natural gas dynamics - mod 1

8/12/2019 Natural Gas Dynamics - Mod 1

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Introduction,Gas Chemistry,

Gas Units, GasReserves

Natural Gas DynamicsModule 1

Vivek Chandravchandra@natgas.infowww.natgas.infowww.naturalgasdynamics.comv1202

Copyright held by author copying prohibited


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What is natural gas ?

It is the fastest growing energy source in the world

It is the most flexible of all fossil fuels

Can be burned directly > to generate heat and power Can be converted to liquid fuels > for transportation and

products

Can be chemically processed > to produce products such asplastics, fertilizer, foams, and base chemicals

It is the cleanest of all fossil fuels

BUT

It is difficult to transport Often found in remote locations far from markets

Chemical conversion can be difficult and expensive

Natural Gas Dynamics 2


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Gas is the fastest growing fossil fuel

Natural Gas Dynamics 3Source: ExxonMobil The Outlook For Energy View to 2030 ; 2010


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Energy fuel transitions


Biomass

Coal

Oil

Gas

Source: ExxonMobil The Outlook For Energy View to 2040 ; 2012


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Oil age being replaced by gas age

Natural Gas Dynamics 5Source: Halliburton presentation to Asia Oil and Gas June09


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Natural Gas vs. OilNatural gas and oil share many characteristics.. They are both hydrocarbons

Primarily (though not 100%) carbon and hydrogen

They are both formed from decomposing organic matter

Often are found together in same reservoir or in the same region

The same techniques can be used to find both oil and gas

Can be often be substituted for each other

Often, but not always, the same contract between the producingcompany and the government is valid for oil and gas


Oil and gas share similar characteristics


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Natural Gas vs. Oil (continued)But they are very different Oil is relatively easy to handle, process and transport

Gas is more difficult to handle and requires special equipment

Oil is more extensively traded and sold at volatile global prices

Gas is generally sold regionally at fixed and/or less volatile prices

Except in US and UK where there is a vibrant market price

No international price for gas

Oil is more polluting when spilled or combusted

Gas is simpler and lighter so disperses quickly and cleaner to burn

Oil fields are generally easy to development and require less capitalinvestments than gas development

Gas developments are higher cost



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Chemistry of natural gas Natural Gas - ahydrocarbon stable in gasphase at temperaturesabove -161C

It is gaseous at StandardConditions (20C andatmosphere pressure)

Effectively, only includes

compounds with five orfewer carbon molecules

Hydrocarbons with longerchains of carbon are eitherliquid or solid


Methane molecule


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Chemistry of natural gas[Contd.]

Natural Gas: 1 to 5 carbon molecules (Methane, Ethane, Propane, Butane, & Condensate)

Natural Gas Liquids (NGL):2 to 5 carbon molecules (Ethane, Propane, Butane & Condensate)

Liquefied Petroleum Gas (LPG) : 3 & 4 carbon molecules (Propane and Butane)

Natural Gas Dynamics 9Source: Author diagram


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Chemistry of natural gas [Contd.]

Source: Author analysis


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Methane Methane (CH4), is the simplest of hydrocarbons, with one

carbon molecule surrounded by four hydrogen molecules

Methane is main component of natural gas If methane content >95%, gas is termed as dryor lean gas

If methane content


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Natural Gas Liquids (NGLs) Natural Gas Liquids refers mainly to Ethane (C2H6), Propane (C3H8) and

Butane (C4H10)

Used as feedstock for petrochemicals, fuel and gasoline blending

Condensates may also be included in NGL

The richeror wetterthe natural gas, the higher proportion of NGLsthat exists

NGLs burn much hotter and are more valuable than methane. UsuallyNGLs are sold separately from methane close to point of production

Large gas development may earn as much revenue from NGL sales assales of LNG methane

NGLs prices are usually correlated with oil prices so there is a pseudo-world price for NGL

Arbitrage across markets possible since NGLs are easier to transport thanMethane for long distances. Methane is usually more expensive to transportover across large distances.



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Share of NGLs in world oil supply


Due to increasing gas production largely in Middle East and US NGL volumes increasingrapidly

Source: Dolphin Energy presentation at 15th annual Condensate and Naphtha forum, March 2011

NGLssupplymore than

14% of theworldsliquidsproduction!


