The hub concept in the petroleum industry Sample Clauses

The hub concept in the petroleum industry. Similarly, the concept of a hub in petroleum industry is in the area with enough capacity to transport gas internationally through pipeline infrastructures and vessels. In order to understand the importance of pipeline transportation, it is necessary to understand the role of logistics in a hub system. A hub system is a network in which gas can be transported to different places. This route system could be across countries and regions in a hub-to-hub progression. A hub is characterized by interconnections among many pipelines and other modes of transportation such as tankers and vessels. In addition, the substantial storage capacity of a hub should be taken into consideration. The availability of storage and different transportation modes in hubs may give them more opportunities to supply gas in the market (CJ Trench, 2001). A hub system could be onshore or offshore but should have enough capacity to allocate all the gas fields. Basically, a hub with large capacity would transport gas of large quantity, thus reducing cost i.e. economics of scale. Åsgard was developed as a hub when pipelines from more than one gas field were tied into that area. The pipeline carries rich gas from the Åsgard field in the Norwegian Sea to a processing plant (Kåstø). Dry gas is separated from the wet part and transported to other regions through pipelines. The wet part of the gas could be transported by vessels. Similarly, the Kollsnes processing plant is developed as a hub which is located in the west of Bergen. It receives gas from the Troll, Kvitebjørn and Visund fields in the North Sea and separates gas into dry gas, natural gas liquid and condensate. After compression, the dry gas is delivered through pipes to Europe, while the remains go to the process plant at Mongstad. As noted above, hub systems play an important role in the gas market’s efficiency because it offers ability to respond to changes in supply and demand. Therefore, the balance between supply and demand in a hub is the key point to determining price levels in the surrounding regions. The gas price could be influenced by quantity and quality of products and the alternative source of supply. It is easy to notice that any regional supply or demand imbalance would be quickly reflected in prices at the region’s hub. Moreover, the capacity of storage and supply options in a hub would become the price signals in the market. All players in that market would take this as an advantage and balance their supply/demand...
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