Natural Gas Processing Overview

Overview Gas & NGL Processing

Updated: January 16, 2018Copyright © 2017 John Jechura ([email protected])Updated: January 16, 2018Copyright © 2017 John Jechura ([email protected])

Topics

Energy consumption & natural gas’s placeNatural gas sources Relationship with petroleum

Basic economics of natural gas & NGL Trends for pricesWhat are appropriate margins for the industry?

Gas processing as part of total production system

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Energy consumption & natural gas’s place


Growth of U.S. Energy Consumption

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Source: 1850-1949, Energy Perspectives: A Presentation of Major Energy and Energy-Related Data, U.S. Department of the Interior, 1975; 1950-2010, Annual Energy Review 2011, Table 1.3.

0

20

40

60

80

100

120

1750 1800 1850 1900 1950 2000

Energy Con

sumed

(Qua

d = 10

15 BTU

)

WoodHydroelectric PowerNuclear Electric PowerCoalNatural GasPetroleum


World Energy Consumption by Source

Growth will not be uniform among all energy sources Renewable & nuclear power

projected to be fastest-growing energy sources, increasing by 2.5% per year Natural gas fastest growing

fossil fuel, increasing by 1.7% per year Coal grows faster than

petroleum because of China’s increasing consumption

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Source:International Energy Outlook 2013, U.S. Energy Information Agencyhttp://www.eia.gov/forecasts/ieo/


Energy Markets Are Interconnected

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https://flowcharts.llnl.gov/commodities/energy


Origins of Oil & Gas

Organic life buried in sedimentary rock

Transformation to hydrocarbons

Migration from source rocks

Accumulation of oil & gas

Flow of oil & gas through porous media

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Petroleum & Natural Gas

Consumption influenced by production & cost of fuels

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Flow of Natural Gas in U.S.

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Natural Gas Annual, 2014https://www.eia.gov/naturalgas/annual/


Overview of Natural Gas Gathering & Processing

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Fundamentals of Natural Gas Processing, 2nd ed.Kidnay, Parrish, & McCartney


Natural Gas ResourcesPetroleum & natural gas formed from decomposing organic matter in “source rock”

Conventional – gas & liquids migrate through permeable rock toward the surface until it is stopped by some trapping mechanism

Unconventional – gas & liquids are trapped at the source rock because of extremely low permeabilities

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Dec. 5, 2012 update, http://www.eia.gov/energy_in_brief/article/about_shale_gas.cfm


North American Conventional Gas Fields

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http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/maps/maps.htm


North American Offshore Gas Fields

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North American Shale Gas Plays

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Marcellus & Utica Shale Formation Map

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http://marcelluscoalition.org/pa-map/


Worldwide Shale Oil & Gas

Shale oil & gas have the potential to dramatically alter world energy markets

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Source: Supplemental presentation is support of International Energy Outlook 2013, U.S. Energy Information Agencyhttp://www.eia.gov/forecasts/ieo/


Expected Natural Gas Production by Source

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Retrieved November 26, 2016http://www.eia.gov/energy_in_brief/article/shale_in_the_united_states.cfm


U.S. Gas Processing & Transportation

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U.S. Energy Mapping System, retrieved January 10, 2016http://www.eia.gov/state/maps.cfm?v=Natural%20Gas


Gas Plants Capacities in U.S. Lower 48

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http://www.eia.gov/todayinenergy/detail.cfm?id=8530


U.S. Gas Transportation, Storage, & Terminals

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U.S. Energy Mapping System, retrieved December 31, 2016http://www.eia.gov/state/maps.cfm?v=Natural%20Gas


Interstate Natural Gas Flow

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Natural Gas Annual, 2014https://www.eia.gov/naturalgas/annual/


Basic economics of natural gas & NGL


Energy & Oil Prices

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Prices retrieved January 1, 2018http://www.bloomberg.com/energy/


Energy & Oil Prices

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Prices retrieved January 1, 2018http://quotes.ino.com/exchanges/exchange.html?e=NYMEX


Price Changes With Time

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Prices updated January 1, 2018Sources: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm & http://www.eia.gov/dnav/ng/ng_pri_fut_s1_d.htm


Price Changes With Time

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No Such Thing as a “Global” Gas Price

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http://www.slideshare.net/enalytica/gas-market-outlook-lng-business-fundamentals


NGLs Can Bring Value

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Economic “Spreads”

NGL Frac spread Difference between the value of components in NGL vs. retaining in the natural gas

Frac Spread = (Value as liquid product) – (Value as component of natural gas)

Can include value of mixture of C2, C3, iC4, nC4, & C5+

• Can be tailored to meet actual NGL compositions• Some prices may be difficult to obtain on a daily basis

o NYMEX C2, C3, nC4, & C5+ from www.ino.com

Can be expressed as $/MMBtu (ideal gas heating value) or $/bbl (NGL volume)• Make use of values for standard liquid density & heating value

NGL frac spread requires a definition for NGL composition

Spark spread More important to electricity producer rather than gas processor Gross margin of a gas-fired power plant selling a unit of electricity having bought the fuel

to produce it

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Example – Propane Frac Spread

Using February values (Last): Propane - $0.97375 per gal Natural gas - $2.953 per MMBtu

Propane conversion factors: 91,563 Btu/gal ideal gas

gross heating value & standard liquid density

Calculation:

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Values retrieved January 1, 2018http://quotes.ino.com/exchanges/exchange.html?e=NYMEX

Btu1,000,000

$ $MMBtuSpread 0.97375 2.953gal MMBtuBtu

91, 563gal

$7.682 per MMBtu



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Example – Ethane Frac Spread

Using February values (Last): Ethane - $0.25563 per gal Natural gas - $2.953 per MMBtu

Ethane conversion factors: 66,340 Btu/gal ideal gas

gross heating value & standard liquid density

Calculation:

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Values retrieved January 2, 2018http://quotes.ino.com/portfolio/?id=309FD6

Btu1,000,000

$ $MMBtuSpread 0.25563 2.953gal MMBtuBtu

66,340gal

$0.900 per MMBtu

$0.06 per gal


Gas processing as part of total production system


Total Production System

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J.M. Campbell & CompanyAdapted from Gas Processors Association (GPA), Tulsa, Oklahoma

Oil

Water

Water Water

Non-associated GasGas Cap orAssociated Gas

GasWell

OilWell

GasWell

Crude Oil

ProductionSeparators

ProductionSeparators

SolutionGas

Field Condensate

GasProcessing

Module

Compression(optional)

Field Treating(optional)

CO for EOR2

Gas Lift andInjection

Sales Gas to Pipeline

EthanePropaneN-ButaneI-ButaneNatural GasolinePlant CondensateSulfur

LPG NGLs


Overview of Gas Plant Processing

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Fundamentals of Natural Gas ProcessingKidnay, Parish, & McCartney, CRC Press, 2011


Summary


Summary

Natural gas supplies nearly 30% of the US’s energy Contribution expected to continue to grow

Production May be associated with petroleum production Unconventional sources – shale & coal

Primary distribution via pipelines Gas processing near the mouth of the pipeline system

NGLs bring value Comparison is the value as a liquid vs the heating value as part of the

natural gas

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Supplemental Slides


How do energy prices compare?

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Natural Gas Processing Overview

Documents

Transcript of Natural Gas Processing Overview