LNG quality and market flexibilityChallenges and solutions

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Presentation outline

• Quality specifications for different distribution networks

Characteristics of LNGs currently produced

• Quality adjustment options available to producers and terminal operators

• Overall optimization: a suggested approach(case study)

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Network gas specifications by regionNetwork gas specifications by region

Objectives:Objectives: SafetySafety – non-toxic, non-corrosive– non-toxic, non-corrosive Interchangability Interchangability of gas being distributedof gas being distributed

limit variation range of parameters affecting combustionlimit variation range of parameters affecting combustion

GCV specs for domestic gas: 3 main regions:GCV specs for domestic gas: 3 main regions:AsiaAsia (Japan, Korea, Taiwan):(Japan, Korea, Taiwan): high GCVhigh GCV > 1090 Btu/scf> 1090 Btu/scfUK & USUK & US: : low GCVlow GCV < 1065 Btu/scf.< 1065 Btu/scf.

In addition, WI < 51,41 MJ/m3(s) for In addition, WI < 51,41 MJ/m3(s) for

UKUKContinental EuropeContinental Europe: : wide range of GCVwide range of GCV: : 990 to 1160 Btu/scf 990 to 1160 Btu/scf

Main parameters covered by specifications:Main parameters covered by specifications:Calorific Value (GCV) Calorific Value (GCV) per unit volumeper unit volumeWobbe IndexWobbe Index (WI = GCV / (WI = GCV / relative density) relative density)ICF, Soot Index, Yellow Tip Factor, …ICF, Soot Index, Yellow Tip Factor, …

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Different quality specifications: historical reasonsDifferent quality specifications: historical reasons

Gas producing countries - Gas producing countries - specs based on characteristics of local gasspecs based on characteristics of local gas : : High inert gas content (UK - Groningen)High inert gas content (UK - Groningen) Extraction of C3 & C4 to valorize as LPGExtraction of C3 & C4 to valorize as LPG Extraction of C2 for petrochemicals feedstock (US Gulf Coast)Extraction of C2 for petrochemicals feedstock (US Gulf Coast) Need to take different gases from diverse sources (Cont. Europe)Need to take different gases from diverse sources (Cont. Europe) Separate networks (H gas & B gas in Europe)Separate networks (H gas & B gas in Europe)

Countries using imported LNG from the start – Countries using imported LNG from the start – specs based on specs based on

characteristics of LNG available in the Asia-Pacific basincharacteristics of LNG available in the Asia-Pacific basin::LNG with low inert gas contentLNG with low inert gas contentLNG rich in ethane and often also C3 – C4LNG rich in ethane and often also C3 – C4Adjustment of GCV before distribution, by injection of LPGAdjustment of GCV before distribution, by injection of LPG

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Characteristics of LNGs currently producedCharacteristics of LNGs currently produced

53

54

55

56

57

58

39 40 41 42 43 44 45 46 47

Gross Calorific Value in MJ/m3(n)

Wo

bb

e In

de

x in

MJ

/m3

(n)

Kenai : almost pure methane

Trinidad&Tobago;Algeria GL1K and GL2Z:

LNGs designed for USA market

15 other plants:LNGs designed for Asian

or European markets

UK Wobbe Index limit

1,075 Btu/scf JapanUSA

UK

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Quality adjustment at the import terminalQuality adjustment at the import terminal

• Options available:

LPG injection (butane and/or propane) Japan Nitrogen injection UK, US Extraction of C3+ and even C2 US Gas streaming to users US, Japan Blending with local gas US, UK, Europe Blending different LNG cargoes Everywhere

Terminal specs can be quite different to network specs Both specs and available equipment may vary over time

Negotiation on a case-by-case basis

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Terminal specifications - GCV

35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Possible future European standard

Spain - All terminals

USA - Lake Charles

France - Montoir and Fos

UK - NGT Transco

USA - Southern California

USA - Florida Gas Transmission

USA - Elba Island

USA - Everett

USA - Cove Point

Japan (example 3)

Japan (example 2)

Japan (example 1)

Korea

Taiwan

Gross Calorific Value in MJ/m3(n)

