Success Stories - Special Market Analysis Projects
There are certain situations where customers want to utilize the MarketBuilder solution, including its suite of models and data, to perform market analysis but they require unique assistance because of one or more of the following conditions:
- They have tight timeframes.
- They have constrained resources.
- They require the specialized skill and experience that our most senior specialists provide.
For these situations, Deloitte MarketPoint provides a service offering we call Special Market Analysis Projects. Our industry specialists utilize our implementation of MarketBuilder with its models and data to provide analysis, formal reporting and/or testimony. Below are some of the examples of these Special Market Analysis Projects.
Many of our customers prefer to remain anonymous. We respect this preference and have taken care to give examples of special market analysis projects without providing names or geographic detail. We hope that these examples will help companies who don't know us to better understand how our solutions can help them, and also to see the deep experience of our people, so that they will give us the opportunity to discuss their needs and propose how we can help.
The success story selections listed below provide examples of projects and customer experiences with Deloitte MarketPoint and also with MarketPoint Incorporated and Altos Management Partners. The history goes back a few decades, so in some instances the use cases refer to precursor versions of MarketBuilder and its current suite of models. As MarketBuilder has evolved over time, it has been designed to better enable our customers to be more self-sufficient in utilizing our technology in their decision-making processes.
Selected Success Stories
Fundamental analysis of North American natural gas for Latin American LNG project
A commodity brokerage company for petroleum products and liquefied petroleum gas engaged Altos to perform a quantitative analysis of the natural gas markets in North America for a Latin American LNG project. Altos calculated the estimated price suppression and basis compression impacts of various LNG importation strategies in North America. In particular, Altos told the company and its prime client the projected price and basis compression impact of alternative LNG import volumes at Everett, Cove Point, Elba Island, and Lake Charles/Gulf of Mexico locations that were calculated in the analysis. The project resulted in a market analysis and recommendation to the LNG plant owners.
Fundamental analysis on natural gas capacity for contract award in Southeastern U.S.
A large U.S. utility company asked Altos to give extensive written and oral testimony in the capacity hearings before a Southeast state's Public Service Commission. Altos provided and delivered testimony on behalf of the company in the capacity hearings and participated in the bid selection decision that resulted in the award of the gas marketing business.
Fundamental market analysis of the economic viability of merchant power plant
A large U.S. power producer retained Altos as the chief economic witness to present their fundamental market analysis and testify, advocating the economic viability of a merchant plant generation project in a Southeastern state.
Valuation of natural gas storage assets
A large U.S. utility engaged Altos to utilize its North American Regional Gas (NARG) model to calculate forward prices monthly through summer and winter in the vicinity of five natural gas storage assets. The utility's objective was to estimate the fundamental value of those storage assets for prospectively acquiring either an entitlement or an equity position in those assets. The analysis provided an estimated quantification of the value of storage, as well as pipeline assets, taking into account the interaction between each.
Fundamental market analysis for Canadian expansion viability
A large North American energy and pipeline developer and operator engaged Altos to perform fundamental market analysis on the viability of a multi-billion dollar expansion to serve Canadian markets. The Altos analysis demonstrated that the expansion appeared to be viable and the company utilized this analysis as part of its decision-making to commit the funding and develop the project. According to the client, the project has performed, from its inception, in line with the analysis provided.
Fundamental analysis in the development and operation of Southwest repowering project
A southwestern power distributor hired Altos to help with fundamental analysis to support strategic and tactical decisions in the conception, development and operation of a repowering project.
Fundamental market analysis of the Australian gas market
One of the main Australian gas producers asked Altos to build a thorough market model of the Australian natural gas business and use it to answer the market questions, such as: What is the estimated market valuation: of current natural gas pipelines? Of prospective green field lines from the traditional producing areas to various demand areas? What would be the predicted profitability and viability for new gas sources? The project helped the customer answer these questions in making a number of decisions and also resulted in the Altos Australia Gas Supply-Demand Model.
Analysis and conception of merchant partnership
Two large U.S. gas and power producers engaged Altos for fundamental market analysis for a merchant project. The joint venture was characterized by the general manager of one of the companies as a unique confluence of natural gas and transmission cooperative operation and financing, together with gas and electricity marketing and trading, all combined with unique vendor performance guarantees for gas combined cycle plants.
Profitability of electric compression for a natural gas pipeline company
A large natural gas pipeline company retained Altos to determine market price differentials across the major segments of their pipelines in order to discern the value of each segment, which way various gas flows would be expected to go, which way the price differentials across various of their assets would point, and which, if any, segments were amenable to electric compression upgrading. The price differential across the segment of pipe dictates the intrinsic profitability of electric compression. The Altos analysis enabled the company to make market optimized decisions about electric compression.
Short-term analysis of North American natural gas basis differentials
A large integrated U.S. energy company engaged Altos because they wanted to know the monthly basis differentials between every producing and every consuming region known in North America. They wanted to understand what the historical “normal” levels of basis for each region were, and what conditions appeared to cause dramatic changes in basis. They also wanted to understand the impact of market area storage and supply area storage in the regions. Using the first commercial application of the Altos Short Term NARG model, which became widely used in the industry for understanding the interplay between pipe, storage, and supply, Altos' analysis was able to help them with many strategic and tactical decisions.
