Gas transmission is an important link in the physical supply chain between producers and end-users. Gas Industry Co reviews the factors influencing security and reliability and assesses their adequacy.
All links in the physical supply chain contribute to providing gas users with a secure and reliable gas supply. The security and reliability (S&R) of transmission pipelines are particularly important, given that a transmission outage has the potential to cause widespread supply interruptions. For example, the cost to the New Zealand economy of a gas transmission interruption that took place in October 2011, when the Maui pipeline failed due to a landslide at Pukearuhe in northern Taranaki, was estimated by the Ministry of Business Innovation and Employment to be $200 million. That event prompted pipeline owners and operators to re-assess risks, increase monitoring, and invest in additional preventative maintenance at high risk sites.
The introduction of new information disclosure requirements in 2012, as an element of a price-quality regime administered by the Commerce Commission under the Commerce Act, greatly improved the transparency of S&R. In particular, the owners of open access transmission pipelines were required to publish their Asset Management Plans (AMPs). However, stakeholders found the information difficult to understand, and concerns about transmission pipeline S&R remained. This prompted Gas Industry Co to review the factors influencing S&R and assess their adequacy. We published our findings in the 2016 Security and Reliability Issues Paper and followed this up in 2017 with a Security and Reliability Update Paper. Links to these papers can be found in the Background section.
More recently, the Commerce Commission published a report it commissioned on how First Gas manages geotechnical risks to the gas transmission network. It also published a report into the broader risk management practices of gas pipeline businesses subject to price-quality regulation. There reports are briefly described in the Current Arrangements section.
Since the Security and Reliability work programme commenced there have been significant developments in the gas transmission business. From mid-2016 First Gas became the sole owner of the transmission pipelines previously owned by Maui Development Limited (MDL) and Vector Limited (Vector). First Gas has since worked with stakeholders to unify and update the transmission access arrangements. The centre-piece of this work is the development of a Gas Transmission Pipeline Access Code (GTAC), expected to come into effect on 1 October 2020. Information about the development of the GTAC can be found here. In addition, First Gas has revitalized associated business practices, systems, and documentation.
Most of the recommendations of our earlier Security and Reliability (S&R) reports – the 2016 S&R Issues Paper and 2017 S&R Update – have been put into effect by First Gas through its continuous improvement of its stakeholder engagement and evolution of its Gas Transmission Asset Management Plan (AMP). Although we have not conducted any further in-depth S&R reviews, two reviews by AECOM, conducted on behalf of the Commerce Commission, give added confidence that First Gas is properly managing transmission pipelines risks.
AECOM’s 17 September 2019 report Geotechnical Risk Management Review – First Gas Transmission Pipelines, concluded that First Gas has good, well documented processes in place to identify geohazards and evaluate/manage the risks associated with them. The report recommended a number of opportunities for further improvement, such as developing action plans to address low probability, high impact events (e.g. major earthquakes and volcanic events); further data capture, including by new automated systems; better definition of High, Medium and Low risk classifications; and, succession planning for staff pipeline integrity specialists.
AECOM’s 4 October 2019 report Risk Management Review of Gas Pipeline Businesses, looked at the four distribution pipeline businesses as well as the gas transmission business. In relation to the transmission business, it found that risk was a high priority, and that there was a strong culture of continuous improvement. The report suggests that, while First Gas is approaching the best level of risk management, there are still opportunities for further improvement. For example, it could benefit from a less prescriptive approach; developing a better understanding of stakeholder appetite for supply risk; and a better understanding of long-term failure profiles.
Gas Industry Co has published the document Security and Reliability Update (S&R Update) following the release of earlier documents in April 2016: Gas Transmission Security and Reliability Issues Paper (Issues Paper) and an Analysis of Submissions on that paper. The S&R Update can be found in Related Documents below.
During the review of security and reliability (S&R), the two gas transmission systems came under the single ownership of First Gas Limited. As part of its submission on the Issues Paper, First Gas noted the importance of S&R to its business, and its desire to improve related communications, including continued constructive discussions with Gas industry Co, shippers and end-users. This was borne out by First Gas engaging widely with stakeholders in the course of preparing its initial Asset Management Plan (New AMP), including an update on key projects.
