders, GTC orders apply only to the regular 9:30 a. m. to 4:00 p. m. ET trading session. Fill-or-kill (FOK) orders require that the order be immediately filled in its entirety. If this is not possible, the order is cancelled. This is one way to find hidden liquidity. Immediate-or-cancel (IOC) orders require that any part of an order that can be filled immediately is filled, and any remaining shares are cancelled. This is another way to find hidden liquidity. Order qualifiers These guidelines modify the execution conditions of an order based on volume, time and price constraints. They include: Minimum-quantity orders specify that you require a minimum number of shares to be executed in order to complete a transaction. If the minimum is not available, minimum quantity orders specify that none of the order should be executed. For example, if you enter an order to buy 5,000 shares with a minimum quantity of 1,000 shares, you are requesting that none of the order be executed unless at least 1,000 shares can be bought. While this order qualifier may help prevent a fill of 100 shares on a 5,000-share order, it may also prevent your order from being executed at all, as this type of qualifier is prohibited on orders sent to the limit order book. It would also require that at least 1,000 shares be executed at a single venue, which may not be possible, although 1,000 shares might be available if the order was broken up and sent to multiple venues. You should be careful with minimum-quantity qualifiers, as the disadvantages may outweigh the advantages. Do-not-reduce (DNR) orders specify that a broker not adjust the limit price of the order when the stock is adjusted on the ex-dividend date. For example, if you enter a GTC limit order to buy XYZ at 193 and, a week later, the stock reaches ex-dividend date for an upcoming dividend payment of 0.50, your limit order would normally be reduced to 192.50. All-or-none (AON) orders specify that the order you place must be executed in its entirety or not at all. Example: If you enter an AON order to buy 5,000 shares, you are requesting that none of the order be executed unless it is for the entire 5,000 shares. While AON order qualifiers may help prevent a partial fill, they may also prevent your order from being executed at all, because they cannot be held on the exchange limit order book. AON orders also require that the entire order be executed at a single venue, which may not be possible, although execution might be possible if the order were broken up and sent to multiple venues. As with minimum-quantity orders, be careful with all-or-nothing qualifiersthe drawbacks may outweigh the benefits. Bottom line Although this article is by no means exhaustive, its meant to help you understand the basics of order types and to provide ideas to help you trade with confidence. Next StepsUse of Debt-Related Derivatives Products A derivative - or swap 1 - is a financial instrument created from or whose value depends upon (is derived from) the value of one or more separate assets or indices of asset values. As used in public finance, derivatives may take the form of interest rate swaps, futures and options contracts, options on swaps and other hedging mechanisms such as rate locks. Derivative products have been used in the debt, risk and asset management programs of state and local governments and other debt issuing authorities. Although it is appropriate to retain a derivatives advisor to assist in a transaction, issuers are advised that they should have a level of in house expertise necessary to understand the core aspects and risks of a derivatives transaction. Simply stated if you do not feel you understand and can explain the transaction, it is probably not appropriate for your use. When used properly derivative products can be effective interest rate management tools, which can provide a governmental entity financial flexibility, opportunities for interest rate savings, alter the pattern of debt service payments, create variable rate exposure, or change variable rate payments to fixed rate and otherwise limit or hedge variable rate payments. However, as observed during and after the financial crisis of 2008 and 2009 (the Financial Crisis), there are significant risks involved with such transactions, especially when other related markets - such as the variable rate market - trigger events in swap contracts. Some governments have experienced collateral calls, and involuntary and voluntary termination of their swaps, which, for some, came at a substantial cost. As a result, governments have significantly curtailed engaging in these types of transactions since the Financial Crisis. To alert governments to the risks associated with derivative products, GFOA maintains an Advisory ( Use of Derivatives and Structured Investments by State and Local Governments for Non-Pension Fund Investment Portfolios - 2010 ) which specifically advises state and local government finance officers to exercise extreme caution in the use of derivatives and structured finance products. Governmental entities must learn about and understand the potential risks and rewards of derivative and structured products, before deciding if they should be used. Governments must understand fully the characteristics of these instruments and have the ability (internal staff and external advisors) to determine the fair market price and be aware of the market, legal, accounting, credit and disclosure risks involved. It is also recommended that issuers read and understand the most current rating agency guidance regarding the effect of derivatives on ratings, prior to execution of a derivatives contract. Following the Financial Crises, Congress and regulators took steps to regulate the derivatives market, both in the public finance and corporate sectors. Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and subsequent Commodity Futures Trading Commission (CFTC) rulemaking have established Business Conduct Rules for dealers. The regulations provide for safe harbors which include issuer representations and the need for a governmental entity to have a Qualified Independent Representative (QIR) a professional that is independent from the swap dealer (the QIR has not been associated with a swap dealer within the past year and has not been recommended by the swap dealer). Additionally, Dodd-Frank contains other regulations that issuers should be familiar with if considering swaps (see reference section). Before a dealer will engage in any discussions or executions of derivative transactions with a municipal counterparty (or any issuer defined as a Special entity under the CFTC rules), the swap dealers are requiring issuers to adhere to the August 2012 and March 2013 Protocols, which effectively amend any existing ISDA Agreements to allow them to fulfill their obligations under the regulations. These protocols mandate the use of the new CFTC Interim Compliant Identifier (CICI) legal entity identifier system for each Issuer Counterparty. The August 2012 Protocol addresses the swap dealers Business Conduct Rules and suitability issues and requires issuers to select a QIR, make certain representations and maintain internal policies and procedures including swap policies and policies regarding the selection of the QIR. The March 2013 Protocol covers swap clearing requirements and provides for an End-User Exception that allows issuers an exception to the clearing requirements if the issuer meets certain criteria. Swap dealers will require adherence to March 2013 Protocol before transacting any derivative. Instead of adhering to the Protocols, Issuers may choose to execute Bi-Lateral Agreements with each swap counterparty. The Bi-lateral Agreements incorporate essentially the same representations under the Protocols. Adhering to Protocols typically is more efficient for issuers with multiple swap counterparties as it allows issuers to provide information, make elections and representations one time. The Government Finance Officers Association (GFOA) advises that state and local governments exercise caution in the use of derivative instruments. Unless your government has the appropriate expertise to understand and resources to monitor the transactions, prepare financial reports, and audit footnotes for swap transactions on an ongoing basis, as well as manage the variable rate instruments and liquidity facilities associated with the instrument, it should not enter into swaps. Issuers must understand fully the characteristics of derivative instruments, have the ability together with its QIR Advisor to determine a fair market price and be aware of the legal, accounting, credit, and disclosure issues involved. These instruments should not be used for speculation, but only to manage risks associated with an issuers assets or liabilities and only in conformity with financial policies that reflect the risk tolerances and management capabilities of the issuer. These products should only be used when the issuer has developed: A comprehensive derivatives policy that includes : Evidence of clear legal authorization to enter into swap contracts and guidelines for how derivative products fit within the overall debt management program. Documentation of the expected impact of the derivative on the issuers underlying bond ratings. Credit rating agencies evaluate the risks of a derivative and its impact on the issuers rating. An issuer should understand the impact if any, prior to entering into a transaction. A financial advisor or QIR should assist the issuer in evaluating the likely rating considerations. Policies and procedures in place for the hiring of a QIR. Determining the scope of work for the QIR. In addition to transaction assistance, an issuer should have the QIR assist with securing the CICI number for the transaction, ensuring that the transaction qualifies as an end user exemption, and adherence to other CFTC rules. Procurement of a written recommendation from the QIR that the transaction should be undertaken. A list of the types of derivative products that may be used or are prohibited. A requirement that the issuer work with the QIR to document the incremental value of the swap transaction versus the cash market, including a valuation of call option considerations. Call option considerations should include valuing the swap if non-callable versus a comparable non-callable bond and valuing the cost of imbedding a call option in the swap to provide some potential protection for the issuer to manage the termination costs. Prohibition or restrictions into taking upfront payments or premiums, and on selling options. The conditions under which these types of products can be utilized ( i. e. bidding procedures, minimum benefit thresholds, valuation of no call or call options 2. policy on collateralization, and terms of master agreements). The maximum allowable notional amount of derivatives contracts, or a means of determining such amount, e. g. . by reference to floating rate assets. Guidelines for selecting counterparties of high credit quality and addressing the risks. Prior to the execution of a transaction, a requirement that the issuer document that the transaction contemplated fits the requirements of the derivatives policy. A written fairness opinion from the QIR that the transaction was priced at market with a fair pricing. A sufficient understanding of the products . The GFOA encourages all financial officers to learn about the