Historically, both regulatory and contractual constraints have inhibited the overall optimization of natural gas transmission systems. Recent changes in the regulatory environment are, however, fostering increased competition within the industry and creating both opportunities and incentives for optimized planning. The largest benefits of such optimization accrue to those companies that apply linear programming techniques to the entire business of moving gas rather than limiting optimization to pipeline operations. This paper identifies opportunities for optimization within the natural gas transmission business and provides an overview of linear programming -- the technique best suited to such optimization. Methods for adapting linear programming to solution of nonlinear problems are also discussed along with the attributes which must be present in systems designed for successful support of optimization activities within today's natural gas industry. Historically, the use of optimization techniques has been extremely limited within the natural gas industry. For more than 40 years, the gas industry structured both its facilities and its operating practices to cope with regulatory constraints, and neither the opportunity nor the incentive for optimizing pipeline operations existed. Today, however, the picture is far different. Recent changes in the regulatory climate have thrust the pipeline companies into a new competitive position, creating strong incentives as well as opportunities for optimization. GASFLOW, a linear programming modeling system developed by Bonner & Moore, is currently in use for both interstate transmission of natural gas and for support of local utility operations. The system is being used in a variety of applications, from overall system operation and minimization of delivered gas costs to selection of gas, minimization of take-or-pay liabilities and evaluation of planned expansion of capacity and facilities.
As illustrated in Figure 1, there are opportunities for optimization throughout the transmission company, in operations planning, supply selection, storage utilization, rate design and the evaluation of potentially profitable additions to capital facilities. Optimization, however, can have different and even conflicting meanings, depending on the application. The operations planning department may construe optimization to mean maximizing gas throughput or minimizing fuel consumption. To the supply department, however, optimization may mean minimizing gas cost, either at the wellhead or the extraction plant tailgate, possibly including take or pay obligations and other contractual constraints. Operations planning may also focus on storage utilization, to maximize throughput based on seasonal changes in demand while accommodating storage demand from customers for both transportation services and commodity gas. To the rate designer, optimization may mean the structure of rates to reduce risks while satisfying the concerns of regulatory agencies. Other parts of the company -- marketing affiliates or investment planners, for example may have their own definitions for "optimization." My point, of course, is that a successful optimization system must not only satisfy the needs of different departments, but must also be capable of considering the concerns of all company segments and resolving the conflicts which arise in the planning process.