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 Whats Happening and Why!
John Morgan
John M. Campbell & Company
2005 Air Products & Chemicals, Inc. All Rights Reserved
$5 Billion Entry Fee
LNG NGL
Methane
Ethane
Propane
Butane
Pentane +
LPG
96%
3%
1%
0.1%
LPG Liquid Petroleum Gas
NGL Natural Gas Liquids
LNG Liquid Natural Gas
WHAT IS LNG
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
An LNG Export Terminal with Multiple
Expansions - Bontang, Indonesia
2004 LNG Journal & Reproduced with Permission
The Basic LNG Chain
LNG Production
Shipping
LNG Reception
Gas Utilization
Gas Production
Natural Gas
Transportation Options
5000
1000
500
100
50
M
M
s
c
f
d
0 1000 2000 3000 4000 5000
Distance to market, km
Pipeline
Uneconomic
Electricity
Gas-to-liquids
LNG
Nominal Gas
Transportation Efficiency
Ref. OG&J (May 15, 2000), p.64
Historical Development
of LNG Trade Last 25 Years
Projects grow from less than 1 mta to 4-6 mta
New supplies to J apan,
first imports to Korea, 1987,
and Taiwan, 1990
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
Todays LNG trade
LNG Industry Growth
Source: CERA, CEDIGAZ
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
1
9
6
4
1
9
6
6
1
9
6
8
1
9
7
0
1
9
8
0
1
9
8
2
1
9
8
4
1
9
8
6
1
9
8
8
1
9
9
0
1
9
9
2
1
9
9
4
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
2
0
1
4
2
0
1
6
2
0
1
8
2
0
2
0
Asia Eur ope Unit ed St at es
5
.
5
%
/
y
r
Historical
Projected
Demand is Met from Diverse
Sources of Supply
2005 Source NPC
LNG Imports Are Needed,
but Face Obstacles
2005 Source NPC
The Basic LNG Chain
LNG Production
Shipping
LNG Reception
Gas Utilization
Gas Production
The Contract Chain
1. Exploration licenses, production-sharing contracts
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
2005 LNG Journal & Reproduced with Permission
Gas Production Platform
North Rankin A
North-West Shelf Project, Australia
The Basic LNG Chain
LNG Production
Shipping
LNG Reception
Gas Utilization
Gas Production
General Schematic
Gas Liquefaction Terminal
2005 LNG Journal & Reproduced with Permission
Pre-cooling and
LPG Separation
Contaminants
Whats 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.
Mixed
Refrigerant
LNG Process
2005 Air Products & Chemicals, Inc. All Rights Reserved
MCR Heat Exchanger Tube Bundle Fabrication
2005 Air Products & Chemicals, Inc. All Rights Reserved
Overview of LNG Production
Facilities Technologies
Established Technologies
ConocoPhillips (Optimized Cascade)
APCI (Propane Precooled)
New Process Technologies
APCI (AP-X)
Linde (MFC)
Shell (PMR)
IFP (Liquefin)
ConocoPhillips Optimized
LNG Process
Courtesy ConocoPhillips Petroleum Company
2003 Atlantic LNG All Rights Reserved
Overview of LNG Production
Facilities Trends
Larger facilities
Bigger Trains
Bigger Turbines
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
study drilling and appraisal design construction
selection acquisition, approvals prepn.
study concept design FEED EPC - construction
study shipping arrangements ship building
Upstream
Terminal Site
LNG Plant
Shipping
& Evaluation study negotiations -j.v. evaluation first LNG
exports
Project Structure
analysis marketing, sales agreements
Markets
Financing
advice and analysis securing financing
2000 LNG Journal All Rights Reserved
Photo Courtesy of CB&I All Rights Reserved
The Basic LNG Chain
Shipping
LNG Production
LNG Reception
Gas Utilization
Gas Production
1959 The Methane Pioneer
2004 LNG Journal & Reproduced with Permission
Partial Loading of LNG Cargoes
Photo Courtesy of ABS
The Basic LNG Chain
LNG Reception
LNG Production
Shipping
Gas Utilization
Gas Production
Reduce Environmental Impact
Reduce CO2
Inject Produced CO2
Install most efficient drivers
Cogeneration
Larger Turbines
Electric Motor Drivers
Reduce NOx
Install Clean-burn technology
Effect on Marine Environment
Use of air coolers
Negishi Terminal, Japan : Single Containment Tanks
(background) Inground Tanks (foreground)
2002 LNG Journal & Reproduced with Permission
Costs in an LNG Project
Gas Gathering US$ 1 1.5 billion
Liquefaction (1 train) US$ 1 1.5 billion
Ships 5 @ $180 m US$ 0.9 billion
Regasification US$ 0.5 billion
TOTAL US$ 3.4 4.4 billion
Could easily reach $5,000,000,000
The Basic LNG Chain
Gas Utilization
LNG Production
Shipping
LNG Reception
Gas Production
Seasonal Demand Pattern
Europe & North America
Gas Markets
Residential & Commercial
Heating demand highly seasonal (low load factor)
No fuel switching capabilities
Industrial
Fuel for factories, chemical plants, steel mills, etc.
Power generation for factories, chemical plants,
steel mills, etc.
Chemical feedstock ammonia, methanol, GTL
High load factor
Fuel switching capability
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
Higher load factor than residential &
commercial
Quick response to demand swings
Summer demand higher than winter (A/C)
Fuel switching capability
Gas Markets
Gas-Fired Electric Power Generation
2002 GE All Rights Reserved
GE GAS TURBINES
H-Technology
400-480 MW combined cycle output
Firing at 2600F, 1430C
23:1 compressor, 18 stages
4 stage turbine
60% combined cycle efficiency
Example Heating Values
36
38 40 42 44 46 48 50
UK
USA - Florida
Japan Power Plant
MJ /m3
Adapted from: Bramoulle, Morin and Capelle, LNG Quality and Market Flexibility
Challenges and Solutions, LNG 14, Doha, Qatar 2004
Commercial Trends
Continued downward pressure on LNG costs
More competition, more risk-taking. Global supply
strategies
Building ships/terminals in advance of firm supply/sales
contracts. Merchant facilities
Increasing power generation market
Regional market trends
Asia. Liberalization of existing markets. India. China.
Europe. Open access. Market related prices.
LNG and pipeline supplies.
Americas. USA more terminals? Price volatility.
Central/South America.
Market niches: small-scale supply projects, reception,
satellites.
LNG Whats Happening and Why!
UK Gas Supply and Demand
South-East Asia to
Aust ralia to Japan
Middle East to Japan (1977),
Korea, Taiwan & Europe
Japan, Korea & Taiwan
Middle East, S-E. Asia
and Australia to USA
USA (Alaska)
to Japan
Nigeria t o
Europe
Trinidad to
USA & Spain
Algeria to USA USA (Alaska)
to Japan
Libya to
Spain
(1969)
& Europe (1964)
(1972) (1987) (1990)
(1989)
(1999)
(1999)
2005 LNG Journal & Reproduced with Permission
World LNG Trade
Some of Todays Challenges in
LNG..Many
Permits for US Imports
Crews for LNG Carriers
LNG quality variations
Security
Materials and Staffing
LNG Whats Happening and Why!
John Morgan
John M. Campbell & Company