SPE DISTINGUISHED LECTURER SERIES is funded principally through a grant of the SPE FOUNDATION

SPE DISTINGUISHED LECTURER SERIES is funded principally through a grant of the SPE FOUNDATION The Society gratefully acknowledges those companies that support the program by allowing their professionals to participate as Lecturers. And special thanks to The American Institute of Mining, Metallurgical, and Petroleum Engineers (AIME) for their contribution to the program.

LNG Roaring Ahead. Where Will it End? John Morgan John M. Campbell & Company Exclusive Provider of PetroSkills Facilities Training Headquarters Office 1215 Crossroads Blvd., Norman, OK 73072 USA (405) 321-1383 Office / (405) 321-4533 Fax / (303) 523-6797 Cell djm@jmcampbell.com / www.jmcampbell.com 2008 John M. Campbell & Co. and Other Copyright Holders All Rights Reserved

$7 Billion Entry Fee

Liquefied Natural Gas (LNG) 1. Allows gas to be sold from remote suppliers Indonesia, Middle East, Australia, Algeria, etc. to industrialized countries, Japan, Korea, Spain, UK and USA 2. The largest producer of LNG is Qatar. 3.. Was Indonesia but gas reserves depleted 4. The largest market for LNG is Japan 5. International trade in 2007 was ~165mtpy (Equivalent to 217BCMa)

Gas Markets 1. Residential & Commercial a. Heating demand highly seasonal (low load factor) b. No fuel switching capabilities 2. Industrial a. Fuel for factories, chemical plants, steel mills, etc. b. Power generation for factories, chemical plants, steel mills, etc. c. Chemical feedstock ammonia, methanol, GTL d. High load factor e. Fuel switching capability

WHAT IS LNG 96% Methane 3% Ethane 1% 0.1% Propane Butane Pentane + LPG NGL LNG LPG Liquid Petroleum Gas NGL Natural Gas Liquids LNG Liquid Natural Gas

Example LNG Properties -162 o C [-235 o F] at atmospheric pressure Rich Lean nitrogen 0.3 0.5 methane 88.7 97.5 ethane 8.0 1.5 propane 2.0 0.5 butanes 1.0 - approx. kg/m 3 465 435 CV (higher) MJ/m 3 42 38.5

2004 LNG Journal & Reproduced with Permission An LNG Export Terminal with Multiple Expansions - Bontang, Indonesia

The Basic LNG Chain Gas Production LNG Production Shipping LNG Reception Gas Utilization

Natural Gas Transportation Options 5000 1000 Pipeline LNG 500 100 50 Electricity Gas-to-liquids Uneconomic 0 1000 2000 3000 4000 5000 Distance to market, km

Nominal Gas Transportation Efficiency Ref. OG&J (May 15, 2000), p.64

Historical Development of LNG Trade Last 25 Years 1. Projects grow from under 1 mtpa to 4-6 mtpa 2. New supplies to Japan, first imports to Korea, 1987, and Taiwan, 1990 3. Late 1990s present Slower growth in Asian LNG demand economic upsets Growth in LNG demand in Europe, USA and Caribbean New supply projects in Atlantic Basin and Middle East Today s LNG trade

2016 2018 2020 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 LNG Industry Growth Projected Historical 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Asia Europe United States Source: CERA, CEDIGAZ 1970 1980 1966 1968 1964

2005 Source NPC Demand is Met from Diverse Sources of Supply

LNG Imports Are Needed, but Face Obstacles 2005 Source NPC

The Basic LNG Chain Gas Production LNG Production Shipping LNG Reception Gas Utilization

The Contract Chain 1. Exploration licenses, production-sharing 2. Gas sales to LNG Producer 3. LNG production joint venture agreement 4. Condensate/LPG production and sale 5. Government and local authority agreements 6. LNG sale and purchase agreement between LNG producer and LNG buyers

Gas Production Platform North Rankin A North-West Shelf Project, Australia 2005 LNG Journal & Reproduced with Permission

The Basic LNG Chain Gas Production LNG Production Shipping LNG Reception Gas Utilization

General Schematic Gas Liquefaction Terminal Pre-cooling and LPG Separation 2005 LNG Journal & Reproduced with Permission

Contaminants What s in gas (besides light hydrocarbons)? H 2 O CO 2 H 2 S S He N 2 Cl Hg As Waxes Asphaltenes etc. Sand Dinosaur Dust Lubricants Corrosion Inhibitors Mystery Stuff, etc.

Some Mercury Levels Worldwide microgm/m3 Mercury kg/a South America 69 119 373 643 Far East 1 3 20 16 108 Far East 2 58 193 313 1,042 Far East 3 0.02 0.16 0.11 0.86 Groningen 180 972 Mid West P/L 0.001 0.1 0.01 0.54 Based on 4 mtpy LNG production (600 MMscfd)

Air Products APCI Mixed Refrigerant LNG Process

Courtesy: Linde

Nominal Gas Transportation Efficiency Ref. OG&J (May 15, 2000), p.64

Thermodynamics Carnot Cycle Hmmmm!

