The Importance of Government Support for Pipeline Network Construction

Abstract

This chapter describes that, focusing on economics theory, a country needs its government support to construct a pipeline network throughout the country. In Japan, before deregulation, vertical integrated companies (gas utilities) provided natural gas to customers in their monopoly area respectively. When the companies transport gas into their own areas, the companies choose to construct pipelines or to use LNG tank trucks from the sight of their strategies. Focusing on long-term uncertainty, short-term uncertainty, and locations, this chapter analyzed the factors of pipeline constructions. The results indicate that if there is another gas utility near a company, then the company construct a pipeline to the gas utility to transport gas. In contrast, if there are no neighbor utilities, the company tends to purchase gas via LNG tank truck. This means gas companies do not construct a pipeline network, or do not try to do it, but construct point to point pipelines. Therefore, without government supports, a pipeline network would not be constructed throughout the country.