🇺🇸United States

Missed Contract Entitlements in Pipeline Capacity Agreements

1 verified sources

Definition

In pipeline transportation within oil and gas midstream operations, revenue leakage occurs due to unmonitored contractual obligations related to capacity contracting, such as metering inaccuracies, quantity/quality delivery discrepancies, and overlooked payment terms. Data silos across divisions lead to missed entitlements, delayed or erroneous billing for capacity usage. This results in systematic underbilling or failure to recover owed revenues from shippers.

Key Findings

  • Financial Impact: 1-5% of EBITA (industry-wide estimate for $6T oil & gas sector)
  • Frequency: Ongoing - recurring across contract cycles
  • Root Cause: Disparate systems for tracking production, delivery, and billing create silos; lack of integrated contract intelligence fails to flag pricing errors or obligation breaches in capacity contracts.

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Pipeline Transportation.

Affected Stakeholders

Contract managers, Billing specialists, Pipeline operators, Midstream traders

Deep Analysis (Premium)

Financial Impact

$1.2M-$6M annually (direct-connect high-volume users; 3-5% billing error rate due to manual entry + tier miscalculation = $500K-$1.2M in disputed/uncollected invoices annually) • $1.5M-$7.5M annually (peak season underutilization credits not applied = lost revenue; spot market adjustments billed months late) • $1.8M-$9M annually (regulated rate-of-return contracts are higher stakes; penalty clauses can trigger $500K+ exposure per LDC per year if entitlements missed)

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Current Workarounds

Ad-hoc Excel reconciliations and WhatsApp coordination between trading ops and billing teams. • Admin calculates tier placement manually at end-of-quarter; spreadsheet tracks rebate eligibility; rebate applied retroactively if caught • Admin maintains calendar + Excel sheet of renewal dates; forwards email reminder to billing team; billing system updated manually with lag

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Undetected or Late‑Detected Leaks Cause Lost Product Revenue Beyond Incident Damage

Example case: ~564,000 gallons of gasoline released in one SCADA‑monitored rupture; at a conservative $2/gal wholesale that is ~$1.1M in lost product in a single event, with NTSB noting similar SCADA‑related issues across multiple accidents, implying multi‑million‑dollar annualized exposure for large operators.[1]

High False‑Alarm Rates in SCADA/CPM Drive Unnecessary Field Callouts and Operational Waste

For a mid‑size operator with dozens of mainlines, a CPM false‑alarm rate that triggers just one unnecessary field investigation per week at ~$10,000–$20,000 (crew mobilization, line balance checks, temporary rate reductions) implies ~$0.5–$1M per year in avoidable operating cost; this is consistent with CPM guidance that emphasizes minimizing false alarms precisely due to their operational and cost impacts.[3]

SCADA Misinterpretation Causes Larger Spills, Claims, and Environmental Remediation Costs

In one documented case, the controller’s failure to determine from SCADA that a leak had occurred contributed to a release of about 564,000 gallons of gasoline, escalating remediation, property damage, and environmental costs well beyond the cost of the failed component itself.[1] Similar SCADA‑related deficiencies across other accidents in the NTSB study indicate multi‑million‑dollar incremental quality‑failure costs industry‑wide.

Slow, Fragmented SCADA Data for Over‑Short Analysis Delays Revenue Reconciliation

Where over‑short detection depends on manual compilation of SCADA and tank‑level data, disputes over imbalances can delay settlement by weeks, effectively increasing DSO (days sales outstanding) and tying up millions in working capital on high‑throughput crude and product systems; CPM best‑practice documents explicitly promote automation of over‑short analysis to reduce these delays.[3]

Conservative Leak Detection Settings and SCADA Limitations Force Throughput Derates

A 5–10% derate on a large crude line moving 500,000 bpd at a $3–$5/bbl tariff equates to $27M–$91M in annual lost tariff revenue; CPM best‑practice documents caution that sensitivity to flow conditions and configuration must be evaluated per line, which in practice leads operators to accept lower capacity to maintain leak detection reliability.[3]

Regulatory Findings on SCADA, Alarm Management, and Control Rooms Drive Costly Remediation and Potential Fines

While individual fine amounts vary by case, PHMSA has authority to levy significant civil penalties per violation per day; in addition, mandated SCADA upgrades, training programs, and leak detection improvements (e.g., implementing API RP 1165‑compliant displays and enhanced CPM) typically run into the hundreds of thousands to millions per operator over multi‑year compliance programs.[1][6][7]

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