Overview Gas & NGL Processing

Overview Gas & NGL Processing

Topics Energy consumption & natural gas s place Natural gas sources Relationship with petroleum Basic economics of natural gas & NGL Trends for prices What are appropriate margins for the industry? Gas processing as part of total production system 2

Energy consumption & natural gas s place

Growth of U.S. Energy Consumption 120 100 Energy Consumed (Quad = 10 15 BTU) 80 60 40 Wood Hydroelectric Power Nuclear Electric Power Coal Natural Gas Petroleum 20 0 1750 1800 1850 1900 1950 2000 Source: 1850-1949, Energy Perspectives: A Presentation of Major Energy and Energy-Related Data, U.S. Department of the Interior, 1975; 1950-2010, Annual Energy Review 2011, Table 1.3. 4

World Energy Consumption by Source Growth will not be uniform among all energy sources Renewable & nuclear power projected to be fastestgrowing energy sources, increasing by 2.5% per year Natural gas fastest growing fossil fuel, increasing by 1.7% per year Coal grows faster than petroleum because of China s increasing consumption Source: International Energy Outlook 2013, U.S. Energy Information Agency http://www.eia.gov/forecasts/ieo/ 5

Energy Markets Are Interconnected https://flowcharts.llnl.gov/commodities/energy 6

Origins of Oil & Gas Organic life buried in sedimentary rock Transformation to hydrocarbons Migration from source rocks Accumulation of oil & gas Flow of oil & gas through porous media 7

Petroleum & Natural Gas Consumption influenced by production & cost of fuels 8

Flow of Natural Gas in U.S. Natural Gas Annual, 2014 https://www.eia.gov/naturalgas/annual/ 9

Overview of Natural Gas Gathering & Processing Fundamentals of Natural Gas Processing, 2 nd ed. Kidnay, Parrish, & McCartney 10

Natural Gas Resources Petroleum & natural gas formed from decomposing organic matter in source rock Conventional gas & liquids migrate through permeable rock toward the surface until it is stopped by some trapping mechanism Unconventional gas & liquids are trapped at the source rock because of extremely low permeabilities Dec. 5, 2012 update, http://www.eia.gov/energy_in_brief/article/about_shale_gas.cfm 11

North American Conventional Gas Fields http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/maps/maps.htm 12

North American Offshore Gas Fields http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/maps/maps.htm 13

North American Shale Gas Plays http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/maps/maps.htm 14

Marcellus & Utica Shale Formation Map http://marcelluscoalition.org/pa-map/ 15

Worldwide Shale Oil & Gas Shale oil & gas have the potential to dramatically alter world energy markets Source: Supplemental presentation is support of International Energy Outlook 2013, U.S. Energy Information Agency http://www.eia.gov/forecasts/ieo/ 16

Expected Natural Gas Production by Source Retrieved November 26, 2016 http://www.eia.gov/energy_in_brief/article/shale_in_the_united_states.cfm 17

U.S. Gas Processing & Transportation U.S. Energy Mapping System, retrieved January 10, 2016 http://www.eia.gov/state/maps.cfm?v=natural%20gas 18

Gas Plants Capacities in U.S. Lower 48 http://www.eia.gov/todayinenergy/detail.cfm?id=8530 19

U.S. Gas Transportation, Storage, & Terminals U.S. Energy Mapping System, retrieved December 31, 2016 http://www.eia.gov/state/maps.cfm?v=natural%20gas 20

Interstate Natural Gas Flow Natural Gas Annual, 2014 https://www.eia.gov/naturalgas/annual/ 21

Basic economics of natural gas & NGL

Energy & Oil Prices Prices retrieved January 1, 2018 http://www.bloomberg.com/energy/ 23

Energy & Oil Prices Prices retrieved January 1, 2018 http://quotes.ino.com/exchanges/exchange.html?e=nymex 24

Price Changes With Time Prices updated January 1, 2018 Sources: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm & http://www.eia.gov/dnav/ng/ng_pri_fut_s1_d.htm 25

Price Changes With Time Prices updated January 1, 2018 Sources: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm & http://www.eia.gov/dnav/ng/ng_pri_fut_s1_d.htm 26

No Such Thing as a Global Gas Price http://www.slideshare.net/enalytica/gas-market-outlook-lng-business-fundamentals 27

NGLs Can Bring Value Prices updated January 1, 2018 Sources: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm & http://www.eia.gov/dnav/ng/ng_pri_fut_s1_d.htm 28

NGLs Can Bring Value Prices updated January 1, 2018 Sources: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm & http://www.eia.gov/dnav/ng/ng_pri_fut_s1_d.htm 29

NGLs Can Bring Value Prices updated January 1, 2018 Sources: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm & http://www.eia.gov/dnav/ng/ng_pri_fut_s1_d.htm 30

Economic Spreads NGL Frac spread Difference between the value of components in NGL vs. retaining in the natural gas Frac Spread = (Value as liquid product) (Value as component of natural gas) Can include value of mixture of C 2, C 3, ic 4, nc 4, & C 5 + Can be tailored to meet actual NGL compositions Some prices may be difficult to obtain on a daily basis o NYMEX C 2, C 3, nc 4, & C 5+ from www.ino.com Can be expressed as $/MMBtu (ideal gas heating value) or $/bbl (NGL volume) Make use of values for standard liquid density & heating value NGL frac spread requires a definition for NGL composition Spark spread More important to electricity producer rather than gas processor Gross margin of a gas-fired power plant selling a unit of electricity having bought the fuel to produce it 31

Example Propane Frac Spread Using (Last) February values: Propane - $0.70250 per gal Natural gas - $3.300 per MMBtu Propane conversion factors: 91,563 Btu/gal ideal gas gross heating value & standard liquid density Calculation: Btu 1, 000, 000 $ MMBtu $ Spread 0.70250 3.300 gal Btu MMBtu 91, 563 gal $4.372 per MMBtu Values retrieved January 10,2016 http://quotes.ino.com/exchanges/exchange.html?e=nymex 32

NGLs Can Bring Value Prices updated January 1, 2018 Sources: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm & http://www.eia.gov/dnav/ng/ng_pri_fut_s1_d.htm 33

NGLs Can Bring Value Prices updated January 1, 2018 Sources: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm & http://www.eia.gov/dnav/ng/ng_pri_fut_s1_d.htm 34

Gas processing as part of total production system

Total Production System CO for EOR 2 Gas Lift and Injection Sales Gas to Pipeline Crude Oil Gas Processing Module Ethane Propane N-Butane LPG I-Butane Natural Gasoline Plant Condensate Sulfur NGLs Field Condensate Compression (optional) Field Treating (optional) Solution Gas Production Separators Oil Well Gas Well Production Separators Gas Well Gas Cap or Associated Gas Non-associated Gas Oil Water Water Water J.M. Campbell & Company Adapted from Gas Processors Association (GPA), Tulsa, Oklahoma 36

Overview of Gas Plant Processing Fundamentals of Natural Gas Processing Kidnay, Parish, & McCartney, CRC Press, 2011 37

Summary

Summary Natural gas supplies nearly 30% of the US s energy Contribution expected to continue to grow Production May be associated with petroleum production Unconventional sources shale & coal Primary distribution via pipelines Gas processing near the mouth of the pipeline system NGLs bring value Comparison is the value as a liquid vs the heating value as part of the natural gas 39

Supplemental Slides

How do energy prices compare? 41