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CNG: A Competitive Technology

to LNG for the Transport of


Natural Gas

Asim Deshpande and


Michael J. Economides
Economides and Oligney “Twist” Forecast
of World Energy Consumption
700
%
Hydro, Geothermal, Solar Share
600 8.1
3.5
Nuclear
500 15
Quadrillion Btu

400 %
Share
7.0
Coal
Share 7.0
6.5 6.8
6.3
5.9 47.5
300 % 24.4
23.7
Share 26.1
Gas
5.9
200 21.6
22.7
22.1
28.9 0.4
17.4
17.4
100
38.9 38.7 Oil
47.3 25.9

0
1970 1988-2001 2001 2010 2020
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?)
T he Continuous Ener g y
Crisis of the
21st Centur y

 Oil flirting with $40 (It is not just OPEC)


 Venezuela, Nigeria
 Iraq
 US oil stocks, lowest in history
 Natural gas at $10-plus (Over and over again)
 Alan Greenspan (“LNG the only solution”)
Natural Gas a Historical Imperative

Source: Robert Hefner


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”
````````
The Middle East
Bosporus

Hormuz

Aden
Gas Production and
Exports/Imports by Country
• Top gas producing countries, TCF/year

Russian Federation 21.03 (6.1)


USA 19.05 (3.6)
Canada 6.63 (3.7)
United Kingdom 3.61 (0.3)
Algeria 2.80 (2.1)
Netherlands 2.66 (1.0)
Iran 2.65
Indonesia 2.48 (1.16)
Gas Reserves by Country
• Top gas reserves by country, TCF
• World reserves: 4980 TCF

1. Russian Federation 1748


2. USA 1475
3. Iran 742
4. Qatar 245
5. Abu Dhabi 188
6. Saudi Arabia 185
7. Venezuela 140
8. Algeria 128
9. Turkmenistan 100
10. Kazakhstan 83
11. Canada 67
12. Uzbekistan 60
U.S. Natural Gas Demand
and Supply Sources
Tcf per year
60
Japan-sized LNG
Natural gas hydrates?
50 Economides and Oligney
“twist” demand forecast
DOE/EIA demand forecast
40
Arctic
Deepwater
30
Canada

20
Shallow Offshore
Unconventional
10
Conventional
0
2000 2004 2008 2010 2012 2020
Proved US Natural Gas Reserves,
Historical and Forecast
1750 16
Long-term History
Additions: 28.6 Tcf/yr
Recent History
1500 Forecast (NPC 1999) 14
Reserves/Production
Ultimate Reserves, Tcf

Additions: 18 Tcf/yr
1250 12

years
R/P,
1000 Additions: 14 Tcf/yr 10

750 8
History Forecast

500 6
1965 1975 1985 1995 2005 2015
Year
Accelerating US Decline Rates

14
Forecast U.S. Natural Gas Supply and Prices—
Moderate Demand and Mild Decline Rate
5.00 120

4.50
New production to meet 2010 demand, 10% decline
100
4.00
Blue line
3.50 indicates
cumulative 80

Bcf per day


additions to
$ per Mcf

3.00 U.S. supply


(right axis)
2.50 60

2.00
Height of bars indicates 40
1.50 equilibrium natural gas
price (left axis)
1.00
20
0.50

0.00 0
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Announced
June 12,
Announced
2001
October 29,
2003
Cheniere LNG

Shell LNG
Exxon Mobil announced plans to build the
nation's largest LNG import terminal for 2
BCF/d from Qatar to land-based locations
at either Corpus Christi, Sabine Pass or
Mobile, Ala. October 15, 2003
LNG tanker underway

Photo Courtesy of BP
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)
Liquefied Natural Gas
(LNG)
 Liquefied gas is transported over long distances
e.g., 2500 miles and more.

LNG Technology
 Capital intensive
 Onshore and transportation needs
 Good demand market is essential
 Steady and large supply of reserves
Estimate of LNG Cost Reductions
1970’s vs. Today
2.53

0.49 30%
decline
of costs
1.54 0.50
1.80 into
pipeline
0.40
1.00 0.40

Lique- Trans- Regas- Total Lique- Trans- Regas- Total


faction portation ification faction portation ification

Source: McKinsey & Company / El Paso


$/MMBtu—2,500 mile voyage
Compressed Natural Gas
(CNG)
 Compressed gas (1500 to 2500 psi and 0 to - 40 F)
 Two technologies for CNG transport
a. The Cran & Stennings approach
b. The Enersea approach
Example: Consider the transportation of 300 MMscf of gas
as CNG
Using the Cran & Stennings approach
Actual volume of CNG: 1.76x106 ft3
Using the Enersea approach
Actual Volume of CNG: 1.2x106 ft3
CNG Transport

Courtesy Enersea
CNG Cargo Containment
System

Courtesy Enersea
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

Example: A 1200 MW plant requiring around 125 MMscf/d


would be well suited for CNG import rather than LNG,
which would require a generating capacity of 5000 MW (!)
of gas-fired generation (if all used for that purpose).
An Example Calculation for
the CNG Process
 Assume two standard volumes of CNG that are to be
transported
 Calculate the actual volume of natural gas that would be
stored at a range of pressures and temperatures.
 Estimate the compression and refrigeration needs