The S&R Update reviews how matters now stand in relation to S&R, including an assessment of First Gas’s New AMP, and other S&R-related developments.
The Issues Paper, Analysis of Submissions, and Submissions received on the Issues Paper are available here.
The April 2016 Issues Paper referred to above focussed on security and reliability of the gas transmission system:
As of June 2016, both the Maui and Vector pipelines came under the ownership of First Gas Limited (First Gas).
First Gas intends to replace the two existing access codes with a single transmission access code (GTAC), and is updating associated business practices, systems, and documentation. The GTAC is expected to come into operation on 1 April 2020. Information about the development of the GTAC can be found below.
While a GTAC post-implementation review is possible, Gas Industry Co has no further work in relation to security and reliability in prospect.
On 1 March 2018, First Gas presented its perspective on two recent events that are relevant to transmission system security and reliability:
In the past, stakeholders have found information about transmission pipeline Security & Reliability (S&R) difficult to bring together and interpret.
In our April 2016 Gas Transmission Security and Reliability Issues Paper below we discussed this and proposed a number of improvements, particularly in relation to the presentation of Asset Management Plan (AMP) information. We followed this up In March 2017 with a further Gas Transmission Security and Reliability Update Paper (S&R Update). The S&R Update reviews how S&R matters stood at the time, including an assessment of the first Asset Management Plan issued by First Gas following its acquisition of the Transmission Pipelines in 2016. Links to these documents are provided below.
Since then, First Gas has continued to improve its AMP and introduce new transmission access arrangements, as described in the Current Arrangements section.
The Submissions Analysis on the Gas Transmission Security and Reliability Issues Paper (Submissions Analysis Paper) was released in April 2016.
Against a background of increasing stakeholder concerns about the security and reliability (S&R) of gas transmission, Gas Industry Co had published an Issues Paper in April 2016. The eight submissions received can be found below.
Submissions tended to support the analysis of the Issues Paper, which could indicate an acceptance that S&R is generally headed in the right direction, assisted by information disclosed under the Commerce Commission’s price-quality determinations. The First Gas submission noted its willingness to discuss the issues raised in the paper, and to look for further improvement.
Accordingly, the Submissions Analysis Paper restates the conclusions and suggested action points of the Issues Paper, with a few additions to reflect submitter suggestions. Given the constructive submission from First Gas, Gas Industry Co believes the best contribution it can make towards S&R improvements at this stage is to keep monitoring and reporting the industry’s progress on those actions.
The Submissions Analysis Paper, the Issues Paper, and workshop presentations by Gas Industry Co, Maui Development Limited and the Commerce Commission can be found below.
Consumers seek a secure and reliable gas supply at a reasonable cost. All links in the physical supply chain contribute to this, and a recent study has found that the New Zealand gas supply system ‘has a high degree of resilience and existing industry operating standards and market structures pose no undue threat to security of supply’.
It is more than four years since the last significant interruption to transmission services (the October 2011 interruption to the Maui Pipeline). The S&R of transmission pipelines is a matter of importance to gas users, given that transmission outages have the potential to cause significant supply interruptions. The 2011 event caused pipeline owners and operators to re-assess risks, increase monitoring, and invest in additional preventative maintenance at high risk sites.
In earlier years, information about transmission S&R has generally been private to the Gas Transmission Businesses (GTBs), and the arrangements supporting S&R were not generally well known or understood. Recent legislative changes, including the introduction of a price-quality regime and associated information disclosure requirements under the Commerce Act, have changed this. In particular, the publication by GTBs of their Asset Management Plans (AMPs) has greatly improved transparency. However, Information about S&R on the transmission pipelines, and arrangements influencing S&R can be difficult to bring together and interpret. Accordingly, stakeholder concerns remain, so it is timely to review the new landscape.
The Issues Paper focuses on security and reliability (S&R). It: