SPE DISTINGUISHED LECTURER SERIESis funded principally

through a grant of the

SPE FOUNDATIONThe Society gratefully acknowledges

those companies that support the programby allowing their professionals

to participate as Lecturers.

And special thanks to The American Institute of Mining, Metallurgical,and Petroleum Engineers (AIME) for their contribution to the program.

LNG – Roaring Ahead

John MorganJohn M. Campbell & Company

Exclusive Provider of PetroSkills Facilities TrainingHeadquarters Office

1215 Crossroads Blvd., Norman, OK 73072 USA

(405) 321-1383 Office / (405) 321-4533 Fax / (303) 523-6797 Cell

djm@jmcampbell.com / www.jmcampbell.com

©2008 John M. Campbell & Co. and Other Copyright Holders

All Rights Reserved

Where Will it End?

© 2005 Air Products & Chemicals, Inc. All Rights Reserved

$7 Billion Entry Fee

©2008 ConocoPhillipsUsed With Permission

All Rights Reserved

Liquefied Natural Gas (LNG)

1. Allows gas to be sold from remote suppliers Indonesia, Middle East, Australia, Algeria, etc.

to industrialized countries, Japan, Korea, Spain, UK and USA

2. The largest producer of LNG is Qatar.3. Was Indonesia but gas reserves depleted4. The largest market for LNG is Japan5. International trade in 2007 was ~165mtpy

(Equivalent to 217BCMa)

LNGNGL

Methane

Ethane

Propane

Butane

Pentane +

LPG

96%

3%

1%

0.1%

LPG – Liquid Petroleum GasNGL – Natural Gas LiquidsLNG – Liquid Natural Gas

WHAT IS LNG

Example LNG Properties-162oC [-235oF] at atmospheric pressure

Rich Leannitrogen 0.3 0.5methane 88.7 97.5ethane 8.0 1.5propane 2.0 0.5butanes 1.0 -

approx. kg/m3 465 435

CV (higher) MJ/m3 42 38.5

An LNG Export Terminal with Multiple Expansions - Bontang, Indonesia

© 2004 LNG Journal & Reproduced with Permission

The Basic LNG Chain

LNG Production

Shipping

LNG Reception

Gas Utilization

Gas Production

Common Engineering Units

• scf is the volume of gas at 14.7psi and 60oF• scm is the volume of gas at 101.3kPa and 15oC• 1MMscfd is 1,000,000scf/day• 1m3 = 35.3ft3

• Density of water = 1000kg/m3

• Molecular weight of air is 29 (28.97)• Power 0.746kW = 1HP• 1Btu is the energy required to raise the temperature of

1 lb water 1oF• 1Btu = 1.055kJ

Natural GasTransportation Options

5000

1000

500

100

50

MM

scfd

0 1000 2000 3000 4000 5000

Distance to market, km

Pipeline

Uneconomic

Electricity

Gas-to-liquids

LNG

Nominal GasTransportation Efficiency

Historical Developmentof LNG Trade – Last 25 Years

• Projects grow from less than 1 mtpa to 4-6 mtpa• New supplies to Japan,

first imports to Korea, 1987, and Taiwan, 1990

• Late 1990s – present– Slower growth in Asian LNG demand – economic upsets– Growth in LNG demand in Europe, USA and Caribbean– New supply projects in Atlantic Basin and Middle East– Today’s LNG trade

LNG Industry Growth

Source: CERA, CEDIGAZ

5.5%/yr

Historical

Projected

Demand is Met from DiverseSources of Supply

© 2005 Source NPC

LNG Imports Are Needed,but Face Obstacles

© 2005 Source NPC

The Basic LNG Chain

LNG Production

Shipping

LNG Reception

Gas Utilization

Gas Production

The Contract Chain

1. Exploration licenses, production-sharing contracts

2. Gas sales to LNG Producer3. LNG production joint venture agreement4. Condensate/LPG production and sale5. Government and local authority agreements6. LNG sale and purchase agreement

between LNG producer and LNG buyers

© 2005 LNG Journal & Reproduced with Permission

Gas Production PlatformNorth Rankin A

North-West Shelf Project, Australia

The Basic LNG Chain

LNG Production

Shipping

LNG Reception

Gas Utilization

Gas Production

General SchematicGas Liquefaction Terminal

© 2005 LNG Journal & Reproduced with Permission

Pre-cooling and

LPG Separation

Contaminants

What’s in gas (besides light hydrocarbons)?

