The cost of transporting gas through the Interconnector
The overall costs to STA shippers are divided into the following elements:
- Tariff and a contribution to operating costs, paid in proportion to the amount of capacity a shipper owns
- Share of fuel costs, which could be fuel gas or electricity depending on pipeline flow direction
- Administrative costs including access to ISIS®
Additional charges may arise through the use of interruptible capacity (depending on the extent of use over a month) and/or through third party pressure service charges.
Construction and operating costs
To secure the finance to build the Interconnector facilities, STA shippers, our original customers, agreed to book all the capacity available at the outset of the project and for a 20-year term. The tariff paid monthly by shippers throughout the 20-year term (1998 to 2018) provides a set rate of return on the capital investment IUK required to deliver the project. The tariff also includes a contribution to the operating costs required to provide the service.
Subsequent projects to enhance the capacity of the Interconnector system were funded on a similar basis.
Tariffs are paid in proportion to the capacity owned by each STA shipper. The tariff is paid monthly, whether or not gas is shipped, provided that the contracted capacity is made available for use (or is unavailable due to planned events such as our maintenance period each year).
The tariffs change year-on-year based on inflation. As of 2012, the average tariff per unit of existing capacity was 0.8 p/kWh/h/day (equivalent to 1 p/therm). The calculation used to determine this figure is set out in an annex to our consultation on implementing CMP.
Fuel gas is used to power the gas turbine compressors at Bacton when gas is flowing from the UK to Belgium and to fire gas heaters at both terminals. Electricity is used to power the electric motor driven compressors at Zeebrugge when gas is flowing from Belgium to the UK.
When the pipeline is transporting gas from the UK to Belgium, each STA shipper contributes a share of the fuel gas used. This is carried out by deducting a quantity of gas from shippers' inventory. This typically amounts to 0.8% of the quantity of gas being transported.
When the pipeline is transporting gas from Belgium to the UK, each STA shipper contributes a share of the cost of the electricity used, invoiced on a monthly basis. This is typically equivalent to 0.2% of the quantity of gas transported. In addition, STA shippers provide a small amount of fuel gas, typically around 0.06% of the quantity of gas transported.
Keeping costs down
We will always aim to manage physical flow to optimise fuel efficiency – and the fuel consumption rates quoted above will typically apply across a fairly wide range of "normal" operating conditions.
Various administrative and legal costs arise during the course of operations. In addition IUK incurs costs providing access to ISIS®, its gas management tool. Shippers are required to contribute towards these in the form of a monthly administration fee.
ISIS® is a web-based platform provided to STA shippers to nominate their gas flow requirements, manage their inventory and trade capacity on a day-by-day, hour-by-hour basis. The system processes data received from shippers in line with the operational rules outlined in the STA. It allows IUK to communicate with shippers and the operators of adjacent gas transportation systems to ensure that gas is transported as required by shippers.