The Liquefaction Heat Balance HEAT SINK 390 MW NG 40 C 60 bar PROCESS 230 MW LNG -162 C 1 bara POWER 160 MW LNG Production 3.7 mtpy (500 tph) Based on a 3.7 mtpy train

Centrifugal Compressors Horizontally Split Generally used in high volume/low pressure applications

Axial Turbine Blades

Overview of LNG Production Facilities Technologies 1. Established Technologies ConocoPhillips (Optimized Cascade) APCI (Propane Precooled) 2. New Process Technologies APCI (AP-X) Linde (MFC) Shell (DMR) IFP (Liquefin)

ConocoPhillips Optimized LNG Process Courtesy ConocoPhillips Petroleum Company

Egypt Idku 2 Trains 3.4 mtpy On stream in 2006 COP Optimised Cascade process Air cooled process Very long jetty Space for expansion

The Liquefaction Heat Balance HEAT SINK 390 MW NG 40 C 60 bar PROCESS 230 MW LNG -162 C 1 bara POWER 160 MW LNG Production 3.7 mtpy (500 tph) Based on a 3.7 mtpy train

Darwin LNG: First LNG March 06

Atlantic LNG Train 4: 5.2mtpy from 8 Frame 5 GTs Started up in March 2006

Overview of LNG Production Larger facilities Bigger Trains Bigger Turbines Facilities Trends Reduce Environmental Impact CO 2 Produced with gas Developed by turbines NO x Marine Environment

Typical Project Schedule Greenfield LNG Export Project Year 0 1 2 3 4 5 6 7 8 9 10 Upstream Terminal Site LNG Plant Shipping study drilling and appraisal design construction selection acquisition, approvals prepn. study concept design FEED EPC - construction study shipping arrangements ship building Project Structure & Evaluation study negotiations -j.v. evaluation first LNG exports Markets analysis marketing, sales agreements Financing advice and analysis securing financing 2000 LNG Journal All Rights Reserved

190,000m 3 LNG Storage Tank

The Basic LNG Chain Gas Production LNG Production Shipping LNG Reception Gas Utilization

1959 The Methane Pioneer 2004 LNG Journal & Reproduced with Permission

LNG Carrier Fleet 1. As at 1 January 2009 the Carrier Fleet was a. 300 ships, average age 14 years b.390 ships in 2011 c. 52% Membrane, 45% Moss, 3% others 2. Small carriers 20-80,000m 3 3. Typical Carriers 125-145,000m 3 4. New very large carriers for Qatar long distance trades (205-265,000m 3 ). 5. The order book is 88 ships 6. Some Fleet owners now looking to replace older ships >35 years

One of the World s Smallest LNG Carriers The 19,100 m 3 Capacity Surya Aki

Finite Element Analysis

Partial Loading of LNG Cargoes Photo Courtesy of ABS

The Basic LNG Chain Gas Production LNG Production Shipping LNG Reception Gas Utilization

Costs in an LNG Project Gas Gathering Liquefaction (1 train) Ships 5 @ $250 m Regasification TOTAL US$ 1.5 2.0 billion US$ 1.5 2.0 billion US$ 1.3 billion US$ 0.5 1.0 billion US$ 4.8 6.3 billion Could easily reach $7,000,000,000

Negishi Terminal, Japan : Single Containment Tanks (background) Inground Tanks (foreground) 2002 LNG Journal & Reproduced with Permission

USA LNG Terminal: Elba Island

The Basic LNG Chain Gas Production LNG Production Shipping LNG Reception Gas Utilization

Seasonal Demand Pattern Europe & North America

Gas Markets Power Generation Combined cycle most popular GT + waste heat boiler Eff.~55% Low CO 2 emissions 7 8 tonnes/mw compared to 25 27 tonnes/mw for coal

Example Heating Values Japan Power Plant USA - Florida UK 36 38 40 42 44 46 48 50 MJ/m3 Adapted from: Bramoulle, Morin and Capelle, LNG Quality and Market Flexibility Challenges and Solutions, LNG 14, Doha, Qatar 2004

LNG Roaring Ahead. Where Will it End?

Ship-to-Ship Transfer

Reduce Environmental Impact 1. Reduce CO2 Inject Produced CO2 Install most efficient drivers Cogeneration Larger Turbines Electric Motor Drivers 2. Reduce NOx Install Clean-burn technology 3. Effect on Marine Environment Use of air coolers

Some of Today s Challenges in LNG..Many Permits for US Imports Crews for LNG Carriers LNG quality variations Security Materials and Staffing

UK Gas Supply and Demand

Melkoya Island

StatoilHydro Snøhvit Plant Europe's first LNG export facility Capacity 4.2mtpy Linde MFC process First shipment 20 th October 2007 140km tie-back to subsea templates CO 2 sequestration

THE END Thank You!