Table Of Content

Fundamentals Natural Gas of : An International Perspective Vivek Chandra CChhaannddrraa FFMM..iinndddd iiiiii 88//3311//0066 1111::0022::1144 AAMM Disclaimer The recommendations, advice, descriptions, and the methods in this book are presented solely for educational purposes. The author and publisher assume no liability whatsoever for any loss or damage that results from the use of any of the material in this book. Use of the material in this book is solely at the risk of the user. Copyright© 2006 by PennWell Corporation 1421 South Sheridan Road Tulsa, Oklahoma 74112-6600 USA 800.752.9764 +1.918.831.9421 [email protected] www.pennwellbooks.com www.pennwell.com Director: Mary McGee Managing Editor: Stephen Hill Production / Operations Manager: Traci Huntsman Production Editor: Tony Quinn Book Designer: Susan E. Ormston Thompson Cover Designer: Kermit Mulkins Illustrations by Edvard Österberg Library of Congress Cataloging-in-Publication Data Chandra, Vivek. Fundamentals of natural gas : an international perspective / Vivek Chandra ; illustrations by Edvard Österberg. p. cm. Includes bibliographical references and index. ISBN-13: 978-1-59370-088-1 (alk. paper) ISBN-10: 1-59370-088-1 (alk. paper) 1. Natural gas. I. Title. TN880.C52 2006 665.7--dc22 2006024868 All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transcribed in any form or by any means, electronic or mechanical, including photocopying and recording, without the prior written permission of the publisher. Printed in the United States of America 2 3 4 5 6 12 11 10 09 08 Chandra_CR.indd 4 8/22/08 3:29:18 PM Contents Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix 1 Th e Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Gas Chemistry and Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Units of Natural Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Gas Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Characteristics of reservoir rocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Gas traps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Gas reserves estimation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Gas Exploration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Gas Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 Drilling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 Coal bed methane. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Gas Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 2 Transport and Storage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 In-Field Transport. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 Gas Transmission Pipelines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 Liquefi ed Natural Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 LNG chain: upstream and midstream. . . . . . . . . . . . . . . . . . . . . . . . .52 LNG chain: liquefaction plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 LNG chain: transportation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 LNG chain: regasifi cation terminals . . . . . . . . . . . . . . . . . . . . . . . . . .61 LNG chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 Gas Storage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 Base load versus peak load storage. . . . . . . . . . . . . . . . . . . . . . . . . . . .68 Types of underground storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74 3 Gas Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77 Gas and the Environment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77 Electricity Generation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79 Background on electrical power industry . . . . . . . . . . . . . . . . . . . . . .81 Generation mix and swing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82 Types of power plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84 Calculating plant effi ciencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85 Distributed generation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86 CChhaannddrraa FFMM..iinndddd vviiii 88//3311//0066 1111::0022::1155 AAMM Fundamentals of Natural Gas Gas to Liquids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87 Syngas production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92 Converting syngas to liquids. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92 Economics and world trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94 Petrochemicals, Steel, and Fertilizer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97 Transport Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Residential Gas Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 4 Contracts and Project Development . . . . . . . . . . . . . . . . . . . . . . . . . . .107 Government Fiscal Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Gas Sales and Transportation Contracts . . . . . . . . . . . . . . . . . . . . . . . . 