H2O CO2 H2S

S He N2 Cl Hg As

Waxes Asphaltenes etc.

Sand Dinosaur Dust

Lubricants Corrosion Inhibitors

Mystery Stuff, etc.

Some Mercury Levels Worldwide

South America 69 119 373 643Far East 1 3 20 16 108Far East 2 58 193 313 1,042Far East 3 0.02 0.16 0.11 0.86Groningen 180 972Mid West P/L 0.001 0.1 0.01 0.54

microgm/m3 Mercury kg/a

Based on 4mtpy LNG production (600MMscfd)

Mixed Refrigerant

LNG Process

© 2005 Air Products & Chemicals, Inc. All Rights Reserved

MCR® Heat Exchanger Tube Bundle Fabrication

© 2005 Air Products & Chemicals, Inc. All Rights Reserved

MCR® Heat Exchanger Tube Bundle Fabrication

© 2005 Air Products & Chemicals, Inc. All Rights Reserved

MCR® Heat Exchanger Tube Bundle Shipping

© 2005 Air Products & Chemicals, Inc. All Rights Reserved

NG LNG

PROCESS

POWER

HEAT SINK

40C60bar

-162C1bara230MW

160MW

390MW

LNG Production 3.7mtpy (500tph)

Based on a 3.7mtpy train

The Liquefaction Heat Balance

Centrifugal Compressors

Horizontally SplitGenerally used in high volume/low pressure applications

Axial Turbine Blades

Overview of LNG ProductionFacilities Technologies

• Established Technologies– ConocoPhillips (Optimized Cascade)– APCI (Propane Precooled)

• New Process Technologies– APCI (AP-X)– Linde (MFC)– Shell (DMR)– IFP (Liquefin)

LNG Facility Comparison

• There are 80 operating trains with a total capacity of 197mtpy (2.5 mtpy/train)

– APCI C3MR (60) 152 mtpy 76.6%– ConocoPhillips Optimised Cascade (9) 30mtpy 15.3%– Shell C3MR(1) 4.2mtpy 2.3%– Linde MFC (1) 4.2mtpy 2.1%– Others (TEAL/SMR) (9) 7.3mtpy 3.7%

• There are 27 trains under construction with a total capacity of 137mtpy (5.1mtpy/train)

– APCI (14) 61mtpy 45%– APCI AP-X (6) 47mtpy 34%– ConocoPhillips Optimised Cascade (3) 10.5mtpy 7.7%– Shell C3MR (2) 8.5mtpy 6.2%– Shell DMR (2) 9.6mtpy 7.0%

ConocoPhillips Optimized LNG Process

Courtesy ConocoPhillips Petroleum Company

Egypt Idku

• 2 Trains 3.4mtpy• On stream in 2006• COP Optimised

Cascade process• Air cooled process• Very long jetty• Space for expansion

Darwin LNG: First LNG March 06

© 2003 Atlantic LNG All Rights Reserved

Atlantic LNG - Train 1

Atlantic LNG

• Train 4: 5.2mtpy from 8 Frame 5 GTs• Started up in March 2006

Atlantic LNG Project Expansion Trinidad

© 2002 LNG Journal & Reproduced with Permission

Overview of LNG ProductionFacilities Trends

• Larger facilities– Bigger Trains– Bigger Turbines

• Reduce Environmental Impact– CO2

• Produced with gas• Developed by turbines

– NOx– Marine Environment

Typical Project ScheduleGreenfield LNG Export Project

Year 0 1 2 3 4 5 6 7 8 9 10

study drilling and appraisal design construction

selection acquisition, approvals prepn.

study concept design FEED EPC - construction

study shipping arrangements ship building

Upstream

Terminal Site

LNG Plant

Shipping

& Evaluation study negotiations -j.v. evaluation first LNGexports

Project Structure

analysis marketing, sales agreementsMarkets

Financingadvice and analysis securing financing

© 2000 LNG Journal All Rights Reserved

Photo Courtesy of CB&I All Rights Reserved

190,000m3 LNG Storage Tank

The Basic LNG Chain

Shipping

LNG Production

LNG Reception

Gas Utilization

Gas Production

1959 – The Methane Pioneer

© 2004 LNG Journal & Reproduced with Permission

© 2008 Hamworthy, Used With Permission, All Rights Reserved

LNG Carrier Fleet

• As at 1 January 2008 the Carrier Fleet was– 250 ships, average age 13 years– 400 ships in 2011– 52% Membrane, 45% Moss, 3% others

• Small carriers 20-80,000m3

• Typical Carriers 125-145,000m3

• New very large carriers on order for Qatar long distance trades (205-265,000m3).

