Category: Oil and Gas business

Gas contracts are divided into long term contracts (over one year but often up to 10-20 years), mid-term contracts (approximately up to five years but can be as short as between one month to one year) and short term contracts or master sales agreements (usually up to 1 month or on a cargo-by-cargo basis for LNG), spot contracts (day of purchase). Traditionally, natural gas contracts were on a long term basis fixing the price, volume and conditions over the term of the contract, thus reducing supply and price risks, but they provided little flexibility to adapt to changing market conditions.

Most GSA contain a make-up provision. This allows a buyer’s ToP obligation to be averaged out over the life of the contract. Once a buyer has made a ToP payment, and if he has not taken all the sales gas, then these volumes will go into a make-up bank. If at some point, the buyer has taken the ToP amount for that year before the year end, he can start taking gas free of charge from the make-up bank up to the make-up outstanding. Thus the buyer will be entitled to exercise the right to have delivered at the delivery point a quantity of sales gas equivalent to the quantity of Sales Gas for which a Take or Pay Payment has been paid (but the gas not taken) without the buyer having an obligation to make a payment in respect thereof (“Make-up Right”). The Make-up Right can either cease to be available on termination of the agreement, or could continue only to the extent that there is Sales Gas to satisfy it or could outlive the GSA agreement by a couple of years. Buyers will certainly want to negotiate a period as long as possible and certainly longer than two years, the more so the higher the ToP figure is as there is more chance of incurring ToP and less chance of using any make up. Often Make Up Gas will be the Buyers sole remedy in respect of Sales Gas paid for but not taken. Usually make up rights cannot be exercised in respect of Excess Gas

Until a few years very few of geologists were excited about the Marcellus Shale as a major source of natural gas. Wells drilled through it produced some gas but rarely in enormous quantity. In early 2008, Terry Englander, a geoscience professor at Pennsylvania State University, and Gary Lash, a geology professor at the State University of New York came up with estimates that the Marcellus might contain more than 500 trillion cubic feet of natural gas. Using some of the same horizontal drilling and hydraulic fracturing methods that had previously been applied in the Barnett Shale of Texas, perhaps 10% of that gas (50 trillion cubic feet) might be recoverable. That volume of natural gas would be enough to supply the entire United States for about two years and have a wellhead value of about one trillion dollars. Throughout most of its extent, the Marcellus is nearly a mile or more below the surface

LNG tanks are employed in a variety of types throughout the world according to social needs and the site environment.

Storage tanks are broken down into three categories: in-ground storage tanks, below ground storage tanks and above ground storage tanks.

Today’s LNG storage tank typically has 100,000 m3 or more of capacity and is designed to facilitate a process that works with the laws of physics to keep the temperature inside the tank from warming. The process, called autorefrigeration, keeps the temperature of LNG constant through LNG vapor release.
LNG storage tanks are required at LNG terminals where a large volume of LNG has to be contained safely for a long time or can be used to meet peak demand needs in certain niche markets.

The UK National Grid for instance owns and operates 4 LNG storage facilities that liquefy natural gas by cooling it to -160 degrees centigrade and store it in liquid form.
The facilities are situated in strategic locations close to areas of high demand or at the extremities of the network. Their key feature is their location and their ability to rapidly revaporize the natural gas, and deliver it to the National Transmission System (NTS). As a result, LNG storage is able to provide a peak gas supply to shippers and supplement National Grid’s network capacity.

In addition, LNG from storage is used as a contingency against the risk of emergencies such as system constraints, failures in supply or failures in end user interruption. When an annual service is booked from the NTS, a quantity of injectability, space and deliverability is reserved for a whole year. The cost of this capacity is invoiced in 12 monthly instalments. In addition to capacity charges, the customer pays commodity charges on the quantities of gas injected into storage or withdrawn from storage.

The main features of an LNG Storage Service are: High Deliverability over short duration at economic prices; Reliable risk management tool; Within Day withdrawal nominations at short notice on high demand days; ‘Allocation Whole’ – customers allocated the capacity nominated; Costs fixed – known in advance
LNG can also be used as storage by a consumer and situated in strategic locations close to areas of high demand. Their key feature is their location and their ability to rapidly revaporise the natural gas and deliver it to a consumer who may be totally dependent on having his gas and needs such a backup if something should happen to the transmission system.

In this manner, LNG storage is able to provide a peak gas supply to shippers and supplement a transmission network’s capacity. In addition, LNG storage is used as a contingency against the risk of emergencies such as system constraints, failures in supply or failures in end user interruption.

As per the Israeli Natural Gas Sector Bill: pressure of 16 bar or less within the transmission system

Magal (a subsidiary of Pi-Glilot) has been supplying natural gas in the south of the country to consumers in Arad for over 40 years. Following a HCJ decision, its license will be renewed when it terminates in May 2009

The amount of local personnel, material and services that an oil and gas company are required to employ from the host country when drilling and operating a well, as specified under the terms of each specific country’s concession agreement

The flow of oil and gas from literally hundreds of thousands of wells has slowed to a relative trickle, yet the formations they have tapped still contain large quantities of hydrocarbons. Many of these wells are marginally economic and at risk of being prematurely abandoned. Significant quantities of oil remain behind when marginal wells are prematurely abandoned. A common misperception is that oil left behind remains readily available for production when oil prices rise again. In most instances, this is not the case as it is far too expensive to re-drill a well after all the equipment has been removed. The US DOE for instance is doing a lot to encourage the revitalization of these wells inter alia by supporting new technology such as downhole tools that reduce pressure drop thereby reducing the gas flow needed to lift liquids up the wellbore