111 Gas sales agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 LNG sales and purchase agreements. . . . . . . . . . . . . . . . . . . . . . . . 116 Important LNG SPA features . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Major evolving changes to the LNG SPA. . . . . . . . . . . . . . . . . . . . 120 Project Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 5 World Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .129 International Pipeline Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 LNG Trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 Growth in LNG activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 Pacifi c region. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 Atlantic region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159 Appendix A Unit Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .161 Appendix B LNG Projects Existing as of 2006 . . . . . . . . . . . . . . . . . . .164 Appendix C LNG Projects Expected Complete 2006–2012. . . . . . . .166 Appendix D LNG Contracts Schematic. . . . . . . . . . . . . . . . . . . . . . . . .168 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .169 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .189 viii CChhaannddrraa FFMM..iinndddd vviiiiii 88//3311//0066 1111::0022::1188 AAMM 1 Th e Basics Introduction Natural gas, called “the prince of hydrocarbons,” is the fastest growing energy source in the world. As the most fl exible of all primary fossil fuels, it can be burned directly to generate power and heat, converted to diesel for transportation fuel, and chemically altered to produce a plethora of useful products. Such products include liquid vehicle fuels, fertilizer, chemicals, and plastics. Best of all, it can do all of this at competitive costs and from a plentiful supply, while emitting signifi cantly fewer harmful pollutants than other fuels. Gas was not always viewed in such high regard. Until recently it was considered a nuisance; it was something to avoid and safely dispose of during the search for more valuable crude oil. Numerous gas reserves around the world remained unexploited because local markets were undeveloped and limited technology made transportation to more distant markets difficult. Unlike oil and coal, natural gas cannot simply be loaded on a ship or train for transportation from its source to the consumer. Gas requires expensive pipelines, which are uneconomic over large distances, or complicated conversion systems that either cool the gas into liquid form, compress the gas to higher pressures, or modify its chemical composition to allow conversion to other products. Technology advances and declining costs have fi nally allowed gas to economically overcome these challenges to become the fuel of the future. Worldwide consumption of natural gas is forecast to double by 2030. Th e developing economies of Asia, Latin America, and Africa, which have relatively recently discovered the magic of natural gas, will show the highest growth rates. Th e greatest total volume increases will be in the developed economies of Europe, North Asia, and Asia, which have used natural gas for decades. Just as coal gave way to oil, the era of oil is poised to give way to natural gas. Undoubtedly, the next few years will be exciting times for the natural gas industry. CChhaannddrraa0011..iinndddd 11 88//3311//0066 1111::0055::3388 AAMM Fundamentals of Natural Gas Gas Chemistry and Language Th e language of natural gas can be confusing and intimidating to the novice professional. Th e terms, though similar, can have signifi cant diff erences and should be used with care. Natural gas, crude oil, and coal are collectively known as hydrocarbons. Also called petroleum compounds, hydrocarbons are made up of the elements hydrogen and carbon, plus impurities. A wide variety of distinctly diff erent hydrocarbon compounds, each with a diff erent proportion of these two main elements, is encompassed within the general terms natural gas and crude oil (fi g. 1–1). Fig. 1–1 Hydrocarbon molecules Th e lower the number of carbon molecules, the lighter the compound, and the more likely the hydrocarbon will be found in the gaseous phase. Crude oils contain longer chains of carbon molecules and are heavier than gas; they are more likely to be found in liquid phase. Coal is usually found in the solid phase and contains even longer chains of carbon molecules. Like all compounds, the phase in which a hydrocarbon exists also depends on temperature and pressure conditions. Increased pressure forces the molecules closer together, changing the phase of the gas into a liquid. Conversely, reducing pressure tends to vaporize lighter liquids into gas. Changing the temperature achieves this same eff ect; decreasing the temperature produces more liquids, 2 CChhaannddrraa0011..iinndddd 22 88//3311//0066 1111::0055::4400 AAMM The Basics and increasing temperature vaporizes more gas. For pure light hydrocarbons, there is a given pressure for every temperature in which the hydrocarbon