California generation plant auction
One of the largest U.S. electric companies asked Altos to assist in an analysis of whether they should submit bids to the California generation plant auction and if so, how much. The company was not only a large portfolio generator but also had large gas and electricity trading businesses. Altos' analysis helped the company decide their strategies in California.
Corporate acquisition strategy
A large integrated U.S. energy company retained Altos to perform analysis to calculate the forward prices of the various energy commodities in North American regions and to calculate the value of every known electric generation station in North America for helping them to establish their acquisition strategy. The company used the Altos analysis to establish and execute their strategy of acquisitions.
Western U.S. pipeline valuation
A public U.S. power and pipeline utility asked Altos to use its NARG model to value the company's pipeline transportation entitlements to facilitate a profitable sale of a number of their supply pipelines in the western U.S.
Forecasting basis differentials resulting from new natural gas pipeline entry in Southeastern U.S.
A U.S. gas pipeline company retained Altos to help them understand the degree to which entry of new pipeline capacity into the Southeastern United States would compress long run basis differentials between Henry Hub and the Southeastern U.S. Altos' analysis was used by the company in their decision buy and sell a number of trading securities.
Analysis and testimony for the approval of a merchant gas combined cycle power project
A large U.S. energy company retained Altos to perform the fundamental market analysis and to testify before a southern state's public service commission to advocate approval of their merchant gas combined cycle power project. Dr. Dale Nesbitt of Altos provided written testimony, depositions, interrogatories, and personal testimony before the commission. The regulator's approval of the company's project was based largely on Altos' work.
Market analysis for bidding and acquisition strategy in ERCOT
A large U.S. energy company retained Altos to conduct fundamental market analysis of ERCOT to facilitate their bidding and acquisition strategy. The Altos model enabled the company to simulate the market behavior of electricity generation, fuel supply transmission, load, import, export, transmission, and demand. They used the model, one of the precursors of MarketBuilder, to calculate the intrinsic forward price value of the generation stations in ERCOT and create and execute a strategy in ERCOT.
Bank financing for prospective power plants
A major U.S. power company asked Altos to provide fundamental market analysis to assist them with securing bank financing for prospective power plants in the southern and western U.S. Utilizing Altos' analysis as part of their supporting documentation, they were able to secure the funding for the projects.
Supply-demand equilibrium model for price forecasts for DOE
A U.S. Presidential Administration Department of Energy (DOE) in 1985 commissioned Altos to build a supply-demand equilibrium model of the world oil market so that they could more accurately forecast oil prices. The model Altos built predicted the softening of world oil prices, during the next year and in the 5 years to follow, and according to the client the forecasts were in line with actual market. The world oil model built for this engagement has been updated continuously frequently and is the MarketBuilder World Oil Model used currently.
Altos models forecast oil industry price
One of the ten largest U.S. oil companies engaged Altos to help answer a number of key questions important to their corporate strategy and in response to concern by senior management regarding non-OPEC world oil supply. The questions included: Were oil prices destined to soften? What specific precursor events were going to be harbingers of lower prices? What could the company do to lock up the existing, higher prices through long-term contract or some other mechanism? Altos, using its World Oil Model, produced a probability distribution over future oil prices which were used by the company to develop its internal answers to these questions. The company's chief economist was credited within the company for having “called the turn” in oil prices well before the rest of the industry.
Analysis persuading FERC to abandon abrogation of take-or-pay contracts
A group of natural gas suppliers engaged Altos to provide analysis and written testimony to FERC concerning the potential effect of FERC Order 436 (pipeline unbundling) and FERC's proposal to abrogate take-or-pay contracts held by Altos' clients. Altos' written testimony supported the suppliers' stance, helping FERC to decide to move away from outright abrogation of take-or-pay contracts and mandatory unbundling and instead adopt voluntary unbundling and preservation of producer rights. This allowed gas producers to potentially recover more money than they otherwise would have, had there been outright abrogation.
Analysis to assess the effect of two new California natural gas pipelines
The California Energy Commission (CEC) wanted to catalyze entry of two new natural gas pipelines into California to spur inter-pipe competition and drive down gas price. They hired Altos to help them assess the resulting estimated natural gas prices. Dr. Dale Nesbitt delivered a forward price analysis that demonstrated that each pipe would be expected to soften prices in California and elevate prices at its upstream terminus, that both pipes were needed, and that the entry of either pipeline would turn San Juan and Permian gas eastward rather than westward. CEC Commissioner at the time, Dick Bilas, told a gas conference in Canada: “When Dale Nesbitt told us boldly that southwest gas would turn backward and flow east, we all had a good laugh at his expense. His prediction was so far from what we had been thinking that it seemed preposterous at the time; it seemed to us it just couldn't happen. Well, guess what. It happened exactly like he and NARG said it would. He was absolutely right, and I became a believer in NARG.”
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