risks and potential benefits of using derivatives. A decision whether or not to use derivatives must be made on an informed basis. Training is essential both in evaluating the use of derivatives and in managing their use. The internal staffing and expertise to manage, monitor, and evaluate these products properly (either on their own or in combination with a QIR ). Tax counsel may also need to be consulted. Issuers must have in place: Methods for measuring, evaluating, monitoring and managing risks associated with derivative products, including: Basis risk - the mismatch between variable rate debt service and the variable rate index used to determine swap payments. Basis risk can also occur when a divergence arises between the index associated with the bonds, and that of the derivative, This divergence could be caused by a number of factors including but not limited to, changes in credit spreadstrading values, tax law changes, absolute levels of interest rate and supply and demand. This risk can be managed through the a matching of the bond index with that of the derivative index, creation of an interest rate reserve fund, or conservative budgeting strategies. Interest rate risk - how the movement of interest rates over time affects the market value of the instrument. Interest rate risk can arise as a.) cashflow risk which is the risk that any market factors (including interest rates or ratios) may increase cashflow from expectations, and b.) Mark-to-Market risk also affected by market factors depending on the trade (interest rates, ratios, yield curve, etc.). Collateral Posting risk the risk that market movements or an issuer downgrade will cause the market value of the swap to be negative enough that the issuer has to post collateral under a Credit Support Annex (CSA). Issuers should be mindful of the different rating standards applied to corporate and municipal credits when evaluating collateralization thresholds and understand that this is a negotiable requirement. Termination and collateral requirements should reflect relative comparable credit strengths of the parties determined on a corporate equivalent or global rating basis. Counterparty risk - the risk that the counterparty fails to make required payments, experiences rating downgrades, or files for bankruptcy protection. This is particularly important if an issuer has more than one swap with a counterparty and the documents contain cross-default provisions. This can be addressed through the establishment of ratings thresholds, guidelines for exposure levels and, particularly, collateralization requirements. Termination risk - the need to terminate the transaction in a market that dictates a termination payment by one of the counterparties. Market practice allows governmental issuers to limit the instances in which this can occur. This risk can also be mitigated through the identification of revenue sources for and budgeting of potential termination payments, structuring the swap so that refunding bond proceeds can be used for termination payments and subordinating the lien status of potential payments. Issuers are cautioned to understand the potential for termination costs to change over time in different interest rate environments and should document the sensitivity to these factors. Issuers are cautioned to ensure that counterparties do not impose excessive or unnecessary fees at termination in excess of amounts allowed for in the swap documents, and are urged to consult with their financial advisors about negotiating the terms of a termination payment. 3 Market-access risk - the risk that the markets may be closed or that an issuer may not be able to enter the credit markets due to its own credit quality deteriorating. For example, to complete a derivatives objective, a new money bond issuance or a refunding may be planned in the future. If at that time the markets are not functioning or an issuer is unable to enter the credit markets, expected cost savings may not be realized while the issuer will continue to be subject to its obligations required by the derivative contract. Amortization risk - the mismatch of the maturity of the swap and the maturity of the underlying bonds or a mismatch in the amortization of the swap and bonds. This should be eliminated by making the maturity and amortization of the swap match those of the bonds. Rollover risk the underlying variable rate bond related to the swap will typically have a liquidity feature or put feature that will require periodic remarketing, rollover or renewal. This requires transactions fees and the risk that a change in the issuers credit, or a change in market conditions may economically disadvantage the issuer. Credit risk - the occurrence of an event modifying the credit rating of the issuer or its counterparty. This should be addressed through minimizing cross defaults and the favorable negotiation of credit event triggers in the underlying documentation. Methods for selecting and procuring derivative products, including when competitive bids and negotiated transactions are warranted, and knowledge of pricing conventions and documentation standards. Guidelines governing the proper disclosure of material information relating to executed derivative products to the issuers governing body, in financial statements, to the rating agencies, to investors in connection with bond offerings, and through secondary market disclosure. Internal disclosure should include information about legal authority, risks, guidelines and market value. Official Statement and secondary market disclosure should comport with current market practice. Procedures and personnel responsible for internally managing and monitoring the issuers (i) obligations (also