Delta's Natural Gas Operational Expertise saves a client $800k/year by delivering an improved solution
SERVICE: Strategic Procurement
CLIENT INDUSTRY: Metals
SITUATION: A world leading metals manufacturer with production facilities around the globe relies on Delta Energy Services to manage over 40 of their North American sites. Delta provides natural gas energy management highlighted by strategic procurement, supply management and invoice auditing.
In order to supply gas for a specific facility located in the East Central United States, the client owned pipeline capacity on two major pipelines, one coming from the Gulf and one in the area of this facility. Although this solution met the client’s objective of having a consistent, reliable supply, it subjected them to hurricane supply disruptions, higher commodity costs, fixed pipeline demand fees and significant variable costs largely due to elevated fuel rates each year, in addition to the contract terms to hold the pipeline capacity.
When the time came to renew the contract for one of the capacity agreements, the team at Delta revisited the current supply strategy and questioned whether it was the most affordable option available for the client. After attempting to negotiate with the pipeline for a rate reduction and not being able to arrive at revised terms that would result in meaningful savings, Delta went back to the drawing board.
Delta looked at other supply options that were available to serve the area. Based on this facility’s
location, we suspected there may be more affordable gas available in the Appalachian Region, which would not require as high of transportation costs as from the Gulf. We knew security of supply was
imperative to the client and that we would need to locate a supplier with a strong presence in the area who had the resources to deliver reliable supply on a consistent basis.
Based on the strength of our relationships with suppliers and producers in the industry, as well as our expert knowledge of the natural gas pipeline system, we were able to identify a supplier we knew to be reliable and capable of meeting the client’s needs. We worked with them to develop a strategy to supply the plant utilizing Appalachian supply. The strategy included identifying the primary supply path, which would bring in gas via the supplier’s capacity. Since the facility was not directly in path of the supplier’s pipeline capacity, there was a chance of interruption, which was not an option for the client. Therefore, Delta negotiated with the supplier to include a second and third supply path utilizing the client’s pipeline capacity and long haul Gulf pipeline capacity to ensure that supply to the plant would not be interrupted. Since the client was able to release some of their contracted pipeline capacity and use the supplier’s capacity, each of the options was less expensive than their current situation. In addition, through an Asset Management Supply deal negotiated with the supplier, the client is able to recoup some of the fixed demand fees associated with the pipeline capacity they do own.
The client has been following the new process with no supply interruptions, which was their primary objective. In addition, they have realized savings of $800k annually since Delta developed and implemented the improved supply plan.