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Other components of natural gas

Natural Gas may also contain Nitrogen (N2), Carbon Dioxide(CO2) and Hydrogen Sulfide (H2S)

Other trace components include Helium, Argon, and Hydrogen Majority of these non-hydrocarbons must be removed prior

to sale (depending on the sales contract requirements)

If the quantities of impurities is large (especially H2S andCO2) gas field development may be uneconomic

Hydrogen Sulfide is a dangerous impurity that requiresspecial treatment

Gases with high levels of H2S are referred to as sourgases

Gases with low levels of H2S are called sweet gases


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Natural gas units Gas is usually not sold by volume, but by amount of energy

that is produced by its combustion

Energy produced is determined by the proportion of

heavier components versus lighter components Thus, the more the proportion of NGLs (ethane, propane

and butane) left in the natural gas, the more energy isreleased (per unit volume) when burnt

Energy produced is measured by calorific value units, suchas British Thermal Units (Btu), Joules (J) and Therms(100,000 Btu)

Gas prices are usually expressed in currency per energyunit (such as $ per MM Btu, $/GJ or pence per Therm)


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However, produced and transported gas is measured byvolume, not by energy

Thus, it is very important to convert gas volume into energy

sold To do so, you must know the energy produced per unit of volume for

the specific gas calorific value

Gas volumes are usually measured in cubic feet (cf or ft3),cubic meters (cm or m3).

Since gas volumes tend to be very large numbers, usualmeasurements are

Mcf (thousand ft3), MMcf (million ft3), Bcf (billion ft3), Tcf (trillion ft3)or

Mcm (thousand m3), MMcm (million m3) and Bcm (billion m3)

Natural gas units

* 1 Btu = the amount of natural gas that will produce enough energy to heat one pound of water one degree at normal pressure


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Unit conversions calorific values Calorific value varies depending on chemical composition

of gas produced

Raw gas produced may produce calorific values up 1,800

Btu / ft3. Once NGLs are removed (for separate sale),calorific values tend to range from 960 Btu / ft3 to 1,050Btu / ft3

For purposes of this course, we will use the conversion1000 Btu / ft3

Thus 1 ft3 = 1,000 Btu = 1 MBtu and

1 MMcf (million ft3) = 1,000 MMBtu (one thousand million [=billion] Btu)

For metric units, 1 m3

gas = 35.3 ft3

: Thus, 1 m3

=35,300 Btu=35.3 MBtu

Some countries use Joules instead of Btu

Use converter on www.natgas.info or iPhone GasUnits app


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Component Calorific Value(Btu / ft3 )

Natural Gas

Raw Natural Gas Upto 1800

Sales quality Gas 960 1050

Main componentin LNG & CNG

Methane ~910

NGL

Ethane ~1600

LPGPropane ~ 2500

Butane ~ 3200

ManufacturedTown Gas

~ 500

Calorific values


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Dealing with calorific values

Gas sellers have to ensure that their gas / LNG meetsmarket or pipeline specification

Calorific values adjusted by adding or removing NGLs(usually propane and butane to increase calorific value)and/or by adding Nitrogen (to reduce caloric value)

Becoming an increasingly important issue as gas qualitychanges, LNG spot market grows and contracts becomemore flexible allowing ships to be re-routed to differentmarkets

US gas quality changing as richer shale gas and deepwater gas increasing involume


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Energy equivalents

1 barrel of Oil

(volume = 0.15 m3)

Equivalent Natural Gas

(volume = 164 m3 = 5,800 ft3)

5.5 m

5.5m

5.5 m

=


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Energy equivalents Crude oil has a calorific value of 5.4 MMBtu to 5.8 MMBtu

per barrel of oil (a factor of 6 MMBtu is commonly used)

It is often required to add the volumes of gas plus oil,

especially when discussing production or reserves in areservoir. To do this, must convert both to energy equivalents, and then

usually give the result in barrels of oil equivalent (boe)

As we have seen earlier, 1 ft3 gas = 1 MBtu and 1 bbl oil =5,800 MBtu. Thus, 1 bbl oil has energy equivalent of 5,800ft3 gas If a reservoir contains 100 MM bbl oil + 500 Bcf ,

500 Bcf = 500,000,000,000 ft : 500 MMM/5,800 = 86 MM boe 100 MM bbl + 86 MM boe = 186 MM Boe

Misleading concept as most gas users are unable to switchfuels between gas and oil


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Gas formation

The organic origin theoryis based on the premise

that organic matteraccumulates anddecomposes withinsedimentary rock layers.

