GAS REFINING / PROCESSING

Here are a great many ways in which to configure the various unit processes used in the
processing of raw natural gas. The block flow diagram below is a generalized, typical
configuration for the processing of raw natural gas from non-associated gas wells. It
shows how raw natural gas is processed into sales gas pipelined to the end user
markets.[8][9][10][11][12] It also shows how processing of the raw natural gas yields these
byproducts:

 Natural-gas condensate
 Sulfur
 Ethane
 Natural-gas liquids (NGL): propane, butanes and C5+ (which is the commonly used
term for pentanes plus higher molecular weight hydrocarbons)
Raw natural gas is commonly collected from a group of adjacent wells and is first
processed at that collection point for removal of free liquid water and natural gas
condensate. The condensate is usually then transported to an oil refinery and the water
is disposed of as wastewater.
The raw gas is then pipelined to a gas processing plant where the initial purification is
usually the removal of acid gases (hydrogen sulfide and carbon dioxide). There are many
processes that are available for that purpose as shown in the flow diagram, but amine
treating is the process that was historically used. However, due to a range of
performance and environmental constraints of the amine process, a newer technology
based on the use of polymeric membranes to separate the carbon dioxide and hydrogen
sulfide from the natural gas stream has gained increasing acceptance. Membranes are
attractive since no reagents are consumed.[13]
The acid gases, if present, are removed by membrane or amine treating can then be
routed into a sulfur recovery unit which converts the hydrogen sulfide in the acid gas into
either elemental sulfur or sulfuric acid. Of the processes available for these conversions,
the Claus process is by far the most well known for recovering elemental sulfur, whereas
the conventional Contact process and the WSA (Wet sulfuric acid process) are the most
used technologies for recovering sulfuric acid.
The residual gas from the Claus process is commonly called tail gas and that gas is then
processed in a tail gas treating unit (TGTU) to recover and recycle residual sulfur-
containing compounds back into the Claus unit. Again, as shown in the flow diagram,
there are a number of processes available for treating the Claus unit tail gas and for that
purpose a WSA process is also very suitable since it can work autothermally on tail
gases.
The next step in the gas processing plant is to remove water vapor from the gas using
either the regenerable absorption in liquid triethylene glycol (TEG),[5] commonly referred
to as glycol dehydration, deliquescent chloride desiccants, and or a Pressure Swing
Adsorption (PSA) unit which is regenerable adsorption using a solid adsorbent.[14] Other
newer processes like membranes may also be considered.

Mercury is then removed by using adsorption processes (as shown in the flow diagram)
such as activated carbon or regenerable molecular sieves.[3]
Although not common, nitrogen is sometimes removed and rejected using one of the
three processes indicated on the flow diagram:
 Cryogenic process (Nitrogen Rejection Unit),[15] using low temperature distillation.
This process can be modified to also recover helium, if desired (see also industrial
gas).
 Absorption process,[16] using lean oil or a special solvent[17] as the absorbent.
 Adsorption process, using activated carbon or molecular sieves as the adsorbent.
This process may have limited applicability because it is said to incur the loss of
butanes and heavier hydrocarbons.
The next step is to recover the natural gas liquids (NGL) for which most large, modern
gas processing plants use another cryogenic low temperature distillation process
involving expansion of the gas through a turbo-expander followed by distillation in a
demethanizing fractionating column.[18][19] Some gas processing plants use lean oil
absorption process[16] rather than the cryogenic turbo-expander process.
The residue gas from the NGL recovery section is the final, purified sales gas which is
pipelined to the end-user markets.
The recovered NGL stream is sometimes processed through a fractionation train
consisting of three distillation towers in series: a deethanizer, a depropanizer and a
debutanizer. The overhead product from the deethanizer is ethane and the bottoms are
fed to the depropanizer. The overhead product from the depropanizer is propane and the
bottoms are fed to the debutanizer. The overhead product from the debutanizer is a
mixture of normal and iso-butane, and the bottoms product is a C5+ mixture. The
recovered streams of propane, butanes and C5+ may be "sweetened" in a Merox process
unit to convert undesirable mercaptans into disulfides and, along with the recovered
ethane, are the final NGL by-products from the gas processing plant. Currently, most
cryogenic plants do not include fractionation for economic reasons, and the NGL stream
is instead transported as a mixed product to standalone fractionation complexes located
near refineries or chemical plants that use the components for feedstock. In case laying
pipeline is not possible for geographical reason,or the distance between source and
consumer exceed 3000 km, natural gas is then transported by ship as LNG (liquefied
natural gas) and again converted into its gaseous state in the vicinity of the consumer.
Helium recovery
If the gas contains significant helium content, the helium may be recovered by fractional
distillation. Natural gas may contain as much as 7% helium, and is the commercial
source of the noble gas.[20] For instance, the Hugoton Gas Field in Kansas and Oklahoma
in the United States contains concentrations of helium from 0.3% to 1.9%, which is
separated out as a valuable byproduct.[21]

