Category: Oil and Gas business

Natural gas; methane.

Gas.

The pressure and high temperatures in the deep underground gas reservoir means that some low boiling point hydrocarbon compounds (which would be liquids at normal temperatures and pressures above the ground) become gases under the ground.

These ‘gasified liquids’ form a part of the flow of gas when it is piped up from the reservoir. When the gas flows up from the depths, the pressure is released and temperature drops. The ‘gasified liquids’ in the cooling gas stream then condense (just as steam condenses back to water as it cools). These liquid condensates and natural gas liquids are quite usual in gas fields. The gas from gas fields is therefore usually ‘wet gas’.

Natural gas liquids

Natural gas, as sold to the consumer, is methane. Gas wells (and the gas on top of oil wells) contain 5% – 20% of gases and ‘gasified liquids’ that are not methane.

These ‘other’ hydrocarbons in the natural gas (methane) stream are either-

(1) gaseous hydrocarbons that can be relatively easily turned into a liquid with application of moderate pressure or freezing,

or :

(2) liquid at normal temperatures and pressures (known as natural gas condensate, or ‘natural gasoline’).

The ‘normally liquid’ portion of the ‘natural gas liquids’ can be separated from the gas stream either at the oil or gas fields adjacent facilities, or elsewhere at a specialist natural gas processing plant.

The term ‘Natural gas liquids’ includes both the ‘condensed’ gaseous liquids captured at specialised natural gas plants, and the ‘normally liquid’ lease condensate, often removed right at the wellhead.

The gaseous liquids are usually made up of both:
(i) lighter hydrocarbons, predominatly ethane, and propane, and
(ii) heavier hydrocarbons, such as pentane and heavier.

(1) The smaller molecules such as ethane, ethylene, propane, butane, butylene, isobutane, and isobutylene can be retrieved from the natural gas stream and converted into liquids at the specialist natural gas processing plants by methods such as freezing and pressurizing.
These now liquified gases may be mixed together and taken to a specialist plant for fractionation, where the individual products are split out and sold separately. Ethane is an important feedstock in the chemical industry, making, amongst other things, ethylene. Propane is used in home heating and cooking. Butane is used as a gasoline additive as an oxygenate to reduce pollution.

If not sold separately, the fractionates can be mixed together to form ‘liquified petroleum gases’, or LPG. This blend has to remain pressurized to be liquid. This gas can be held in relatively thin walled bottles, so is sold worldwide for both domestic cooking as ‘bottled gas’ and as a transport fuel.

Some heavier hydrocarbons with more hydrogen atoms, such as hexane and heptane, can also be recovered from the fractionisation of the gas stream. They can be used to ‘make’ gasoline, but have to be blended with other liquid hydrocarbons from distillation of crude oil in order to be useful. These heavier gaseous natural gas liquids cannot be counted as ‘oil equivalent’ by themselves – they depend on crude oil to become useful.

(2) The heavier hydrocarbons that are liquid at normal temperatures are often called ‘lease condensate’, ‘natural gas condensate’, ‘natural gasoline’, or ‘casinghead gasoline’.

A typical ‘natural gas liquids’ breakdown would be about 83% gaseous liquids, and 17% natural gasoline (it varies, and can be as much as 22%).

Condensate

Condensate refers to a specific portion of the ‘Natural Gas Liquids’. It is more usually referred to as ‘lease condensate’.

This involves identifying the parts of the plant that are constraining production and removing the constraint. It might involve increasing the size of some of the pipework, increase the power of the compressors and/or increasing the capacity of the gas treatment units. The modifications will vary from plant to plant and will be specific to that plant. The work is typically carried out during a maintenance shutdown and can often realize an additional 10% of LNG production

The price of LNG was usually linked to the crude price (either international crude prices or specific crude import prices such as to Japan with 3-6 months’ lag. This does not mean a crude oil price equivalent, but rather what is known as the slope.

Namely, the extent to which the LNG price changes in response to changes in the oil price.

The slope of an LNG contract refers to the degree of indexation of the gas price to that of oil and is thus a measure of how much the gas price changes relative to a change in the oil price.

A slope of 16.67% is approximately oil parity.

On average 1 mmbtu of natural gas has about 16.67% of the energy content of a barrel of oil.

In LNG contracts the slope is typically less than oil parity, namely less than 16.67% and could be 14% or 15% but it could even be higher than parity if the buyer were willing to pay a premium over the heat equivalent oil price.

Thus, 1 mmbtu of gas = +/- 16.6% of energy content of 1 barrel of oil (6 to 1 heat equivalent parity)

New rules that come into force in ECAs at the start of 2015. The International Maritime Organisation has set a sulphur limit of 0.1% in marine fuels in ECA regions. This requires tanker owners to choose between converting their fleet to using LNG, to switching to expensive distillate fuels, or buying scrubbing technology to clean exhaust emissions. It is very probable that the switch over to natural gas would be both the cheapest and most environmentally friendly solution.

The economic benefits depend on the price of the oil and gas in each area and on the regulations and incentives offered by each particular government.