 Estimate the number of ships required
 Calculate the final unit price of the gas delivered
 Optimum condition is chosen by minimizing the final
unit price of the gas delivered
Volumetric Calculations
1600
1400
1200
Volume, MMscf

1000 at 0F
800 at -20F
600 at -40F

400
200
0
0 1000 2000 3000 4000
Pressure, Psig

Natural gas compressed into 3.5× 106 ft3 at different


pressures and temperatures.
Volumetric Calculations
2500

2000
Volume, MMscf

1500 at 0F
at -20F
1000 at -40F

500

0
0 1000 2000 3000 4000
Pressure, psig

Natural gas compressed into 5× 106 ft3 at


different pressures and temperatures.
Estimated Compression
Requirements
Pressure BHP
psig
1400 7800
1600 11000
1800 14000
2000 16600
2200 22100
2400 25000
2600 27550
Required Refrigeration in tonnes
Temperature of compressed gas from air-cooled compressors:
100 oF
Tonnes of refrigeration required
T, o0F tonnes
-7450 required*
to -7500
-20 -8900 to -9900
-40 -10000 to-12500

Temperature of compressed gas from water-cooled compressors:


60 oF
Tonnes of refrigeration
0 required
-4600 to -4670
T,-20
o
F tonnes
-6170 required*
to -6830
-40 -7600 to -9200
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.
Pipes and their layouts
 Carbon steel or stainless steel
 42 inch pipes
 Thickness varies with pressures
Estimated number of ships
Factors for determining the number of ships: loading
rate of the gas, distance for which the CNG is
transported and the time required for a ship to make
one complete cycle.
Distance No. of ships
miles
1000 4
1500 5
2000 6
2500 7
3500 8 to 9
5000 11 to 12
Cost of transportation
 For voyage distance of 2500 miles
 Cost of CNG transport: $1.86-
$2.43/Mscf (depending on pressure
and temperature)
 Published Cost of LNG transport:
$1.89/Mscf
 As the distance decreases CNG
becomes more attractive than LNG
Comparison of CNG and
LNG
Size of investment for a 500MMscf/d plant
CNG LNG
Reserves: Modest Large
Processing cost: MM$30-40 MM$750-2000*
Transportation costs: MM$230/ship MM$160/ship
Unloading costs: MM$16-20 MM$500-550
Total investment: $1-2 billion** $2-3 billion**

* Depending upon the location of the production site


** Depending upon the number of ships used for the transport of the gas.
Typical cost components for LNG
project

Unloading
11%

Liquefaction
50%
Shipping
39%
Typical cost components for CNG
project

Unloading
6%

Compression
and loading
5%

Shipping
89%
Comparison of LNG and
CNG
Price of the delivered gas
LNG value chain per MMBTU
Exploration and Production: $0.5-1.0/MMBTU
Liquefaction: $0.8-1.2/ MMBTU.
Shipping: $0.4-1.5/ MMBTU*.
Regasification and Storage: $0.3-0.5/ MMBTU.
$1.00 as netback for the investors

Final price of LNG: $3.00-5.20/MMBTU.

* For transport distances from 1000 miles to 5000 miles


Comparison of LNG and
CNG
CNG value chain per MMBTU
Exploration and Production: $0.5-1.0/MMBTU
Processing and transportation: $1.08-3.82/MMBTU*
$1.00 as netback to the investor

Final unit price of CNG: $2.58-5.82/MMBTU

* For transport distances from 1000 miles to 5000 miles


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.
Comparison of CNG and
LNG
Advantages of CNG over LNG
 Requirement of lower throughput of gas for a project
 Involvement of lower capital
 Ease of deployment … faster implementation of a project
 Ability to access stranded reserves and monetize them
 Majority of the investment is in the shipping, making the
assets movable and reducing the risk involved

Disadvantages
Inability to transport large volumes of gas such LNG
Disparity in the volume transport hinders commercial
possibility of CNG
Comparison of CNG and
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
Role the GTL technology can
play
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
Project Constraints

LNG GTL CNG


Reserves Large Large Medium to
Small
Infrastructure Large Large Small
Investment Large Medium* Medium to
Large
Transportation Large Medium* Large

* Depending upon the number of ships required.


Worldwide areas of interest for application
of CNG technology
Conclusions
 CNG transport of gas is simple and easy to
implement
 CNG facilities are cheap compared to LNG and
GTL. Majority of the investment is in shipping
 LNG transports three times the volume of gas
envisioned as CNG per ship.
 CNG can deliver gas cheaper than LNG for
distances up to 2500 miles
 At distances above 2500 miles the cost of CNG
becomes similar or more than LNG thus making
LNG attractive because of its ability to transport
more gas per shipment