Natural Gas Dynamics - Mod 1

Introduction,
Gas Chemistry,
Gas Units, Gas
Reserves
Natural Gas Dynamics
Module 1
Vivek Chandra
vchandra@natgas.info
www.natgas.info
www.naturalgasdynamics.com
v1202
Copyright held by author copying prohibited
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 as
plastics, 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
2
Gas is the fastest growing fossil fuel
3 Source: ExxonMobil The Outlook For Energy View to 2030 ; 2010
Energy fuel transitions
4
Biomass
Coal
Oil
Gas
Source: ExxonMobil The Outlook For Energy View to 2040 ; 2012
Oil age being replaced by gas age
5 Source: Halliburton presentation to Asia Oil and Gas June09
Natural Gas vs. Oil
Natural 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 producing
company and the government is valid for oil and gas
6
Oil and gas share similar characteristics
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 capital
investments than gas development
Gas developments are higher cost
7
Chemistry of natural gas
Natural Gas - a
hydrocarbon stable in gas
phase at temperatures
above -161C
It is gaseous at Standard
Conditions (20C and
atmosphere pressure)
Effectively, only includes
compounds with five or
fewer carbon molecules
Hydrocarbons with longer
chains of carbon are either
liquid or solid
8
Methane molecule
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)
9 Source: Author diagram
10
Chemistry of natural gas [Contd.]
Source: Author analysis
11
Methane
Methane (CH
4
), 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 dry or lean gas
If methane content <95% and has more than 5% heavier molecules (NGL =
ethane, propane and butane), then gas is termed as wet or rich gas
Pure methane produces less energy (heat) than heavier
hydrocarbons
Methane is main component of
Liquefied Natural Gas (LNG)
Feedstock for Gas-to-liquid (GTL) process to produce liquid fuels
Compressed Natural Gas (CNG)
Methane is the main component used by residential,
industrial, and power customers
When methane is combusted (burnt), the products
are energy, CO
2
and water
Natural Gas Liquids (NGLs)
Natural Gas Liquids refers mainly to Ethane (C
2
H
6
), Propane (C
3
H
8
) and
Butane (C
4
H
10
)
Used as feedstock for petrochemicals, fuel and gasoline blending
Condensates may also be included in NGL
The richer or wetter the natural gas, the higher proportion of NGLs
that exists
NGLs burn much hotter and are more valuable than methane. Usually
NGLs are sold separately from methane close to point of production
Large gas development may earn as much revenue from NGL sales as
sales 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 than
Methane for long distances. Methane is usually more expensive to transport
over across large distances.
12
Share of NGLs in world oil supply
13
Due to increasing gas production largely in Middle East and US NGL volumes increasing
rapidly
Source: Dolphin Energy presentation at 15th annual Condensate and Naphtha forum, March 2011
NGLs
supply
more than
14% of the
worlds
liquids
production
!
14
Other components of natural gas
Natural Gas may also contain Nitrogen (N
2
), Carbon Dioxide
(CO
2
) and Hydrogen Sulfide (H
2
S)
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 H
2
S and
CO
2
) gas field development may be uneconomic
Hydrogen Sulfide is a dangerous impurity that requires
special treatment
Gases with high levels of H
2
S are referred to as sour gases
Gases with low levels of H
2
S are called sweet gases
15
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 is
released (per unit volume) when burnt
Energy produced is measured by calorific value units, such
as British Thermal Units (Btu), Joules (J) and Therms
(100,000 Btu)
Gas prices are usually expressed in currency per energy
unit (such as $ per MM Btu, $/GJ or pence per Therm)
16
However, produced and transported gas is measured by
volume, 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 ft
3
),
cubic meters (cm or m
3
).
Since gas volumes tend to be very large numbers, usual
measurements are
Mcf (thousand ft
3
), MMcf (million ft
3
), Bcf (billion ft
3
), Tcf (trillion ft
3
)
or
Mcm (thousand m
3
), MMcm (million m
3
) and Bcm (billion m
3
)
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
17
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 / ft
3
. Once NGLs are removed (for separate sale),
calorific values tend to range from 960 Btu / ft
3
to 1,050
Btu / ft
3
For purposes of this course, we will use the conversion
1000 Btu / ft
3
Thus 1 ft
3
= 1,000 Btu = 1 MBtu and
1 MMcf (million ft
3
) = 1,000 MMBtu (one thousand million [=billion] Btu)
For metric units, 1 m
3
gas = 35.3 ft
3
: Thus, 1 m
3
=35,300 Btu=35.3 MBtu
Some countries use Joules instead of Btu
Use converter on www.natgas.info or iPhone GasUnits app
18
Component Calorific Value
(Btu / ft
3
)
Natural Gas
Raw Natural Gas Upto 1800
Sales quality Gas 960 1050
Main component
in LNG & CNG
Methane ~910
NGL
Ethane ~1600
LPG
Propane ~ 2500
Butane ~ 3200
Manufactured
Town Gas
~ 500
Calorific values
19
Dealing with calorific values
Gas sellers have to ensure that their gas / LNG meets
market 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 quality
changes, LNG spot market grows and contracts become
more flexible allowing ships to be re-routed to different
markets
US gas quality changing as richer shale gas and deepwater gas increasing in
volume
20
Energy equivalents
1 barrel of Oil
(volume = 0.15 m
3
)
Equivalent Natural Gas
(volume = 164 m
3
= 5,800 ft
3
)
5.5 m
5
.
5

m
5.5 m
=
21
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 a
reservoir.
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 ft
3
gas = 1 MBtu and 1 bbl oil =
5,800 MBtu. Thus, 1 bbl oil has energy equivalent of 5,800
ft
3
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 switch
fuels between gas and oil
22
Gas formation
The organic origin theory
is based on the premise
that organic matter
accumulates and
decomposes within
sedimentary rock layers.
Over time, with heat and
pressure, the organic
compounds decompose
and break down into
carbon and hydrogen
compounds.
23
Reservoir rocks characteristics
Reservoir rocks are sedimentary rocks
(usually sandstone or limestone) that
contain hydrocarbons
Hydrocarbons (gas or oil) plus water
are stored between the rock grains
The % of free space in a rock is called
Porosity
Porosity = Total volume grain volume
Total volume
Good reservoirs will have porosities
greater than 10 15%
The level of inter-connections between
the pore space is called Permeability.
The higher the Permeability, the easier
it is for the hydrocarbons to flow and
produce
Bucket full of sand will absorb
water (into the pore spaces
between grains) until pore
spaces are full.
24
Porosity & permeability
A rock is porous when it has
many tiny spaces, or pores
A rock is permeable when the
pores are connected
Permeability in the biscuit allow
the fluid to be sucked through
the biscuit
25
Reservoir structure
A classic reservoir contains
gas, oil and water within a
rock layer with sufficient
porosity and permeability
Gas traps require
Source Rock where
organic matter could
decompose
Reservoir rock with
A sealing cap-rock to
prevent further migration
A trap or specific geologic
or geometric configuration
allowing gas to be
accumulated
Trap
Seal
Source
Need all for
gas trap to
be present !
Reservoir
Flow chart of hydrocarbon accumulation
26
Decomposition and breakdown of
organic material
Organic material deposition
Formation of Kerogen which
converts to hydrocarbons
Expelling of hydrocarbons from
source rock into other rocks
Migration of hydrocarbons
updip through rocks with
Entrapment of hydrocarbons
against sealing rocks
Gas (or Oil) Field
With Time, Heat and Pressure
27
Wells can be drilled to tap multiple
reservoirs
28
Reserves classification
Reserves classification is
controversial - Economic and
political factors may influence
volumes reported
Proved : Volumes that are
commercially recoverable
(>90% chance) under current
conditions.
Probable : Volumes that likely
to be recovered but are not
definitive as yet (>50% chance)
Possible : Unproved reserve
volumes based on regional non-
specific data and/or not likely
to be commercial at current
conditions (>10% chance)
Probable
Possible
1P = Proved Reserves
2P = Proved + Probable Reserves
3P = Proved + Probable + Possible Reserves
Uncertainty of recoverable hydrocarbons
29 Source: Reserves Classification: The Truth, Mike Scott, Cooper Energy presentation at Good Oil Conference Sept 2009
Another way to look at reserves...
30 Source: CSM Technical & Economic Fundamentals, NSAII Sept 07
Proved reserves
Probable reserves
Possible reserves
34
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 to
monetize &
41% is in the Middle East (of which has large amounts of sour gas)
Unconventional gas is the bulk (60%) of global gas potential
35
30,000 Tcf =
5000 bn BOE
Source: Deloitte Emerging Technologies Presentation
Natural gas reserves are global
36
Source: BHP Petroleum presentation, May 2012
Arrows indicate countries that are not currently large gas exporters
In 2011, global proved reserves ~6600 Tcf
Gas reserves comparable to oil
37
Source: Total Presentation at APPEA 2012 A non-conventional energy future
However, large portion of future production (of both oil and gas) will be
from unconventional resources and both oil and gas can be produced for
100+ years
38
Stranded reserves
Many gas fields are either too small, far from markets and
infrastructure, or technically complex to be developed economically.
These reserves are called Stranded
As we know, oil is easier to produce and transport, so there are
much fewer stranded oil fields than gas fields
Source: Syntroleum website
Global Distribution of Gas Fields
By some estimates, out of the total
reserves of 6,500 Tcf, 1,500 - 3000
Tcf can be called stranded and are
currently non-producing
Non-conventional or innovative
commercialization options may offer
the best chance for these reserves
to be produced (FLNG, CNG, GTL,
Petrochemical, etc)
39
Gas flaring
In Associated Gas fields, oil and gas are produced at the
same time. Oil is sold to markets, but gas when
infrastructure or local gas markets do not exist - is
released to atmosphere, it is either vented (not ignited) or
flared (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
Volumes of gas flared is enormous
40 Source: PFC presentation Flaring in a carbon world at Global Forum on Flaring conference
41
Gas flaring continued
Gas flaring not only harms the environment by contributing to
global warming but is a huge waste of a cleaner source of
energy that could be used to generate much needed electricity
in poor countries around the world. In Africa alone about 40
billion cubic meters of gas are burned every year, which if put
to use could generate half of the electricity needed in that
continent.
Quote from Bent Svensson, manager of the World
Banks Global Gas Flaring partnership. 2007
Nigeria could earn $500 MM per year
if they could sell the gas that is
current being flared. Nigeria outlawed
flaring in 1979 to be phased in 5 years,
but companies rather pay a small fine
than stop- flaring volumes have been
stable for the past decade Economist Apr08
42
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 Liquid
Petroleum 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 transported
under pressure. No chemical change to methane
Gas-to-Liquid GTL is methane converted to liquid fuels by a chemical
process
43
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 the
calorific value, or energy/volume, of the specific gas stream
Calorific value is proportional to the percentage of NGLs present in the gas
mixture; the more pure the methane, the leaner or less calorific value it has.
The more the percentage of NGLs and condensates present, the richer or
higher 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 gas
production
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 every
year
44
Thank you!
Vivek Chandra
vchandra@natgas.info
www.natgas.info
www.naturalgasdynamics.com
v1202
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