Gas Reserves and Technologies

1
 Reserves
Top 10 Global Gas Reserves, 2009

1600

1400

1200
Trillion cubic metres

1000

800

600

400

200

0
Russia Iran Qatar Turkmenistan Saudi Arabia US UAE Nigeria Venuzuela Algeria

2
 Global Producers
Top 10 Producesrs in 2009

25

20
% 0f world total (tcm)

15

10

0
US Russia Canada Iran Norway Qatar China Algeria Saudi Arabia Indonesia

3
 World Natural Gas Consumption

• Natural gas is rapidly becoming the premier

source of energy.
World Natural gas Consumption
2003: 90 Tcf
2020: 153 Tcf ( EIA, International energy outlook, 2003)
• Demand in electricity generation for natural gas
as fuel is set to increase by 80% from 5.23
Tcf/year in 2002 to 9.39 Tcf/year in 2020 in just
the United States.
 Drivers
Power generation
Using Coal as fuel: $84/MWHr
Using natural gas: $41/MWHr
Other energy sources( nuclear and hydroelectric) about
14% of the market but with considerable restrictions. Solar
and wind are insignificant contributors and will continue to be so.
Natural gas in Transportation and a Source for
Hydrogen (When and how?)
 The New Energy Economy
Carbon
content:
• Wood (1800s) Increasingly:
High
• Coal • Clean

• Oil Medium • Energy intensive

• Technologically
• Natural Gas Low sophisticated
• Hydrogen (envisioned) (Zero) • Distributed

The emerging “hydrogen economy” better characterized as a

“fuel cell economy” that will run on natural gas--i.e. a “natural
gas economy”
 What is CNG, LNG, NGLs, LPG, and GTL?
Typical Natural Gas Composition LNG Composition

Ethane
Methane Other
82% 19% Nitrogen Methane Others
95% 5%
Propane

Carbon
Dioxide

Butane

Pentane
NGL Composition
LPG Composition

Ethane,
propane, Others Propane
butane 5% and Butane Others
95% 95% 5%

© 2005 by Institute for Energy, Law & Enterprise, University of Houston Law Center. All rights
reserved. 7
 Reservoir Fluid Gases
Natural Gas
Wet Gas • Principally Methane
•Gas in Reservoir But Liquid and Gas • Mainly Used as Fuel
• Occasionally Has Liquefiable
on Surface
Components (Condensate or Natural
•Separating Conditions are in Fluid
Gas Liquid; NGL)
Two-Phase Region NGL on Fractionation Produces
Dry Gas •Ethane
•Gas in Reservoir and Gas on • Propane
Surface •Liquified Petroleum Gas(LPG,
•Both Reservoir and Separating C3/C4Mix)
Conditions are in Fluid Single (Gas) • n-Butane
Phase Region. • I-Butane
• Natural Gasoline(C5+)
Liquefied Natural Gas
•Natural Gas Liquefied for
Purpose of Transportation
 Forecast of World Energy Consumption

700
%
%
Hydro, Geothermal, Solar Share
Share
600 8.1
Nuclear 3.5
Quadrillion Btu

500 15
%
400 %
%
Share
Share
7.0
Coal
Share 7.0
6.5 6.8
6.3
5.9 47.5
300 % 24.4
Gas
Share 26.1 23.7
5.9
200 21.6
22.7
22.1
28.9 0.4

Oil
17.4
17.4
100 38.7
38.9
47.3 25.9
0
1970 1988-2001 2001 2010 2020
Natural Gas Consumption and Production in the US
 Figure 1
ILLUSTRATIVE COSTS (2002 PERSPECTIVE) OF
GAS AND OIL TRANSPORTATION
SHOWING GAS'S HIGHER COSTS AND THE EFFECT OF SCALE
(Gas Delivery Capability in BCM)

$/MMBTU
$/BBLOE
$4.00
42" HP Offshore
36" LP Offshore
Gas Line (30)
Gas Line (10) Two Train LNG (11)
36" LP Onshore $20.00
$3.00 56" LP Onshore
Gas Line
Gas Line (32)
(10)

$2.00
$10.00

$1.00 Crude Oil Tanker

Onshore
Crude Line

$0.00
0 2,000 4,000 6,000 8,000
MILES
Jensen Associates
 ELEMENTS OF AN LNG DELIVERY SYSTEM
BASIS: TWO 4.0 MMT TRAINS - 6,100 NAUTICAL MILES
(ROUGHLY THE DISTANCE FROM NIGERIA TO THE U.S. GULF)
REQUIRES ABOUT 12 TCF OF RESERVES TO SUPPORT
A 20 YEAR CONTRACT
COST OF
CAPEX SERVICE
Field Development (Varies) $3.0 Bn $1.00

Liquefaction $4.3 Bn $2.15

Tankers (10 @$210 Mn) $2.1 Bn $1.23

Regasification (Varies) $1.1 Bn $0.70

Total $10.5 Bn $5.08

12
 Compressed Natural Gas (CNG)

© 2005 by Institute for Energy, Law & Enterprise, University of Houston Law Center.
 Scope of the CNG Technology
• Projects using the CNG technology can be successful
technically and commercially
• CNG is capable of meeting small market demands
and monetizing small supply areas
• Majority of the investment involved with shipping
needs, thus, making the assets movable and used in
other areas of interests
• CNG can supply gas for distances of 2500 miles
cheaper than LNG
 Transport Costs
•Supply Matched with
Demand Centers
•Smaller Demand
Centers can be
converted to gas

Transport costs range from

$1.25-1.75/MMBTU (100-300 MMSCF)
 Compressed Natural Gas (CNG)

Advantages

• Simplicity
• Inexpensive onshore facilities
• Can start with very modest transporting needs
• Energy efficient
• Can exploit isolated supply sources
• Suitable for small demand markets

Source: Deshpande, A & Economides, M.J. –

University of Houston
 CNG Application
• For distances up to 2500 miles, CNG
appears more attractive than LNG
• Major advantage in terms of market entry
• Much less capital deployed in country
• Up to 2 Bcf on a ship
• Ideal for limited supply, limited consuming
markets

© 2005 by Institute for Energy, Law & Enterprise, University of Houston Law Center. All rights
reserved. 17
 Transportation of the gas
90% of the investment involved is in shipping of the gas.
Loading and unloading is possible and easy with small
facilities.

© 2005 by Institute for Energy, Law & Enterprise, University of Houston Law Center. All rights
reserved. 18
 CNG Cargo Containment System

© 2005 by Institute for Energy, Law & Enterprise, University of Houston Law Center.
 What is Liquefied Natural Gas?

 LNG is natural gas that has been super

cooled to minus 260 degrees F becoming
liquid for easier storage and shipping
 LNG is a clear, odorless, colorless, non-
corrosive and non-toxic liquid
 LNG takes up 1/600th of the space –
simplifying storage and transportation
 LNG Fast Facts

• An average LNG tanker carries 2.9 Bcf

• The largest, a Q-Flex, carries 4.5 Bcf

• LNG floats on water if spilled

• There are 113 LNG facilities in the U.S.

 Composition
• 95% methane, 5% other heavier hydrocarbons
 LNG Properties
100%

Density
3.9ppg (Water 8.3ppg)
LNG floats on water. Over-Rich
Will not burn
Flammability range
5 – 15%.

Upper Flammability Limit (UFL) 15%

Flammable
Lower Flammability Limit (LFL) 5%
Too Lean - Will not burn
Flammable Range for LNG (Methane)
Comparison of Properties LNG Liquefied Gasoline Fuel Oil
of Liquid Fuels Petroleum Gas
(LPG)
Toxic No No Yes Yes
Carcinogenic No No Yes Yes
Flammable Vapor Yes Yes Yes Yes
Form Vapor Clouds Yes Yes Yes No
Asphyxiant Yes, but in a vapor cloud Yes, same As LNG No No
Extreme Cold Temperature Yes Yes, if refrigerated No No
Other health hazards None None Eye irritant, Same as
narcosis, nausea, gasoline
others.
o
Flash point F -306 -156 -50 140
o
Boiling point F -256 -44 90 400
Flammability Range in air % 5-15 2.1-9.5 1.3-6 N/A
Stored Pressure Atmospheric Pressurized Atmospheric Atmospheric
(atmospheric if
refrigerated)
Behavior if spilled Evaporates, forming visible Evaporates, forming Evaporates, forms Same as
“clouds”. Portions of cloud vapor clouds which flammable pool; gasoline
could be flammable or could be flammable environmental
explosive under certain or explosive under clean up required.
conditions. certain conditions.
Source: Lewis, William W., Lewis, James P, Outtrim, Patricia A., PTL: LNG Facilities - The Real Risk, AiChE Meeting, New Orleans, April 2003 as modified by industry sources.
 LNG Production
• Exploration

