Vapor Recovery Units: Agenda

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Reducing Methane Emissions with Vapor Recovery on Storage Tanks Technology Transfer Workshop PEMEX & Environmental Protection Agency, USA April 25, 2006 Villahermosa, Mexico Vapor Recovery Units: Agenda Methane Losses Methane Savings Is Recovery Profitable? Industry Experience Project Summary for Mexico Discussion Questions 2

Methane Losses from Storage Tanks We estimate 1.7 billion cubic feet (Bcf) of methane lost from crude oil storage tanks each year in Mexico Storage Tank Venting 1.7 Bcf Meters and Pipeline Leaks 2.0 Bcf Other Sources 4.0 Bcf Pneumatic Devices 11.5 Bcf Gas Engine Exhaust 2.3 Bcf Dehydrators & Pumps Well Venting and Flaring 3.1 Bcf 3.3 Bcf Sources: US Natural Gas STAR program success points to global opportunities to cut methane emissions cost-effectively, Oil and Gas Journal, July 12, 2004 Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2004 A storage tank battery can vent 4,900 to 96,000 thousand cubic feet (Mcf) of natural gas and light hydrocarbon vapors to the atmosphere each year Vapor losses are primarily a function of oil throughput, gravity, and gas-oil separator pressure 3 Sources of Methane Losses Flash losses Occur when crude is transferred from a gas-oil separator at higher pressure to a storage tank at atmospheric pressure Working losses Occur when crude levels change and when crude in tank is agitated Standing losses Occur with daily and seasonal temperature and barometric pressure changes 4

Methane Savings: Vapor Recovery Vapor recovery can capture up to 95% of hydrocarbon vapors from tanks Recovered vapors have higher heat content than pipeline quality natural gas Recovered vapors are more valuable than natural gas and have multiple uses Re-inject into sales pipeline Use as on-site fuel Send to processing plants for recovering valuable natural gas liquids 5 Types of Vapor Recovery Units Conventional vapor recovery units (VRUs) Use rotary compressor to suck vapors out of atmospheric pressure storage tanks Require electrical power or engine driver Venturi ejector vapor recovery units (EVRU TM ) or Vapor Jet Use Venturi jet ejectors in place of rotary compressors Contain no moving parts EVRU TM requires source of high pressure gas and intermediate pressure system Vapor Jet requires high pressure water motive 6

Conventional Vapor Recovery Unit Vent Line Back Pressure Valve Control Pilot Source: Evans & Nelson (1968) Suction Line Electric Control Panel Crude Oil Stock Tank(s) Suction Scrubber Bypass Valve Gas Sales Meter Run Gas Check Valve Sales Condensate Return Liquid Transfer Pump Electric Driven Rotary Compressor 7 Vapor Recovery Installations 8

Vapor Recovery Installations 9 Venturi Jet Ejector* Pressure Indicator Temperature Indicator PI TI PI TI High-Pressure Motive Gas (~850 psig) Flow Safety Valve TI PI Suction Pressure (-0.05 to 0 psig) Discharge Gas (~40 psia) Low-Pressure Vent Gas from Tanks (0.10 to 0.30 psig) *EVRU TM Patented by COMM Engineering Adapted from SRI/USEPA-GHG-VR-19 psig = pound per square inch, gauge psia = pounds per square inch, atmospheric 10

Vapor Recovery with Ejector LP Separator Compressor 6,200 Mcf/day Gas to Sales @ 1000 psig 281 Mcf/day Gas Net Recovery (19 Mcf/day incremental 5,000 Mcf/day Gas fuel) 5,000 barrels/day Oil Ejector 40 psig 900 Mcf/day Ratio Motive / Vent = 3 = 900/300 300 Mcf/day Gas Oil & Gas Well Oil Crude Oil Stock Tank Oil to Sales 11 Vapor Jet System* *Patented by Hy-Bon Engineering 12

Vapor Jet System* Utilizes produced water in closed loop system to effect gas gathering from tanks Small centrifugal pump forces water into Venturi jet, creating vacuum effect Limited to gas volumes of 77 Mcf / day and discharge pressure of 40 psig *Patented by Hy-Bon Engineering 13 Criteria for Vapor Recovery Unit Locations Steady source and sufficient quantity of losses Crude oil stock tank Flash tank, heater/treater, water skimmer vents Gas pneumatic controllers and pumps Outlet for recovered gas Access to low pressure gas pipeline, compressor suction, or on-site fuel system Tank batteries not subject to air regulations 14

