Natural Gas Processing Overview

Overview Gas & NGL Processing

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

Energy consumption & natural gas’s place

Growth of U.S. Energy Consumption

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.

1750 1800 1850 1900 1950 2000

Energy Con

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

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

Energy Markets Are Interconnected

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

Petroleum & Natural Gas

Consumption influenced by production & cost of fuels

Flow of Natural Gas in U.S.

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

Overview of Natural Gas Gathering & Processing

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

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

North American Conventional Gas Fields

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

North American Offshore Gas Fields

North American Shale Gas Plays

Marcellus & Utica Shale Formation Map

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

Worldwide Shale Oil & Gas

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

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

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

U.S. Gas Processing & Transportation

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

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

U.S. Gas Transportation, Storage, & Terminals

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

Interstate Natural Gas Flow

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

Basic economics of natural gas & NGL

Energy & Oil Prices

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

Energy & Oil Prices

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

Price Changes With Time

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

No Such Thing as a “Global” Gas Price

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

NGLs Can Bring Value

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

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:

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

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:

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

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

Water Water

Non-associated GasGas Cap orAssociated Gas

GasWell

OilWell

GasWell

Crude Oil

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

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

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

Supplemental Slides

How do energy prices compare?

Natural Gas Processing Overview

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