• Liquefaction

• Transportation

• Regasification and Storage

 Brief History of LNG
EMERGENCE
• 1941 – First commercial LNG production
• 1964 – Algeria first commercial LNG export facility
• Spawned all US receiving terminals and
several European counterparts
• 1969 – Kenai USA starts supply to Japan
• 1970 – Libya starts supply to Italy

DEVELOPMENT
• 1972-1990 – Development of Far Eastern
LNG trade
• Brunei, Indonesia, Abu Dhabi, Malaysia, Australia
start production
• Korea, Taiwan, USA join Japan as importers

GROWTH British Gas Canvey Island LNG Terminal

• 1996 – Qatar starts production A World First Import Terminal
• 1999 - Trinidad starts production
• 2000 – Nigeria starts production

© 2005 by Institute for Energy, Law & Enterprise, University of Houston Law Center.
 General LNG Production Process
Ships
LNG
Gas -259 F
Treatment Refrigerant
Compression

Pipeline
Feed Gas

Heat
Exchangers LNG Storage

• Pentanes and heavier

• Condensates
• Impurities Heat expelled to
-Carbon Dioxide water or air
-Mercury
-Hydrogen Sulfide
-Water
-Nitrogen

Source: Cheniere
 Liquefaction
• Contaminants are removed to avoid damaging
equipments

• Purify Natural Gas

• Cooling to -260F
 Typical LNG Tanker

Holding tanks
LNG Supply Chain
Cross-Section of a Modern LNG Tank
 Transportation of Natural Gas
Pipelines vs Liquefied Natural Gas (LNG)
• Pipelines are convenient and economical for onshore
transport of natural gas
• Offshore, as the water depth and distance increase
pipeline transport of gas becomes difficult.
• LNG for offshore transport of gas.
• LNG is liquid at –260 oF and atmospheric presure,
transported in specially designed ships.
• 25% of the trade movement of natural gas in 2002 was
as LNG. (BP Statistical Review, 2003)
Typical cost components for LNG project

Unloading
11%

Liquef action
50%
Shipping
39%
 Supply and Demand

• Globally, receiving capacity exceeds liquefaction

capacity by almost 3 to 1

• Japan’s receiving capacity alone exceeds total world

liquefaction capacity

• Since much global LNG is spot traded, it moves where

the prices are highest
 Safety
• Cleveland loss, 1944. 128 fatalities

• Staten Island loss, 1973, 40 fatalities

• Cove point loss, 1979, one fatality

• Algerian loss, 2004, 27 fatalities

• In the 50 year history of LNG marine shipping, there

has never been a significant loss. No LNG related
fatalities. Over 80,000 voyages.
 Safety
• Eight minor spills of LNG during ship loading or
unloading, no fires

• Minor cryogenic cold fracture damage

• Since a large spill has never occurred, and no large

scale spill testing has been done, spills must be
modeled.

• Significant variation in modeling output, so what do

we do?
 Why LNG Now?
Growing Global LNG Demand

Natural Gas Trade Movement Growth in LNG Demand

2002 6,000
LNG
26% 5,000 7% per year growth
(1992-2002)
4,000

bcf
3,000

2,000

1,000

-
Pipeline 1970 1980 1990 1992 1994 1996 1998 2000 2002

74% Japan South Korea Taiwan France Spain USA

Italy Belgium Turkey Greece Portugal UK
Source: Cedigaz, BP Statistical Review of World Energy June 2003
Source: BP Statistical Review of World Energy June 2003

LNG is about 6% of worldwide natural gas consumption and

about 94% of natural gas consumption in Japan.
 Global LNG Imports by Basin
• In 2002 there are 43 terminals with a
Global LNG IMPORTERS
capacity of over 280 million tonnes, 24 Year 2002

of the terminals are in Japan. Pacific Basin Atlantic Basin

• Inter-regional LNG trade is expected to South Korea

16%
Taiwan
5%
increase six fold over the next 30 years. France
8%
• Most of the increase in LNG trade would Spain
Other 8% USA
be in the Atlantic basin, which will 31%
5%
Italy
overtake the pacific basin in volume. Japan
4%
Belgium

•
2%
Importing countries will need to add 48% Portugal
0% Greece Turkey

almost 660 million tonnes of new 0% 4%

regasification capacity.

Source: World Energy Investment Outlook, IEA, Nov. 2003.