known as operational risk), such as monitoring rates, calculating and making payments, managing collateral, and budgeting and accounting for derivatives appropriately and (ii) exposure, such as counterparty credit, collateral posting levels, variable rate exposure levels and basis risk. Pursuant to applicable accounting requirements, these procedures must include the development of a methodology for providing periodic termination value analyses. Documentation Standards. The new regulatory framework dictates that all derivative transactions be documented using standardized forms, as standardized terms make it easier for market participants to analyze transactions, which minimizes costs. Documentation in the municipal swap market is accomplished through the negotiation and execution of the forms of documents published by the International Swaps and Derivatives Association, Inc. (ISDA) . 4 ISDA has updated these forms to conform to the new CFTC regulations. The GFOA also advises that many provisions in such forms are subject to negotiation and therefore recommends that finance officers have a QIR to advise on negotiations and amend ISDA documents as changing market conditions warrant. Specifically, the provision of collateral by one or both parties to a swap under certain circumstances is determined at the time the swap is executed. The form of that potential collateral may also be decided at the point of execution or may be postponed until such collateral is required. Collateral is identified in a Credit Support Annex (CSA), and while it will add legal costs to the original transaction and has the potential of never being used, the GFOA recommends it be completed simultaneous with the execution of the swap to avoid having to negotiate collateral arrangements under distressed circumstances. Ongoing Monitoring . Once an issuer has adopted a derivatives policy and executed a derivatives transaction, the issuer should monitor and, to the extent possible, take action to limit its exposure to the risks described above. Because opportunities in the derivatives market change frequently, the GFOA encourages finance officers to keep abreast of such market conditions. Governmental Debt Management 1 Commodity Exchange Act definition of a swap - any agreement. that provides on an executory basis for the exchange. of one or more payments based on the value or level of one or more. rates, currencies, commodities, securities, instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind. and that transfers, as between the parties to the transaction, in whole or in part, the financial risk associated with a future change in any such value or level without also conveying a current or future direct or indirect ownership interest in an asset (including any enterprise or investment pool) or liability that incorporates the financial risk so transferred. 2 The cost of many of the problems experienced by municipalities with swaps could have been reduced had the municipalities been able to terminate swaps at lower costs. One way to reduce the cost of termination is to imbed an issuer call option in the swap. Historically bonds have call options as a matter of course and historically most municipalities have not had call options imbedded in their swaps. It is important to evaluate the portion of the value in the swap that is being derived from the elimination of the call option versus the value being derived from other components of the swap transaction. When undertaking a swap, municipalities should evaluate the incremental value and or cost of imbedding a call option in the swap. Depending on market conditions, call options in swaps may increase costs which should be evaluated versus the risk reduction obtained. 3 Terminating Swaps and Re-indexing There may be opportunities to restructure or re-index a swap to obtain savings or a reduction in the size of the swap. When evaluating these types of transactions, Issuers should be aware that there are potential tax consequences to the modification of an existing swap. The issuer should get advice from a qualified bond counsel regarding any potential adverse tax consequences of a partial termination or re-indexing for example. 4 National Federation of Municipal Analysts, White Paper on Disclosure for Swaps (February 2004) SIFMAGFOA March 2013 Webinar: Municipal Swaps - Understanding the New World of Regulation GFOA Best Practice: Debt Management Policy , 2012 GFOA Advisory: Use of Derivatives and Structured Investments by State and Local Governments for Non-Pension Fund Investment Portfolios , 2010 GFOA Public Policy Statement: Regulation of Derivative Products. 1994 Swaps in the Aftermath of the Banking Debacle . Peter Schapiro, Government Finance Review, 22013 CICI identifier page - ciciutility. org ISDA Protocol - www2.isda. orgfunctional-areasprotocol-managementopen-protocols CFTC Regulations - cftc. govLawRegulationFederalRegisterFinalRules2012-1244 GFOA Publication: Elected Officials Guide to Debt Issuance , Patricia Tigue and J. B. Kurish, 2005 Understanding Municipal Derivatives , David Taub, Government Finance Review . 2005 GFOA Derivatives Checklist . 2010 GASB Derivative Instruments: A Plain-Language Summary of GASB Statement No. 53 Fitch Ratings: High DemandDiminished Supply Changing Dynamics of Bank Facilities Market Heighten the Risk Profile for Some Municipal Borrowers . 2010. Moodys U. S. Public Finance Potential Risks of Variable Rate Debt and Interest Rate Swaps for U. S. State and Local Governments are Heightened by Economic and Financial Crisis . October 2009. Standard amp Poors, Contingent Liquidity Risks In U. S. Public Finance Instruments: Methodology and Assumptions . 2012. Approved by GFOA039s Executive Board: