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FERC rejects BP complaint over bundling of NGPL transportation service

June 05/2020

MOSCOW (MRC) -- The Federal Energy Regulatory Commission has dismissed a complaint filed by BP Energy alleging Natural Gas Pipeline Company of America acted improperly by forcibly bundling a systemwide gas transportation service option as a condition of BP exercising its right of first refusal to bid on continuing firm service, reported S&P Global.

The dispute involves the reach of FERC rules meant to protect an existing firm customer's need to continue its historical transportation service.

FERC sided with the pipeline company Wednesday in finding that BP was seeking to alter existing service rather than preserve it. The right of first refusal "does not afford the firm shipper a right to change the essential character of its service, as BP seeks to do here," FERC concluded in a Wednesday order (RP20-481).

BP had contended that NGPL, in violation of its tariff and FERC rules, "required BP to take its 'optional' (systemwide) service to retain capacity subject to a regulatory right of first refusal, even though NGPL's own notice of released capacity stated the current capacity holder my elect to match the bids with or without the (systemwide) option."

BP said it had preferred to continue primary point capacity without systemwide service that provided access to secondary points throughout its system.

The net effect of NGPL's approach was to increase the cost of its exercise of its right of first refusal for a single contract by about USD7.5 million over the life of the contract, BP argued in its January 31 compliant.

Tenaska Marketing Venture also weighed in in support of the complaint.

NGPL for its part countered that BP was trying to use the right of first refusal to change its existing service, contrary to FERC rules, the pipeline's tariff and BP's contract. It argued that BP exercised its right to match the highest bid to keep its firm service with the systemwide option but now sought to downgrade that service.

BP was using the process to get a different service at a rate below the highest bid received, NGPL asserted.

FERC ultimately concluded that the systemwide option was "essential" to BP's existing firm service, which had a higher maximum reservation rate reflecting the right to secondary access points.

Language in the tariff does not provide BP with a right to discontinue a fundamental part of its existing service that includes a systemwide options while keeping a firm transportation service through a right of first refusal, FERC said.

"Rather, this language ensures that a historical shipper without the (systemwide) option in its existing service may not be compelled to add the (systemwide) option in order to match a competing bid in the (right of first refusal) process," FERC said.

As MRC informed before, BP has entered into an agreement to license its latest generation technology for the production of purified terephthalic acid (PTA) to Chinas Dongying Weilian Chemical Co., Ltd. Weilian Chemical is a subsidiary of Dongying United Petrochemical Co., Ltd, one of the leading manufacturers and distributors of petroleum and petrochemical products in China. Weilian Chemical intends to build a 2.5 million tonnes per annum PTA production unit at the Dongying Port Economic Development Zone in eastern Shandong province, adding to Dongying United Petrochemicals existing refineries and paraxylene (PX) facilities portfolio.

PTA is used to produce polyethylene terephthalate (PET), which, in its turn, is used in the manufacturing of plastic bottles, films, packaging containers, in the textile and food industries.

According to MRC's ScanPlast report, April total estimated PET consumption virtually did not change year on year, totalling 60,840 tonnes (in April 2019 - 60,980 tonnes). 235,160 tonnes of PET chips were processed in Russia in January-April 2020.

BP is one of the world's leading international oil and gas companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products for everyday items.
Author:Margaret Volkova
Tags:PET-granulate, terephthalic acid, packaging, BP Plc, China, Rossiya, USA.
Category:General News
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