Quantify Volume of Losses Estimate losses from chart based on oil characteristics, pressure, and temperature at each location (± 50%) Estimate emissions using the E&P Tank Model (± 20%) Measure losses using recording manometer and well tester or ultrasonic meter over several cycles (± 5%) This is the best approach for facility design 15 Estimated Volume of Tank Vapors 110 Vapor Vented from Tanks, cubic foot / barrel Gas/Oil Ratio 100 90 80 70 60 50 40 30 20 40 API and Over 30 API to 39 API Under 30 API API Gravities 10 10 20 30 40 50 60 70 80 Pressure of Vessel Dumping to Tank (Psig) o API = API gravity 16

What is the Recovered Gas Worth? Value depends on heat content of gas Value depends on how gas is used On-site fuel Valued in terms of fuel that is replaced Natural gas pipeline Measured by the higher price for rich (higher heat content) gas Gas processing plant Measured by value of natural gas liquids and methane, which can be separated 17 Value of Recovered Gas Gross revenue per year = (Q x P x 365) + NGL Q = Rate of vapor recovery (Mcf per day) P = Price of natural gas NGL = Value of natural gas liquids 18

Value of Natural Gas Liquids Btu/gallon 1 2 3 4 MMBtu/ gallon $/gallon $/MMBtu 1,2 (=3/2) Methane 59,755 0.06 0.43 7.15 Ethane 74,010 0.07 0.64 9.14 Propane 91,740 0.09 0.98 10.89 n Butane 103,787 0.10 1.32 13.20 iso Butane 100,176 0.10 1.42 14.20 Pentanes+ 105,000 0.11 1.50 13.63 5 6 7 8 9 10 11 Mixture Btu/cf MMBtu/Mcf $/Mcf Vapor $/MMBtu Composition (MMBtu/Mcf) Value ($/Mcf) (=8*10) (=4*6) Methane 1,012 1.01 $ 7.22 7.15 82% 0.83 $ 5.93 Ethane 1,773 1.77 $ 16.18 9.14 8% 0.14 $ 1.28 Propane 2,524 2.52 $ 27.44 10.89 4% 0.10 $ 1.09 n Butane 3,271 3.27 $ 43.16 13.20 3% 0.10 $ 1.32 iso Butane 3,261 3.26 $ 46.29 14.20 1% 0.03 $ 0.43 Pentanes+ 4,380 4.38 $ 59.70 13.63 2% 0.09 $ 1.23 Total 1.289 $ 11.28 1 Natural Gas Price assumed at $7.15/MMBtu as on Mar 16, 2006 at Henry Hub 2 Prices of Individual NGL components are from Platts Oilgram for Mont Belvieu, TX, January 11,2006 3 Other natural gas liquids information obtained from Oil and Gas Journal, Refining Report, March 19, 2001, p-83 Btu = British Thermal Units, MMBtu = Million British Thermal Units 19 Cost of a Conventional VRU Vapor Recovery Unit Sizes and Costs Capacity (Mcf / day) Compressor Horsepower Capital Costs ($) Installation Costs ($) O&M Costs ($ / year) 25 5-10 15,125 7,560-15,125 5,250 50 10-15 19,500 9,750-19,500 6,000 100 15-25 23,500 11,750-23,500 7,200 200 30-50 31,500 15,750-31,500 8,400 500 60-80 44,000 22,000-44,000 12,000 Cost information provided by Unite States Gas STAR companies and VRU manufacturers, 1998 basis. 20

Is Recovery Profitable? Peak Capacity (Mcf / day) Installation & Capital Costs 1 O & M Costs ($ / year) Value of Gas 2 ($ / year) Annual Savings Simple Payback (months) Return on Investment 25 26,470 5,250 $ 51,465 $ 46,215 7 175% 50 34,125 6,000 $ 102,930 $ 96,930 5 284% 100 41,125 7,200 $ 205,860 $ 198,660 3 483% 200 55,125 8,400 $ 411,720 $ 403,320 2 732% 500 77,000 12,000 $ 1,029,300 $ 1,017,300 1 1321% 1 Unit Cost plus estimated installation at 75% of unit cost Financial Analysis for a conventional VRU Project 2 $11.28 x 1/2 capacity x 365, Assumed price includes Btu enriched gas (1.289 MMBtu/Mcf) 21 Industry Experience Top five United States companies for emissions reductions using VRUs in 2004 Company 2004 Annual Reductions (Mcf) Company 1 1,273,059 Company 2 614,977 Company 3 468,354 Company 4 412,049 Company 5 403,454 22