• The order book is 142 ships• Some Fleet owners now looking to replace older

ships >35 years

One of the World’s Smallest LNG Carriers The 19,100 m3 Capacity Surya Aki

© 2008 Hamworthy, Used With Permission, All Rights Reserved

Partial Loading of LNG Cargoes

Photo Courtesy of ABS

A Typical Large-Size LNG CarrierThe 135,000 m3 Capacity Al Bidda

© 2002 LNG Journal & Reproduced with Permission

Qflex

© 2008 Hamworthy, Used With Permission, All Rights Reserved

©2008 Hamworthy©Used With Permission©All Rights Reserved

© 2008 Hamworthy, Used With Permission, All Rights Reserved

The Basic LNG Chain

LNG Reception

LNG Production

Shipping

Gas Utilization

Gas Production

Costs in an LNG Project

Gas Gathering US$ 1.5 – 2.0 billion

Liquefaction (1 train) US$ 1.5 – 2.0 billion

Ships 5 @ $250 m US$ 1.3 billion

Regasification US$ 0.5 – 1.0 billion

TOTAL US$ 4.8 – 6.3 billion

Could easily reach $7,000,000,000

Negishi Terminal, Japan : Single Containment Tanks (background)

Inground Tanks (foreground)

© 2002 LNG Journal & Reproduced with Permission

US LNG Terminal: Elba Island

The Basic LNG Chain

Gas Utilization

LNG Production

Shipping

LNG Reception

Gas Production

Seasonal Demand PatternEurope & North America

Gas Markets

1. Residential & Commerciala. Heating demand highly seasonal (low load

factor)b. No fuel switching capabilities

2. Industriala. Fuel for factories, chemical plants, steel

mills, etc.b. Power generation for factories, chemical

plants, steel mills, etc.c. Chemical feedstock – ammonia, methanol,

GTLd. High load factore. Fuel switching capability

Ship-to-Ship Transfer

• Power Generationa. Combined cycle most popular

• GT + waste heat boiler Eff.~55%• Low CO2 emissions

7 – 8 tonnes/MW compared to25 – 27 tonnes/MW for coal

b. Higher load factor than residential & commercial

c. Quick response to demand swingsd. Summer demand higher than winter

(A/C)e. Fuel switching capability

Gas Markets

Gas-Fired Electric Power Generation

© 2002 GE All Rights Reserved

GE GAS TURBINESH-Technology

400-480 MW combined cycle output

Firing at 2600°F, 1430°C

23:1 compressor, 18 stages4 stage turbine

60% combined cycle efficiency

Example Heating Values

36 38 40 42 44 46 48 50

UK

USA - Florida

Japan – Power Plant

MJ/m3Adapted from: Bramoulle, Morin and Capelle, “LNG Quality and Market FlexibilChallenges and Solutions”, LNG 14, Doha, Qatar 2004

Examples of Sales Gas SpecificationsQualityQuality USAUSA CanadaCanada EuropeEurope UKUK

Water ContentWater ContentDew PointDew Point

44--7lb H2O/MMscf7lb H2O/MMscf3232ooF at 1000psiF at 1000psi

--1010ooC at 7000kPaC at 7000kPa65mg/std m65mg/std m33

--88ooC@C@70barg70barg

--1010ooC@C@85barg85barg

HH22SS0.250.25--1gr/100scf1gr/100scf

(4(4--16ppm 16ppm volvol))66--23 mg/m23 mg/m33

(0.25(0.25--1 gr/100scf)1 gr/100scf)5mg/m5mg/m33 4mg/m4mg/m33

Total STotal S 55--20 gr/100scf20 gr/100scf(20(20--100 100 ppmppm volvol)) 2323--115 mg/m115 mg/m33 30mg/m30mg/m33 50mg/m50mg/m33