 Global LNG Imports

Japan 24
23

Importing Country
Existing
Planned
 LNG Liquefaction Facilities
The LNG industry could be poised for dramatic growth
Global LNG Supply

Existing
Under Construction
Proposed

• LNG supply growing

• Multiple LNG supply proposals
announced
• Long term LNG supply outlook
robust
Source: Cedigaz, NPC

40
 LNG Liquefaction Facilities
mpta
More than 60% 0
Liquefaction
5 10
Capacity
15 20 25
of the equity is
Sonatract 23.3
owned by state Pertamina 17.0
Petronas 10.0
companies; in Shell 9.1
some cases in Qatar Petroleum
Mitsibushi 4.7
8.9

joint ventures Exxonmobil 4.7 Others

Japan Indonesia LNG Company (JILCO) 4.6
with major oil Total 4.4
16%

and gas Abu Dhabi National Oil Company (ADNOC)

Brunei Government 3.4
3.8

producers Omani State 3.4

Oil
Nigeria National Petroleum Company 3.0
Companies State
BP 3.0
23% Owned
Nippon Oil Corporation (NOC) 2.6
61%
Vico 2.2
Mitsui 2.0
Unocal 2.0
BHP 1.4

Source EIA
 Atlantic Basin LNG Supply and Demand
8,000

7,000

6,000

5,000 Middle East

New Markets
Bcf/yr

4,000 Venezuela
Angola Europe
3,000
Egypt

2,000
Trinidad

1,000
Nigeria
United States
0
Supply (2001) Demand (2001) Supply (2010) Demand (2010)
Algeria

Source: Pace Global Energy Services

 How Much Does LNG Cost?

LNG costs are LNG COSTS ARE DECLINING

declining. $/MMBTU
Does not include feedstock prices

2.5
Natural gas can be 0.5
2 0.1
economically produced 0.1

1.5
and delivered to the U.S. 2.5

as LNG in a price range of 1 1.8

about $2.50 - 0.5

$3.50/MMBtu 0
1980's Liquefaction Shipping Regasification 2000's

depending largely on and Storage

shipping cost. Sources: El Paso

 LNG Project Costs Will Continue Dropping

800
700
600
$/tonne of capacity

500
400
300
200
100
0
mid 1990 2002 2010 2030
Source : IEA Liquefaction Shipping Shipping Regasification and Storage
 Current LNG Cost Competitiveness

Source: Marcy Darsey et al, Liquefied Natural Gas,

Exploring Energy, Inc.’s Future with a Developing Field,
UH Law Center, 2004
 Liquefaction Costs Transformed
$ per tonne of capacity
700

600

500

400

300

200

100

0
1990 1995 1999 Trinidad 00 Future LNG

Source: BP
Major Natural Gas Trade Movements

BP Statistical Review of World Energy 2004

New Trade Routes Are Emerging

Existing Trade
Prospective Trade
 LNG Spot Cargo - Volume
8
Volume of LNG Spot Cargo
7
MTPA
6
5
4 Spot Trading is
3 increasing rapidly
2 5 fold increase
1 from 1998

0
'95 '96 '97 '98 '99 '00 '01 '02 '03

Sources : Clarkson Research Studies, LNG Trade &

Transport,
Source: Iwata, Makoto, 2003, Lines,
Mitsui O.S.K. BP
Ltd., LNG Transportation, LNG Ministerial
Summit, Washington D.C., 2003
 Comparison of gas prices
Distance LNG CNG (Case I) CNG (Case II)
miles $/MMBTU $/MMBTU $/MMBTU
500 3.55 2.72 2.72
1000 3.65 2.74-2.84 2.82-2.90
1500 3.75 3.06-3.10 3.15-3.26
2000 3.85 3.30-3.37 3.11-3.62
2500 3.95 3.44-3.90 3.50-3.98
3500 4.25 4.08-4.43 3.98-4.34
5000 4.65 4.84-5.49 4.70-5.43
Case I: Transported Volume = 3.5 106 ft3
Case II: Transported Volume = 5.0 106 ft3
Price of gas: $0.75/MMBTU, Liquefaction: $1.0MMBTU,
Regasification: $0.4/MMBTU

Usage of water-cooled compressor raises the unit price of the gas by

0.01/MMBTU.
Gas-To-Liquid

51
 GTL
• GTL (Gas-to-liquids) technology converts natural
gas into hydrocarbon liquids.
• Impetus for the GTL technology: Clean fuel
obtained as product and easy transportation
• Main products: Middle distillates like gasoline,
kerosene, jet fuel,naphtha and diesel
 Reasons for GTL attraction
• Monetizing stranded natural gas
• Salvaging associated gas
• Meeting environmental specifications
• Maintaining pipeline productivity (e.g., Alaska
pipeline)

