overview gas & ngl processing...title: overview gas & ngl processing author: john jechura...

Overview Gas & NGL Processing

Updated: January 4, 2019Copyright © 2019 John Jechura ([email protected])

Topics

Energy consumption & natural gas’s place▪ Natural gas sources

▪ Relationship with petroleum

Basic economics of natural gas & NGL▪ Trends for prices

▪ What are appropriate margins for the industry?

Gas processing as part of total production system

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Energy consumption & natural gas’s place


Growth of U.S. Energy Consumption

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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.

0

20

40

60

80

100

120

1750 1800 1850 1900 1950 2000

Ener

gy C

on

sum

ed (

Qu

ad =

10

15 B

TU)

Wood

Hydroelectric Power

Nuclear Electric Power

Coal

Natural Gas

Petroleum


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

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

http://www.eia.gov/forecasts/ieo/


Energy Markets Are Interconnected

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https://flowcharts.llnl.gov/commodities/energy

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

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Petroleum & Natural Gas

Consumption influenced by production & cost of fuels

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Flow of Natural Gas in U.S.

9

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

https://www.eia.gov/naturalgas/annual/


Overview of Natural Gas Gathering & Processing

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Fundamentals of Natural Gas Processing, 2nd ed.Kidnay, Parrish, & McCartney


Natural Gas Resources

Petroleum & 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

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

http://www.eia.gov/energy_in_brief/article/about_shale_gas.cfm


North American Conventional Gas Fields

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



North American Offshore Gas Fields

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North American Shale Gas Plays

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Marcellus & Utica Shale Formation Map

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

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


Worldwide Shale Oil & Gas

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

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Source: Supplemental presentation in support of International Energy Outlook 2013, U.S. Energy Information Agencyhttp://www.eia.gov/forecasts/ieo/

http://www.eia.gov/forecasts/ieo/


Expected Natural Gas Production by Source

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

http://www.eia.gov/energy_in_brief/article/shale_in_the_united_states.cfm


U.S. Gas Processing & Transportation

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U.S. Energy Mapping System, retrieved January 10, 2016http://www.eia.gov/state/maps.cfm?v=Natural%20Gas

http://www.eia.gov/state/maps.cfm?v=Natural Gas


Gas Plants Capacities in U.S. Lower 48

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

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


U.S. Gas Transportation, Storage, & Terminals

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

http://www.eia.gov/state/maps.cfm?v=Natural Gas


Interstate Natural Gas Flow

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

https://www.eia.gov/naturalgas/annual/


Basic economics of natural gas & NGL


Energy & Oil Prices

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Prices retrieved January 3, 2019http://www.bloomberg.com/energy/

http://www.bloomberg.com/energy/


Energy & Oil Prices

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Prices retrieved January 3, 2019http://quotes.ino.com/exchanges/exchange.html?e=NYMEX

http://quotes.ino.com/exchanges/exchange.html?e=NYMEX


Energy & Oil Prices

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Prices retrieved January 3, 2019https://www.barchart.com/my/watchlist?viewName=main

https://www.barchart.com/my/watchlist?viewName=main


Price Changes With Time

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Prices updated January 2, 2019Sources: 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

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

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No Such Thing as a “Global” Gas Price

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

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


NGLs Can Bring Value

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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

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http://www.ino.com/


Example – Propane Frac Spread

Using “Last” values:

▪ Natural gas - $2.931 per MMBtu

▪ Propane - $0.56625 per gal

• 91,563 Btu/gal ideal gas gross heating value & standard liquid density

Calculation:

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Values retrieved January 3, 2019https://www.barchart.com/my/watchlist?viewName=main

= −

=

Btu1,000,000

$ $MMBtuSpread 0.56625 2.931

gal MMBtuBtu91,563

gal

$3.253per MMBtu

$0.298 per gal

01_Ethane_Propane_Heating_Values.pptx



Example – Ethane Frac Spread

Using “Last” values:

▪ Natural gas - $2.931 per MMBtu

▪ Propane - $0.31313 per gal

• 66,340 Btu/gal ideal gas gross heating value & standard liquid density

Calculation:

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= −

=

Btu1,000,000

$ $MMBtuSpread 0.31313 2.931

gal MMBtuBtu66,340

gal

$1.789 per MMBtu

$0.119 per galValues retrieved January 3, 2019https://www.barchart.com/my/watchlist?viewName=main

01_Ethane_Propane_Heating_Values.pptx




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Prices updated January 2, 2019Prices collected from ino.com & barchart.com


Gas processing as part of total production system


Overview of Gas Plant Processing

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Adapted from Figure 7.1, Fundamentals of Natural Gas Processing, 2nd ed.Kidnay, Parrish, & McCartney


Summary


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

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Supplemental Slides


How do energy prices compare?

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overview gas & ngl processing...title: overview gas & ngl processing author: john jechura...

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