Consumption
Natural gas consumption patterns, across nations, vary based on access. Countries with
large reserves tend to handle the raw-material natural gas more generously, while
countries with scarce or lacking resources tend to be more economical. Despite the
considerable findings, the predicted availability of the natural-gas reserves has hardly
changed.

Applications of natural gas

 Fuel for industrial heating and desiccation process

 Fuel for the operation of public and industrial power stations
 Household fuel for cooking, heating and providing hot water
 Fuel for environmentally friendly compressed or liquid natural gas vehicles
 Raw material for chemical synthesis
 Raw material for large-scale fuel production using gas-to-liquid (GTL) process (e.g.
to produce sulphur-and aromatic-free diesel with low-emission combustion)

Natural gas prices, as with other commodity prices, are mainly driven by supply and
demand fundamentals. However, natural gas prices may also be linked to the price
of crude oil and/or petroleum products, especially in continental Europe.[1][2] Natural gas
prices in the US had historically followed oil prices, but in recent years have decoupled
from oil and are now trending somewhat with coal prices.[3]
The current surge in unconventional oil and gas in the U.S. has resulted in lower gas
prices in the U.S. This has led to discussions in Asian oil-linked gas markets to import
gas based on the Henry Hub index[4] (until very recently the most widely used reference
for US natural gas prices).[5]
Depending on the marketplace, the price of natural gas is expressed in US dollars (or
other currency) per 1 million British thermal units (MMBtu), million cubic feet (Mcf), or
1,000 cubic meters. Note that, for natural gas price comparisons, $ per MMBtu multiplied
by 1.025 = $ per Mcf of pipeline-quality gas, which is what is delivered to consumers. For
rough comparisons, one million Btu is approximately equal to a thousand cubic feet of
natural gas.[6] Pipeline-quality gas has a BTU value slightly higher than that of pure
methane, which has 1,012 BTU per cubic foot. Natural gas as it comes out of the ground
is most often predominantly methane, but may have a wide range of BTU values, from
much lower (due to dilution by non-hydrocarbon gasses) to much higher (due to the
presence of ethane, propane, and heavier compounds) than standard pipeline-quality
gas.[7]