Source: Economides, M.J. – University of Houston

GTL Technology
 Gas to Liquids
• The Fischer-Tropsch synthesis (F-T synthesis) is
one of the most important technologies for GTL.
• A main advantage of the F-T products is the
absence of sulphur, nitrogen and complex cyclic
hydrocarbons resulting in almost no emissions of
sulfur dioxide, nitrous oxides and unburned
hydrocarbons.
• For 100 barrels of liquids 1 MMscf of gas is
needed
 STAGE 1

Two processes may be used to convert methane into syngas:

Natural gas autothermal reforming (ATR).
Methane may be converted into syngas via a reaction with water (steam) and
oxygen O2 :
2CH4 + O2 + H2O → 5H2 + 2CO OR
with water (steam) and carbon dioxide CO2:
2CH4 + O2 + CO2 → 3H2 + 3CO + H2O

Both of these reactions are exothermic (they produce heat), and the temperature
of the syngas produced is around 1000 OC.

Steam methane reforming (SMR).

Methane may also be converted into syngas using only water. It requires a high
temperature (700-1000 OC) and occurs in presence of a Nickel based catalyst.

CH4 + H2O → CO + 3 H2 This is the most used method to convert methane into
syngas (widely used to produce ammonia-based fertilizers).
 STAGE 2

The syngas ('synthetic gas') obtained in the previous step contains

contaminants, which must be removed:

Solid particles are removed with cyclones, fabric filters, scrubbers.

Carbon dioxide CO2 and Sulfur compounds are removed with a process
called 'Gas sweetening' or Acid Gas removal.
The process :

The idea is to flow the gas stream through a liquid solvent, in which the
contaminants will be absorbed. Then this solvent - loaded with contaminants - is
'regenerated' by heating or cooling it down: the solvent releases the
contaminants. Then these contaminants can be processed appropriately.

Various solvents may be used.

The most commonly used in this process are:

•MDEA (Methyldiethanolamine)
•DEA (Diethanolamine)
•MEA (Monoethanolamine)

These solvents are commonly named amines. Hence the name 'Amine gas
treating' that can also be used for this process.
The clean syngas is liquefied in a Fischer Tropsch reactor.

The clean syngas is then introduced in a reactor in which it

undergoes a reaction in presence of a catalyst (Cobalt based).
This reaction is explained further in some details.

The Hydrogen and the Carbon monoxide from the syngas react
to form hydrocarbon chains. The type of hydrocarbons produced
depends mostly on the catalyst used and the temperature of the
reaction.
 The Fischer Tropsch (FT) process
is a chemical reaction between Carbon Monoxide CO and
Hydrogen H2, facilitated by a catalyst (usually Iron or Cobalt), and
which produces hydrocarbons (their type depends on the catalyst
used and the conditions at which the reaction occurs).
The mix of CO and H2 used in this reaction is called syngas
and can be produced in various way, using various organic
materials (coal, natural gas, Biomass, Oil shales, solid residues
from refineries etc...).
The FT process was developed in Germany in the 1920s by
Franz Fischer and Hans Tropsch at the Kaiser Wilhelm Institute in
Berlin (Today Max Planck Institute).
It was first used on a commercial scale in 1936, and throughout
the 2nd World War permitted to produce 6.5 millions barrels of
synthetic fuels, which allowed Germany to wage a war without
holding significant 'natural' oil reserves on its territory.
GTL projects: the birth of an industry
Heritage Plants
World GTL Tinrhert Shell Bintulu
Trinidad Algeria PetroSA Mossgas
4kbpd 35kbpd

Sasol
BP
“Oryx”
“Colombia Condor”
SasolChevron 35kbpd (70kd/d train 2)
~35kbpd
Nigeria
35kbpd Shell
“Pearl”
140kbpd (Nov. 2003)

ExxonMobil
“AGC 21”
160kbpd (July, 2004)

ConocoPhillips
SasolChevron
Marathon/Syntroleum
POSTPONED
 GTL Cost Trends
100 Actual Estimated
„000$/tonne Installed Capacity
80

60

40

20

0
Mossgas Bintulu Oryx Escravos Pearl
1991 1993 2006 2009 2010

• Relatively few commercial-scale projects to date

• Significant scope, scale and location-specific differences
• Estimates based on published data
LNG and GTL comparison: boundary
conditions

GTL Plant

Shell