Industry Experience: Chevron Chevron installed eight VRUs at crude oil stock tanks in 1996 Project Economics Chevron Methane Loss Reduction (Mcf/unit/year) Approximate Savings per Unit 1 Total Savings Total Capital and Installation Costs Payback 21,900 $153,300 $1,226,400 $240,000 3 months 1 Assumes a $7 per Mcf gas price; excludes value of recovered natural gas liquids. Refer to the Gas STAR Lessons Learned for more information. 23 Industry Experience: Devon Energy For 5 years, Devon employed the Vapor Jet system and recovered more than 55 MMcf of gas from crude oil stock tanks Prior to installing the system, tank vapor emissions were about 20 Mcf per day Installed a system with maximum capacity of 77 Mcf per day, anticipating production increases Revenue was about $91,000 with capital cost of $25,000 and operating expenses less than $0.40 per Mcf of gas recovered At today s gas prices, payback is less than 5 months MMcf = million standard cubic feet 24

Industry Experience: EVRU TM Facility Information Oil production: Gas production: Separator: Storage tanks: Measured tank vent: 5,000 Barrels/day, 30 o API 5,000 Mcf/day, 1060 Btu/cf 50 psig, 100 o F Four 1500 barrel tanks @1.5 ounces relief 300 Mcf/day @ 1,850 Btu/cf EVRU TM Installation Information Motive gas required: 900 Mcf/day Gas sales: 5,638 MMBtu/day Reported gas value: $28,190/day @ $5/MMBtu Income increase: $2,545/day = $76,350/month Reported EVRU TM cost: $75,000 Payout: <1 month 25 Vapor Recovery Dual VRU bound for Venezuela one of 17 units capturing gas currently for Petroleos de Venezuela. Flooded screw compressor for volumes to 5.0 MMSCFD; up to 200 psig. 26

Vapor Recovery PDVSa has installed vapor recovery in the majority of their production facilities in Eastern Venezuela. 27 Vapor Recovery At this PDVSa installation, three dual rotary screw compressor packages were set in tandem to move 15 MMSCFD of 2500-2600 2600 BTU/cu ft. tank vapors. Project economics were based primarily on the condensate recovery from these high BTU gas streams. 28

29 Vapor Recovery Two large rotary screw vapor recovery compressor systems manufactured for ENI Venezuela designed to capture 1.4 MMcfd of tank vapor gas (per skid) and discharge to aftercoolers at a pressure of 230 psig. 30

Vapor Recovery ENI installed their vapor recovery systems with large aftercoolers in order to maximize condensate production. Each unit now captures over 100 bbls of 70 api gravity condensate per day. 31 Lessons Learned Vapor recovery can yield generous returns when there are market outlets for recovered gas Recovered high heat content gas has extra value Vapor recovery technology can be highly costeffective in most general applications Venturi jet models work well in certain niche applications, with reduced operating and maintenance costs Potential for reduced compliance costs can be considered when evaluating economics of VRU, EVRU TM, or Vapor Jet 32

Lessons Learned (cont d) VRU should be sized for maximum volume expected from storage tanks (rule-of-thumb is to double daily average volume) Rotary vane or screw type compressors recommended for VRUs where Venturi ejector jet designs are not applicable EVRU TM recommended where there is a high pressure gas compressor with excess capacity Vapor Jet recommended where less than 75 Mcf per day and discharge pressures below 40 psig 33 Project Summary for Mexico Install Vapor Recovery on Crude Oil Storage Tanks Project Description: 100 Mcf per day of vapor recovery capacity installed on a crude oil stock tank battery. Gas Saved: 17.3 MMcf per year (491 thousand cubic meters per year) Sales Value: $91,000 ($5.25 per Mcf gas) Capital and Installation Cost: ($41,125) Operating and Maintenance Cost: ($1,900) per year Payback Period: 6 months Additional Carbon Market Value: $210,000 ($30 per tonne of CO 2 e) 34

Discussion Questions To what extent are you implementing this technology? How can this technology be improved upon or altered for use in your operation(s)? What is stopping you from implementing this technology (technological, economic, lack of information, manpower, etc.)? Reference: Unit Conversions 1 cubic foot = 0.02832 cubic meters Degrees Fahrenheit = ( F 32) * 5/9 degrees Celsius 1 inch = 2.54 centimeters 1 mile = 1.6 kilometers 14.7 pounds per square foot = 1 atmosphere 35