U.S. market mechanisms

The natural gas market in the United States is split between the financial (futures)
market, based on the NYMEX futures contract, and the physical market, the price paid for
actual deliveries of natural gas and individual delivery points around the United States.
Market mechanisms in Europe and other parts of the world are similar, but not as well
developed or complex as in the United States.
Futures market
The standardized NYMEX natural gas futures contract is for delivery of 10,000 mmBtu
(10,000 million Btu) of energy (approximately 10,000,000 cubic feet (280,000 m3) of gas)
at Henry Hub in Louisiana over a given delivery month consisting of a varying amount of
days. As a coarse approximation, 1000 ft3 of natural gas ≈ 1 MMBtu ≈ 1 GJ. Monthly
contracts expire 3–5 days in advance of the first day of the delivery month, at which
points traders may either settle their positions financially with other traders in the market
(if they have not done so already) or choose to "go physical" and accept delivery of
physical natural gas (which is actually quite rare in the financial market).
It should be noted that most financial transactions for natural gas actually take place off
exchange in the over-the-counter ("OTC") markets using "look alike" contracts that match
the general terms and characteristics of the NYMEX futures contract and settle against
the final NYMEX contract value, but that are not subject to the regulations and market
rules required on the actual exchange.
It is also important to note that nearly all participants in the financial gas market, whether
on or off exchange, participate solely as a financial exercise in order to profit from the net
cash flows that occur when financial contracts are settled among counterparties at the
expiration of a trading contract. This practice allows for the hedging of financial exposure
to transactions in the physical market by allowing physical suppliers and users of natural
gas to net their gains in the financial market against the cost of their physical transactions
that will occur later on. It also allows individuals and organizations with no need or
exposure to large quantities of physical natural gas to participate in the natural gas
market for the sole purpose of gaining from trading activities.

Physical market
Generally speaking, physical prices at the beginning of any calendar month at any
particular delivery location are based on the final settled forward financial price for a
given delivery period, plus the settled "basis" value for that location (see below). Once a
forward contract period has expired, gas is then traded daily in a "day ahead market"
wherein prices for any particular day (or occasional 2-3 day period when weekends and
holidays are involved) are determined on the preceding day by traders using localized
supply and demand conditions, in particular weather forecasts, at a particular delivery
location. The average of all of the individual daily markets in a given month is then
referred to as the "index" price for that month at that particular location, and it is not
uncommon for the index price for a particular month to vary greatly from the settled
futures price (plus basis) from a month earlier.
Many market participants, especially those transacting in gas at the wellhead stage, then
add or subtract a small amount to the nearest physical market price to arrive at their
ultimate final transaction price.
Once a particular day's gas obligations are finalized in the day-ahead market, traders (or
more commonly lower-level personnel in the organization known as, "schedulers") will
work together with counterparties and pipeline representatives to "schedule" the flows of
gas into ("injections") and out of ("withdrawals") individual pipelines and meters.
Because, in general, injections must equal withdrawals (i.e. the net volume injected and
withdrawn on the pipeline should equal zero), pipeline scheduling and regulations are a
major driver of trading activities, and quite often the financial penalties inflicted by
pipelines onto shippers who violate their terms of service are well in excess of losses a
trader may otherwise incur in the market correcting the problem.

Basis market
Because market conditions vary between Henry Hub and the roughly 40 or so physical
trading locations around United States, financial traders also usually transact
simultaneously in financial "basis" contracts intended to approximate these difference in
geography and local market conditions. The rules around these contracts - and the
conditions under which they are traded - are nearly identical to those for the underlying
gas futures contract.

Derivatives and market instruments

Because the U.S. natural gas market is so large and well developed and has many
independent parts, it enables many market participants to transact under complex
structures and to use market instruments that are not otherwise available in a simple
commodity market where the only transactions available are to purchase or sell the
underlying product. For instance, options and other derivative transactions are very
common, especially in the OTC market, as are "swap" transactions where participants
exchange rights to future cash flows based on underlying index prices or delivery
obligations or time periods. Participants use these tools to further hedge their financial
exposure to the underlying price of natural gas.

