An operational balancing agreement (OBA) is a contractual arrangement that is commonly used in the natural gas industry to manage imbalances between supply and demand. These imbalances can occur due to a variety of factors, such as weather conditions, unexpected equipment failures, or changes in customer demand.
The purpose of an OBA is to ensure that all parties involved in the natural gas supply chain – including producers, pipelines, and distribution companies – are able to maintain a reliable and efficient system of delivery. By agreeing to a set of rules and procedures for managing imbalances, these parties can work together to minimize disruptions to the flow of natural gas and maintain stable prices for consumers.
Under an OBA, each party agrees to maintain a certain level of “operational balance” between the gas they produce, transport, and consume. For example, a pipeline operator might agree to maintain a certain amount of gas in storage to compensate for fluctuations in customer demand, while a producer might agree to adjust their production levels in response to changes in market conditions.
To ensure that these agreements are being followed, parties to an OBA typically use a system of “balancing charges” and “balancing credits”. Balancing charges are incurred when a party fails to maintain their agreed-upon level of operational balance, while balancing credits are earned when a party over-delivers on their commitments. These charges and credits are typically settled on a monthly basis.
Overall, operational balancing agreements are a crucial component of the natural gas industry, helping to ensure that supply and demand remain in balance even in the face of unpredictable events. By working together to manage imbalances, producers, pipelines, and other stakeholders can help to maintain a reliable and efficient system of delivery that benefits everyone involved.