Managing and Optimizing Midstream Gross Margin Positions Using a Fully Integrated, Predictive Business Model

Presented with Southern Union Gas Services 2010 National GPA Meeting

Mike Merritt and Steve Hendon eSimulation, Inc. Houston, Texas U.S.A

Mike Cutson and Bob Milam Southern Union Gas Services Fort Worth, Texas U.S.A


In early 2008, Southern Union Gas Services (SUGS) commissioned eSimulation to build a predictive business model to help SUGS accurately manage and forecast plant gross margins. The business model encompasses SUGS‟s fully integrated gathering and processing assets located in the Permian Basin region of west Texas and southeast New Mexico (5 plant gathering and processing/treating supersystem). SUGS chose eSimulation‟s midstream business modeling platform eSimEvaluatorTM because of its ability to integrate both the commercial and physical interactions inherent in midstream businesses. eSimEvaluator is a predictive model-based planning, forecasting, and business optimization solution. The model is used for monthly plant margin estimates, annual forecasting / budgeting, sensitivity analyses in support of the financial reporting process, and operations for margin improvement simulations. The project scope included modeling all physical and commercial aspects of the gathering and processing systems, including almost 2,000 wellhead meters, over 500 complex producer contracts, treating and processing facilities, compression fuel consumption, interplant transfers, and residue and NGL sales points. Wellhead and non-wellhead volume and composition data from the measurement system are captured through an integrated semi-automated interface. The authors discuss the project objectives, the project implementation process, project benefits, and the lessons learned from applying the integrated solution to the SUGS gathering and processing systems.

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