Natural gas demand

The demand for natural gas is mainly driven by the following factors:

 Weather
 Demographics
 Economic growth
 Fuel competition
 Storage
 Exports

Natural gas demand in North America after

2010

Sector 2010 (Bcf)

US residential 4,838

US commercial 3,057

US industrial 6,608

US electric power 5,797

US other 1,650
 Total US demand 21,950

US LNG exports 65

US exports to Mexico 305

Total US gas disposition 22,320

Canada residential 602

Canada commercial 442

Canada industrial/power 1,428

Total Canadian demand 2,472

Total N.A. demand 24,421

Total N.A. disposition 24,791

Weather
Weather conditions can signiciantly affect natural gas demand and supply. Cold
temperatures in the winter increase the demand for space heating with natural gas in
commercial and residential buildings.
Natural gas demand usually peaks during the coldest months of the year (December–
February) and is lowest during the "shoulder" months (May–June and September–
October). During the warmest summer months (July–August), demand increases again.
Due to the shift in population in the United States toward the sun belt, summer demand
for natural gas is rising faster than winter demand.
Temperature effects are measured in terms of 'heating degree days' (HDD) during the
winter, and 'cooling degree days'(CDD) during the summer. HDDs are calculated by
subtracting the average temperature for a day from 65 degrees. Thus, if the average
temperature for a day is 50 degrees, there are 15 HDDs. If the average temperature is
above 65 degrees, HDD is zero.
Cooling degree days are also measured by the difference between the average
temperature and 65 degrees. Thus, if the average temperature is 80 degrees, there are
15 CDDs. If the average temperature is below 65 degrees, CDD is zero.
Hurricanes can affect both the supply of and demand for natural gas. For example, as
hurricanes approach the Gulf of Mexico, offshore natural gas platforms are shut down as
workers evacuate, thereby shutting in production. In addition, hurricanes can also cause
severe destruction to offshore (and onshore) production facilities. For example, Hurricane
Katrina (2005) resulted in massive shut-ins of natural gas production.
Hurricane damage can also reduce natural gas demand. The destruction of power lines
interrupting electricity produced by natural gas can result in significant reduction in
demand for a given area (e.g., Florida).

Demographics
Changing demographics also affects the demand for natural gas, especially for core
residential customers. In the US for instance, recent demographic trends indicate an
increased population movement to the Southern and Western states. These areas are
generally characterized by warmer weather, thus we could expect a decrease in demand
for heating in the winter, but an increase in demand for cooling in the summer. As
electricity currently supplies most of the cooling energy requirements, and natural gas
supplies most of the energy used for heating, population movement may decrease the
demand for natural gas for these customers. However, as more power plants are fueled
by natural gas, natural gas demand could in fact increase.

Economic growth
The state of the economy can have a considerable effect on the demand for natural gas
in the short term. This is particularly true for industrial and to a lesser extent the
commercial customers. When the economy is booming, output from the industrial sectors
generally increases. On the other hand, when the economy is experiencing a recession,
output from industrial sectors drops. These fluctuations in industrial output accompanying
the economy affects the amount of natural gas needed by these industrial users. For
instance, during the economic recession of 2001, U.S. natural gas consumption by the
industrial sector fell by 6 percent.[10]

Fuel competition
Supply and demand dynamics in the marketplace determine the short term price for
natural gas. However, this can work in reverse as well. The price of natural gas can, for
certain consumers, affect its demand. This is particularly true for those consumers who
have the ability to switch the fuel which they consume. In general the core customers
(residential and commercial) do not have this ability, however, a number of industrial and
electric generation consumers have the capacity to switch between fuels. For instance,
when natural gas prices are extremely high, electric generators may switch from using
natural gas to using cheaper coal or fuel oil. This fuel switching then leads to a decrease
for the demand of natural gas, which usually tends to drop its price.

Storage
North American natural gas injections (positive) represent additional demand and
compete with alternative uses such as gas for heating or for power generation. Natural
gas storage levels significantly affect the commodity’s price. When the storage levels are
low, a signal is being sent to the market indicating that there is a smaller supply cushion
and prices will be rising. On the other hand, when storage levels are high, this sends a
signal to the market that there is greater supply flexibility and prices will tend to drop.

Exports
Exports are another source of demand. In North America, gas is exported within its
forming countries, Canada, the US and Mexico as well as abroad to countries such as
Japan.
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