Over time, with heat andpressure, the organiccompounds decomposeand break down intocarbon and hydrogen

compounds.


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Reservoir rocks characteristics

Reservoir rocks are sedimentary rocks(usually sandstone or limestone) thatcontain hydrocarbons

Hydrocarbons (gas or oil) plus waterare stored between the rock grains

The % of free space in a rock is calledPorosity

Porosity = Total volume grain volume

Total volume Good reservoirs will have porosities

greater than 10 15%

The level of inter-connections betweenthe pore space is called Permeability.

The higher the Permeability, the easierit is for the hydrocarbons to flow andproduce

Bucket full of sand will absorbwater (into the pore spacesbetween grains) until porespaces are full.


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Porosity & permeability

A rock is porous when it hasmany tiny spaces, or pores

A rock is permeable when thepores are connected

Permeability in the biscuit allowthe fluid to be sucked throughthe biscuit


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Reservoir structure A classic reservoir contains

gas, oil and water within arock layer with sufficientporosity and permeability

Gas traps require Source Rock whereorganic matter coulddecompose

Reservoir rock withporosity and permeability

A sealing cap-rock toprevent further migration

A trap or specific geologicor geometric configurationallowing gas to beaccumulated

Trap

Seal

SourceNeed all forgas trap to

be present !

Reservoir


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Flow chart of hydrocarbon accumulation


Decomposition and breakdown oforganic material

Organic material deposition

Formation of Kerogen whichconverts to hydrocarbons

Expelling of hydrocarbons from

source rock into other rocks

Migration of hydrocarbonsupdip through rocks withporosity and permeability

Entrapment of hydrocarbonsagainst sealing rocks

Gas (or Oil) Field

With Time, Heat and Pressure


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Wells can be drilled to tap multiple

reservoirs


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Reserves classification Reserves classification is

controversial - Economic andpolitical factors may influencevolumes reported

Proved: Volumes that arecommercially recoverable(>90% chance) under currentconditions.

Probable : Volumes that likely

to be recovered but are notdefinitive as yet (>50% chance)

Possible : Unproved reservevolumes based on regional non-specific data and/or not likelyto be commercial at currentconditions (>10% chance)

Probable

Possible

1P = Proved Reserves

2P = Proved + Probable Reserves

3P = Proved + Probable + Possible Reserves


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Uncertainty of recoverable hydrocarbons

Natural Gas Dynamics 29Source: Reserves Classification: The Truth, Mike Scott, Cooper Energy presentation at Good Oil Conference Sept 2009


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Another way to look at reserves...

Natural Gas Dynamics 30Source: CSM Technical & Economic Fundamentals, NSAII Sept 07


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Proved reserves



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Probable reserves



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Possible reserves



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Global distribution of reserves

Source: BP Statistical Review 2010

Global Proved Reserves: ~6,500 Tcf of which 50% are considered remote or stranded and commercially difficult tomonetize &

41% is in the Middle East (of which has large amounts of sour gas)


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Unconventional gas is the bulk (60%) of global gas potential


30,000 Tcf =5000 bn BOE

Source: Deloitte Emerging Technologies Presentation


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Natural gas reserves are global


Source: BHP Petroleum presentation, May 2012

Arrows indicate countries that are not currently large gas exporters

In 2011, global proved reserves ~6600 Tcf


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Gas reserves comparable to oil

Natural Gas Dynamics 37Source: Total Presentation at APPEA 2012 A non-conventional energy future

However, large portion of future production (of both oil and gas) will befrom unconventional resources and both oil and gas can be produced for100+ years


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Stranded reserves

Many gas fields are either too small, far from markets andinfrastructure, or technically complex to be developed economically.These reserves are called Stranded