compound can exist in both liquid and gaseous state. (Pure light hydrocarbons are those with fewer than four carbon molecules in the chain and containing no other elements.) Pressure and volume relationships are particularly important in the production of natural gas. Gas in the reservoirs may exist in dense phase, with liquid and vapor phases mixed together in equilibrium. Pressures and temperatures above which the dense phase occurs are called cricondenbar (CB) and cricondentherm (CT) levels, respectively (fi g. 1–2). As the natural gas comes to the surface, decreased temperatures and pressures result in a drop below the cricondenbar and cricondentherm levels. Th is leads to the separation of liquid and vapor components. As expected, it signifi cantly impacts the economic and technical development and production of a gas reservoir. Fig. 1–2 Pressure and temperature relationships for gas As a strict defi nition, natural gas consists of hydrocarbons that remain in the gas phase (not condensable into liquids) at 20°C and atmospheric pressure, conditions considered to be standard temperature and pressure (STP). Th is eff ectively limits the defi nition to components with four or fewer carbon molecules: methane (C H , commonly written as CH ), ethane (C H ), 1 4 4 2 6 propane (C H ), and butane (C H ). Hydrocarbons with more carbon 3 8 4 10 molecules are liquid at STP conditions but may exist in gaseous phase in the 3 CChhaannddrraa0011..iinndddd 33 88//3311//0066 1111::0055::4411 AAMM Fundamentals of Natural Gas reservoir. A more practical defi nition of natural gas (fi g. 1–3) includes the C components that are produced with natural gas. Pentane (C H ) begins 5+ 5 12 the series that includes condensates. Natural gas defi nitions do not include components heavier than hexadecane (C H ) that are produced and found 16 34 as liquid or solid waxy compounds. Th ese may be considered compounds in the crude oil family. (cid:24)(cid:6)(cid:4)(cid:14)(cid:10)(cid:6)(cid:27)(cid:17)(cid:25)(cid:6)(cid:19) (cid:24)(cid:25)(cid:26) (cid:26)(cid:9)(cid:25) (cid:15)(cid:17)(cid:18) (cid:16) (cid:9)(cid:3)(cid:7)(cid:4)(cid:6)(cid:7)(cid:3)(cid:19) (cid:20)(cid:15)(cid:11)(cid:7)(cid:21)(cid:3)(cid:7)(cid:22) (cid:19)(cid:6)(cid:4)(cid:3)(cid:19)(cid:23) (cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:3) (cid:8)(cid:4)(cid:5)(cid:6)(cid:7)(cid:3) (cid:9)(cid:10)(cid:11)(cid:12)(cid:6)(cid:7)(cid:3) (cid:13)(cid:14)(cid:4)(cid:6)(cid:7)(cid:3) Fig. 1–3 Natural gas components Methane is the main component of natural gas, usually accounting for 70%–90% of the total volume produced. If gas contains more than 95% methane, it is sometimes termed dry or lean gas, and it will produce few, if any, liquids when brought to the surface. Gas containing less than 95% methane and more than 5% of heavier hydrocarbon molecules (ethane, propane, and butane) is sometimes called rich gas or wet gas. Th is gas usually produces hydrocarbon liquids during production. Methane is the most common component transported by pipelines and converted to liquefi ed natural gas (LNG). LNG is the liquid product produced by cooling methane to –161.5°C. Th is allows for effi cient transport to markets, usually by special ships, where it is heated back to STP and converted to gaseous methane. Methane may also be converted to liquid fuels through gas- to-liquids (GTL) processes. Methane is the main component of natural gas that power stations and industrial and residential users consume. Liquefi ed petroleum gas (LPG) refers specifi cally to propane and butane when they are stored, transported, and marketed in pressurized containers. 4 CChhaannddrraa0011..iinndddd 44 88//3311//0066 1111::0055::4422 AAMM The Basics Propane and butane gases actually liquefy at –43°C at STP conditions and 0°C at 90 psi to 110 psi. A large portion of global LPG is produced in the Middle East, in association with gas production, and is exported to Asia, Europe, and North America. Natural gas liquids (NGL) include components that remain gaseous at both reservoir and surface conditions. Th ese include ethane, propane, and butane, and components that exist with the gas in the reservoir but become liquid on the surface, such as condensates and natural gasoline. Condensates are low-density liquid mixtures of pentanes and other heavier hydrocarbons. As stated earlier, methane is the simplest hydrocarbon component in natural gas. Because it is lighter, containing the fewest number of carbon atoms, it produces less energy when burned than heavier components, such as ethane and LPGs. Th e heavier the hydrocarbon component, the more carbon molecules are present, and the more heat generated when it is burned. Because the value of the gas to the gas customer is proportional to the heat and energy the gas creates, the value of the hydrocarbon increases as the proportion of heavier nonmethane components increases. If signifi cant quantities of nonmethane components are present, the components are separated and sold separately, often at large premiums to the price of pure methane. A large gas development project can often earn as much revenue from selling nonmethane components as from methane sales, even though methane may comprise 90% or more of the total volume produced. Table 1–1 shows the components of “typical” natural gas. Specifi c gas fi elds will have diff erent proportions of hydrocarbon and nonhydrocarbon components than indicated. Table 1–1 Major hydrocarbon components of natural gas (cid:2)(cid:6)(cid:28)(cid:11)(cid:10)(cid:17)(cid:29)(cid:30)(cid:21)(cid:10)(cid:11)(cid:31)(cid:6)(cid:10) (cid:11)(cid:7)(cid:17)(cid:15)(cid:11)!