Click for a transcript of the Natural Gas End Users mini-lecture.
Now we finally reach the actual end of our logistical path for natural gas from well head to burner tip. We're going to talk about the various types of end users. This is not an all-inclusive list. But we'll cover quite a few of them.
We've got basically local distribution companies which I've referred to thus far us gas companies, that's what they are, and then the various direct end users of natural gas. Local Distribution Companies, otherwise in the business known as LDCs, these are your gas companies. Whoever your local gas company is an LDC. They're going to distribute the gas to the various end users that are connected to their systems.
Their primary operation is to distribute low-pressure gas. When we talked about transmission pipelines, they move the gas at very, very high pressures. And you can't have that type of pressure coming into your house, especially into something like a hot water heater. So they lower the pressure. You can see here, mainline transmission pipelines can be running 500 pounds per square inch to as much as 1,500 pounds per square inch. Well, the gas flow into your house at the meter needs to be cut down to four to six ounces per square inch. So we have residential customers, commercial customers, industrial, and electric customers.
Another type of operation, they can actually perform a transportation service. In other words, several states across the country have what's known as a deregulated natural gas industry. And that includes deregulation of the local distribution companies. So if you're a large enough end user, you actually can buy gas from an entity other than the natural gas company, your local gas company. But they still make sure that it gets delivered to you and so they charge you a transportation fee.
So we refer to this as transportation behind the city gate. That means within the distribution territory. So end users can have their own transportation on the LDC system. It's an open access system. So in other words, any entity that qualifies under their regulations to do so can, in fact, buy from someone else and have it transported.
Here's kind of a breakdown of that delivered price. When you get that gas bill and you look at it, these are the components. You've got the commodity is only 34% of that. So the price of the commodity itself. The LDC or the pipeline company is about 19% there of the cost has to do with the transmission pipeline transportation and storage. But then the distribution costs are 47%. So this is your gas company providing that service.
Here's just a typical residential meter. And here we just have a large metropolitan area. This happens to be Denver. So we're going to address the actual end users. You can just see here some of the end users. Electric power is the largest end used for natural gas, 31%, followed by industrials and then residential. Commercials having a very small percentage as well. And one thing here, notice the vehicle fuel at this point in time, as of 2013, was less than 1% of the consumption of natural gas in the US.
We'll talk about electric generators. There are two different groups. You've got the electric utility generators. These are regulated producers of electricity. They're either federally regulated or regulated by the respective states. And then you have the non-utility electric generators, the so-called independent power producers. These are also known as merchant power companies.
And then another group is known as the co-generators. These are companies whose plants actually produce electricity and steam-- steam as an actual commercial commodity. It can be shipped by pipeline to nearby facilities such as food processing or actual crude oil refineries.
Within electric generation, we have different types of generators themselves. A simple cycle generator has gas turbines. These are essentially jet engines. They're internal combustion. They use natural gas as a fuel. And then there's also steam turbines where the natural gas goes into a boiler first and creates steam. And the steam is used to push the turbines. It's not the fuel source. It's literally spinning the turbines.
You also have combined cycle plants. This is where you have a combination of gas and steam turbines. The gas turbine, again, is strictly using natural gas as a fuel. But it has exhaust heat. That exhaust heat then is pumped into a boiler where we create steam which then drives a steam turbine. So a combined cycle natural gas plants are among your most efficient. And then again we have the co-generation facilities where they've got a gas turbine which is going to create electricity. But then they also have a steam boiler where are they going to create the steam, as I mentioned, to sell as an actual commercial commodity.
And then you can see, this is somewhat of a simplified diagram of the process itself. Now you see on the left you have an energy supply or fuel. Now the fuel, in this case, doesn't matter. It can be coal. It can be wood. It can be natural gas. It can be nuclear fission. It's anything that can create heat because the idea here is to take water and basically bring it to a boiling point where you have steam.
Now the steam actually drives the turbine. That's the little blue and white area in the middle part of the diagram in the center there. That turbine spins. And on the axle of that turbine are magnets, very large magnets. And they spin within a copper wire field. The magnets are of opposite polarity. And when they spin they actually create current, which as you can see, goes on out into the transmission lines. And most plants re-circulate then the steam. They cool it down. That's what those large cooling towers are that you see. And then they recycle as much of that water as they can.
Here's what a typical gas turbine looks like. Again, you can see it's got fins on it like a jet engine. Other end users such as industrial end users, you've got petrochemical refining as I mentioned. They're going to have feedstocks created from natural gas, paper production, metals especially things like steel mills use a considerable amount of gas in their furnaces. Stone, essentially cement plants, they have components like clay and glass and silica and sand. And they actually, in addition to having furnaces, once the cement is created it's in a wet mixture, and they use natural gas to actually dry it. All types of food processing, I'm sure that everyone can come up with to use that, and then in fertilizer. Anhydrous ammonia or fertilizer, 80% of that feedstock happens to be natural gas.
Then we also have commercial uses. Believe it or not, there are large air conditioning units at, let's say for instance, in large warehouses or factories that can run off of natural gas, you know, food service, motels, hotels, healthcare, various hospitals, office buildings, and then at the retail level. And then, last but not least, we have natural gas vehicles. The market for natural gas vehicles has grown the last few years. But it's probably going to decline because just recently Honda Motors said they're going to phase out the manufacture of their CNG Civic which has been around for probably 20 years, and then also their Honda Accord CNG vehicle as well.
Now the better ones are dual fuel. You can use gasoline or CNG. But CNG still has an important usage within what we would call fleet vehicles. For instance, metropolitan buses, trucks using on short haul routes like the USPS or FedEx or UPS, and then pool cars. Various companies who have let's say a certain district and they don't need the longer range of cars, they can use CNG. But again the limitations are the limited range and refueling. Now the refueling infrastructure across the United States is getting better. But for most people, it is still a sticking point in terms of buying these types of vehicles.