COCO22 22--3%3% 2%2% 2.5 mole%2.5 mole% 2.0 mole%2.0 mole%

NN22 22--3%3% Typically not Typically not specifiedspecified

Typically not Typically not specifiedspecified 5 mole%5 mole%

OO22 0.1%0.1% 0.4%0.4% 0.01 mole%0.01 mole% 0.001 mole%0.001 mole%

HydrocarbonHydrocarbonDew PointDew Point

+15+15ooF @ F @ 800psia800psia

--1010ooC @C @Specified pressureSpecified pressure

--22ooC@70bargC@70barg --22ooC@85bargC@85barg

WobbeWobbe IndexIndex Typically not Typically not specifiedspecified

Typically not Typically not specifiedspecified

13.613.6--15.8kWh/m15.8kWh/m33 47.247.2--

51.4MJ/m51.4MJ/m33

Gross Heating Gross Heating ValueValue

10001000--1200 1200 btu/scfbtu/scf3737--45 MJ/std m45 MJ/std m33 3535--39 mJ.m39 mJ.m33

8.48.4--13.113.1kWh/mkWh/m33 36.936.9--

42.3MJ/m42.3MJ/m33

Gas Interchange Diagram

Non Methane components %

Adapted from “A Guide to the Gas Safety (Management) Regulations

1996 – Guidance on Regulations Health & Safety Executive.

© Crown Copyright (UK) 1996

Commercial Trends1. Rapid increase in capital cost2. More competition, more risk-taking. Global supply

strategies3. Building ships/terminals in advance of firm

supply/sales contracts. Merchant facilities4. Increasing power generation market

5. Regional market trendsa. Asia. Liberalization of existing markets. India.

China.b. Europe. Open access. Market related prices.

LNG and pipeline supplies.c. Americas. USA – more terminals? Price volatility. d. Central/South America.

6. Market niches: small-scale supply projects, reception, satellites.

Flex LNG concept

• SPB type Cargo Containment• Flat deck to mount process plant

LNG – Roaring Ahead

Where Will it End?

© 2008 Hamworthy, Used With Permission, All Rights Reserved

Reduce Environmental Impact

1. Reduce CO2– Inject Produced CO2– Install most efficient drivers

• Cogeneration• Larger Turbines• Electric Motor Drivers

2. Reduce NOx– Install “Clean-burn” technology

3. Effect on Marine Environment– Use of air coolers

UK Gas Supply and Demand

World LNG Trade

© 2005 LNG Journal & Reproduced with Permission

Some of Today’s Challenges in LNG…..Many

• Permits for US Imports

• Crews for LNG Carriers

• LNG quality variations

• Security

• Materials and Staffing

LNG – Roaring Ahead

John MorganJohn M. Campbell & Company

Exclusive Provider of PetroSkills Facilities TrainingHeadquarters Office

1215 Crossroads Blvd., Norman, OK 73072 USA

(405) 321-1383 Office / (405) 321-4533 Fax / (303) 523-6797 Cell

djm@jmcampbell.com / www.jmcampbell.com

©2008 John M. Campbell & Co. and Other Copyright Holders

All Rights Reserved

Where Will it End?

Melkoya Island

StatoilHydro Snøhvit Plant

• Europe's first LNG export facility

• Capacity 4.2mtpy• Linde MFC process• First shipment 20th

October 2007• 140km tie-back to

subsea templates• CO2 sequestration

THE END

Thank You!

Bontang Train B Incident April 1983

Natural Gas Reserves/Consumption

1. Russia (Gazprom) 26.6%) 14.7%2. Iran (NIOC) 14.9%) 56% 3.2%3. Qatar (Qatargas) 14.3%) 0.6%4. Saudi (Saudi Aramco) 3.8% 2.5%5. UAE (Adnoc) 3.4% 1.5%6. USA 3.0% 23.0%7. Nigeria (NNPC) 2.9%8. Algeria (Sonatrach) 2.5% 0.9%9. Venezuela (PDVSA) 2.4% 1.1%10. Iraq (INOC) 1.8%11. Indonesia 1.5% 1.3%12.Australia 1.4% 0.9%13.Malaysia 1.4% 1.3%14.China 1.3% 1.7%15.Norway 1.3% 0.2%16.ROW 17.5% 37.1%

Courtesy BP Statistical Review 2006

Prices in 2006 (77) ($/MMBtu)

• Japan 7.14

• EU 8.77• UK 7.87

• USA (HH) 6.76

• Oil 10.66 (20)

• Current Prices 10-15

© 2008 Hamworthy, Used With Permission, All Rights Reserved

Costs in an LNG Project

Gas Gathering US$ 1 – 1.5 billion

Liquefaction (1 train) US$ 1 – 1.5 billion

Ships 5 @ $180 m US$ 0.9 billion

Regasification US$ 0.5 billion

TOTAL US$ 3.4 – 4.4 billion

Could easily reach $5,000,000,000