(cid:12)(cid:11)(cid:7)(cid:3)(cid:7)(cid:4)(cid:19)(cid:17)(cid:11)"(cid:17)#$(cid:30)(cid:12)%(cid:31)(cid:6)(cid:27)#(cid:17)(cid:24)(cid:6)(cid:4)(cid:14)(cid:10)(cid:6)(cid:27)(cid:17)(cid:25)(cid:6)(cid:19) (cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:3) (cid:15)& *(cid:16)+(cid:17)(cid:4)(cid:11)(cid:17)(cid:6) (cid:11),(cid:3)(cid:17)-(cid:16)+ (cid:8)(cid:4)(cid:5)(cid:6)(cid:7)(cid:3) (cid:15)’ ’+(cid:17)(cid:4)(cid:11)(cid:17)&(cid:16)+ (cid:9)(cid:10)(cid:11)(cid:12)(cid:6)(cid:7)(cid:3) (cid:15)( ./’(cid:16)+(cid:17)(cid:4)(cid:11)(cid:17)(cid:16)+ (cid:13)(cid:14)(cid:4)(cid:6)(cid:7)(cid:3) (cid:15)) (cid:2)(cid:3)(cid:3)(cid:17).(cid:17)(cid:4)(cid:11)(cid:17)(cid:16)+ (cid:9)(cid:3)(cid:7)(cid:4)(cid:6)(cid:7)(cid:3) (cid:15)(cid:16)(cid:18) ./.(cid:16)+(cid:17)(cid:4)(cid:11)(cid:17)’+ (cid:24)(cid:11)(cid:7)(cid:22)(cid:5)(cid:30)(cid:21)(cid:10)(cid:11)(cid:31)(cid:6)(cid:10) (cid:11)(cid:7)(cid:17)(cid:15)(cid:11)!(cid:12)(cid:11)(cid:7)(cid:3)(cid:7)(cid:4)(cid:19)(cid:17)(cid:12)(cid:10)(cid:11)(cid:21)(cid:14)(cid:31)(cid:3)(cid:21)(cid:17)0%(cid:4)(cid:5)(cid:17)(cid:24)(cid:6)(cid:4)(cid:14)(cid:10)(cid:6)(cid:27)(cid:17)(cid:25)(cid:6)(cid:19) (cid:24)%(cid:4)(cid:10)(cid:11)1(cid:3)(cid:7) (cid:24)’ (cid:3)(cid:3).(cid:17)(cid:4)(cid:11)(cid:17)’.+ (cid:29)(cid:30)(cid:21)(cid:10)(cid:11)1(cid:3)(cid:7)(cid:17)(cid:19)(cid:14)(cid:27)"%(cid:21)(cid:3) (cid:29)’3 (cid:3)(cid:3).(cid:17)(cid:4)(cid:11)(cid:17)(cid:6) (cid:11),(cid:3)(cid:17)&(cid:16)+ (cid:15)(cid:6)(cid:10) (cid:11)(cid:7)(cid:17)(cid:21)%(cid:11)2%(cid:21)(cid:3) (cid:15)4’ (cid:3)(cid:3).(cid:17)(cid:4)(cid:11)(cid:17)(cid:6) (cid:11),(cid:3)(cid:17)’.+ 5 CChhaannddrraa0011..iinndddd 55 88//3311//0066 1111::0055::4444 AAMM Fundamentals of Natural Gas Natural gas can also contain nonhydrocarbon components such as carbon dioxide (CO ), hydrogen sulfi de (H S), hydrogen, nitrogen, helium, and 2 2 argon. All of these impurities, especially the fi rst two, CO and H S, must 2 2 be removed from the natural gas stream prior to sale. If local markets exist, hydrogen, nitrogen, helium, and argon may be sold. CO and H S can corrode 2 2 pipelines and are signifi cant components of air pollution. H S, if left in the 2 gas stream, results in emissions of sulfur oxides (SO ), a component of acid x rain and other air pollution eff ects. CO is a greenhouse gas, which has been 2 blamed for contributing to global warming. (See the section on gas and the environment in chapter 3 for a complete discussion of the environmental impacts of natural gas.) Gases with high levels of H S are also called sour gases, referring to the sour 2 smell of sulfur. Conversely, gases with low levels of H S are termed sweet gases 2 and can be directly sold to consumers. Sour gases usually require treatment to remove sulfur prior to sale. Economic drivers infl uence whether a fi eld or resource gets developed. Since removing impurities can be expensive, their presence may hinder the development of the entire fi eld. A famous example of this is the Natuna Field in Indonesia, which is estimated to contain more than 40 trillion cubic feet (tcf) of recoverable reserves. However, because its reservoir gas has a CO 2 content exceeding 70%, the fi eld has remained undeveloped since its discovery in 1973. Natural gas may also contain inert gases such as nitrogen, helium, and argon. Th ese gases are neither corrosive nor toxic, but their presence reduces the overall heat energy contained in the gas, thus requiring handling and transportation of larger volumes to generate equivalent energy amounts. Depending on their concentrations and the strictness of the gas sales contract, removing these components may be required, making the entire process a more expensive proposition. Natural gas is the cleanest burning primary fossil fuel, often commanding a premium price for its purity. Burning methane releases only CO and water, 2 with few other impurities such as lead, heavy metals, solids, and other pollutants. Even with the premium prices, however, total power generation costs for gas- fi red turbines can be competitive with those fueled by other energy sources, including coal and oil. 6 CChhaannddrraa0011..iinndddd 66 88//3311//0066 1111::0055::4455 AAMM