As we know, oil is easier to produce and transport, so there aremuch fewer stranded oil fields than gas fields

Source: Syntroleum website

Global Distribution of Gas Fields

By some estimates, out of the totalreserves of 6,500 Tcf, 1,500 - 3000

Tcf can be called stranded and arecurrently non-producing

Non-conventional or innovativecommercialization options may offer

the best chance for these reservesto be produced (FLNG, CNG, GTL,Petrochemical, etc)


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Gas flaring In Associated Gas fields, oil and gas are produced at the

same time. Oil is sold to markets, but gas wheninfrastructure or local gas markets do not exist - isreleased to atmosphere, it is either vented(not ignited) orflared(ignited)

By World Bank* estimates, 6 Tcf per year is being flared Equivalent to 25% of US consumption, 30% of European consumption

Equivalent 6% of worlds production is being flared, worth $40 B per year Middle east alone flares 1 Tcf/y (= 2.9 Bcf/d) - more than production of

Dolphin and equivalent to 20 MTA LNG plant

Top flaring countries: Russia, Nigeria, Iran, Iraq, Angola,

Venezuela, Qatar, Algeria, the United States, Indonesia,Kazakhstan, Equatorial Guinea, Libya, Mexico, Azerbaijan,Brazil, Congo, the United Kingdom, and Gabon.

Source: World Bank Global Gas Flaring Reduction Partnership 2007


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Volumes of gas flared is enormous

Natural Gas Dynamics 40Source: PFC presentation Flaring in a carbon world at Global Forum on Flaring conference


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Gas flaring continuedGas flaring not only harms the environment by contributing toglobal warming but is a huge waste of a cleaner source of

energy that could be used to generate much needed electricityin poor countries around the world. In Africa alone about 40billion cubic meters of gas are burned every year, which if put

to use could generate half of the electricity needed in thatcontinent. Quote from Bent Svensson, manager of the WorldBanks Global Gas Flaring partnership. 2007

Nigeria could earn $500 MM per year

if they could sell the gas that iscurrent being flared. Nigeria outlawed

flaring in 1979 to be phased in 5 years,but companies rather pay a small finethan stop- flaring volumes have been

stable for the past decade Economist Apr08


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Recap : Sections 1 - 5 Gas is the fastest growing energy source in the world Main reasons: flexible usage, clean burning, large reserves distributed

around the world Issues holding back further usage of gas: Difficult to transport, stranded

reserves, and expensive processing may be required Coal is still the most used fuel for power generation, oil is still the most

common fuel for transport. Gas usage is growing in both of these sectors Gas and oil are often found together in same field, and share many other

characteristics Natural Gas includes methane, Natural Gas Liquids (ethane, propane and

butane) and Condensates. Propane and butane are also called LiquidPetroleum Gas (LPG)

Methane is the simplest and most common component of Natural Gas Liquefied Natural Gas LNG is simply methane in liquid form, at very low

temperatures. No chemical change to methane

Compressed Natural Gas CNG is mostly methane stored and transportedunder pressure. No chemical change to methane Gas-to-Liquid GTL is methane converted to liquid fuels by a chemical

process


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Recap : Sections 1 5 [contd.] When produced and transported, gas is measured in volume units, but when it

is sold, it is measured by energy units

Converting volume transported to energy sold requires knowledge of thecalorific value, or energy/volume, of the specific gas stream

Calorific value is proportional to the percentage of NGLs present in the gasmixture; the more pure the methane, the leaner or less calorific value it has.The more the percentage of NGLs and condensates present, the richer orhigher calorific value the gas stream the gas stream contains

Both gas and oil are produced by organic matter decomposing under heat and

pressure beneath the surface of the earth. Worldwide reserves of gas estimated 6,600 Tcf, yearly production ~110 Tcf

Unconventionals will play a very large and increasing role in future gasproduction

1,500 3,000 Tcf may be considered stranded and is currently not producing

Large volumes of associated gas (produced with oil) is flared and wasted everyyear


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Thank you!

Vivek Chandravchandra@natgas.infowww.natgas.infowww.naturalgasdynamics.comv1202

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natural gas dynamics - mod 1

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