Group:

Europe

Asia

USA

Problem with USA specification

Nigeria / Indonesia

Qatar / Malaysia

Oman / Australia

Brunei / Abu Dhabi

Trinidad & Tobago

Alaska

Algeria (2 plants)

Algeria (2 plants)

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Wobbe Index Specification

48 49 50 51 52 53 54 55 56 57 58 59 60

Future European standard

Spain

France

United Kingdom

Japan (example 1)

Japan (example 2)

MJ/m3(n)

Group:

Japan

UK

Europe

Nigeria / Indonesia

Qatar / Malaysia

Oman / Australia

Brunei / Abu Dhabi

Trinidad & Tobago

Alaska

Algeria (2 plants)

Algeria (2 plants)

Problem with UK specification

Terminal specifications – Wobbe Index

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C2+ production from existing plants

Petrochemicals

GCV

Gas production

GCV

Gas production

Petrochemicals

GCV

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LPG extraction at the plant

• Negative aspects

Increased Capex and Opex

(extraction units, storage and loading facilities)

Marked increase in safety constraints

Risk of saturating port facilities

• Positive aspects

Increased amount of feedgas produced

LPG easy to valorize

better project economics

Ethane only worth extracting if petrochemicals outlet nearby

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Overall optimization – a suggested approach

GNL

Shipping

GNL

Import terminal

GNL

CONDENSATS

GNL

EXTRACTION

Liquefaction plant

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Overall optimization – a suggested approach

Need for a global approach factoring in shipping

• Case study

Delivery of 750 mmscfd to the US Gulf Coast market

(~ 5,4 Mt/an)

Production in Middle East (North Field type gas)

Quality compatible with UK specs to allow rerouting

140 000 m3 tankers

Voyage duration 24 days

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Three scenarios studied

Three quality-adjustment options,

but, same amount of energy delivered on the natural gas market

1. No extraction at plant – Injection of nitrogen at terminal(max. N2 content: US 3%, UK 5%)

2. Extraction of GPL at plant and valorization at FOB Arabo-Persian Gulf price

3. No extraction at plant – Extraction of GPL at terminal and valorization at Mont Belvieu price

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Scenario 1 – No LPG extraction

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Scenario 2 – LPG extracted at plant

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Scenario 3 – LPG extracted at terminal

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Extra costs vs extra product revenues

Case n°1 Case n°2 Case n°3

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Extra costs vs extra product revenues

Case n°1 Case n°2 Case n°3

Natural gas 280 TBtu/year

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Extra costs vs extra product revenues

Case n°1 Case n°2 Case n°3

Feed gas 813 884 (+9%) 878 (+8%)

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Extra costs vs extra product revenues

Case n°1 Case n°2 Case n°3

Extra LPG 500 kt 480 ktExtra condensates 10 kt 10 kt

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Extra costs vs extra product revenues

Case n°1 Case n°2 Case n°3

Nitrogen

Injection

220,000 t

Extra costs

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Extra costs vs extra product revenues

Case n°1 Case n°2 Case n°3

LPG extraction,Storage and loading

+3 cargoes +7 cargoes

Extra costs

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Extra costs vs extra product revenues

Case n°1 Case n°2 Case n°3

LPG extraction,Storage and loading

+3 cargoes +7 cargoes

Extra costs

at at

feed-gas Henry

Hub

price price

Fuel gas

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Extra costs vs extra product revenues

Case n°1 Case n°2 Case n°3

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Overall optimization - Conclusions

• Extraction of LPG: Helps boost production from gas field 8 - 9% Profitability OK at current LPG prices

• Extraction at plant rather than US terminal Need detailed study factoring in real Capex Sensitive to relative LPG prices in Gulf and US

• Extraction at plant LNG meets both US and UK specs: GCV = 1052 Btu/scf ; WI = 51.41 MJ/m3(s)

• Extraction at US terminal harder to reroute within Atlantic zone, but LNG meets Asian specs:

GCV ~ 43 MJ/m3(n) i.e. 1,100 Btu/scf

• Should factor in impact of LNG composition on shipping costs

Thank you for your attention