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Natural Gas Market Centers and Hubs: A 2003 Update

October 1, 2003

This special report looks at the current status of market centers/hubs in today=s natural gas marketplace, examining their role and their importance to natural gas shippers, marketers, pipelines, and others involved in the transportation of natural gas over the North American pipeline network. Questions or comments on the contents of this article should be directed to James Tobin at james.tobin@eia.doe.gov or (202) 586-4835.

The establishment of market centers and hubs is a rather recent development in the natural gas marketplace. They evolved, beginning in the late 1980s, as an outgrowth of gas market restructuring and the execution of the Federal Energy Regulatory Commission’s (FERC) Order 636 issued in 1992. Order 636 mandated that interstate natural gas pipeline companies transform themselves from buyers and sellers of natural gas to strictly gas transporters. Market centers and hubs evolved to provide new gas shippers with many of the physical capabilities and administrative support services formally handled by the interstate pipeline company as “bundled” sales services. (For simplicity, in the remainder of this report the term Amarket center@ will be used to refer to either a center or hub except when the proper name for the center is referred to as a “Hub”).

Two of the key services offered by these new centers included transportation between and interconnections with other pipelines, and the physical coverage of short-term receipt/delivery balancing needs. These centers also developed new and unique services that helped expedite and improve the gas transportation process overall. For instance, many centers developed Internet-based access to gas trading platforms and capacity release programs, and provided title transferservices between parties that buy, sell, or move their gas through the center.

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