LNG 101 week three: The Upstream Chain

The LNG process, one that is much more complex than pipeline transportation, is often referred to as the “LNG chain.” It is made up of distinct parts: upstream, liquefaction plant, shipping, regasification and gas distribution. In this issue, we’ll discuss the gathering and processing aspects of the chain (upstream), as well as the liquefaction plants.

Of course, the entire process begins with a decision to develop a gas field. That decision is typically related to the distance from the gas field to market, if a pipeline is available or if LNG shipment is required. Other considerations include the amount of recoverable gas, the cost to produce the gas that is delivered to the liquefaction plant in the removal of any impurities from the gas, a port that is close enough to the gas field for a liquefaction plant to be built, a political situation that supports longterm investments and a market price that is high enough to support the entire process and provide a good return.

LNG-101-Week-Three-wellhead-chartThe upstream section of the LNG chain is very similar to regular gas systems. It includes drilling exploratory wells and eventually drilling and operating wells that recover the natural gas and bring it to the surface.

The exact placement of an exploration well depends on the nature of the formation to be drilled, what the geology of the formation looks like, and the depth and size of the deposit. After a geophysical team chooses the best location for a well, the drilling company works to ensure that it completes all the necessary steps so that it can egally drill in that area. Securing permits for the drilling operations is a critical part of this phase.

Once a natural gas well is drilled, and it has been confirmed that a large enough quantity of natural gas is there to commercially develop, the well must be “completed” to allow the natural gas to flow out of the formation and up to the surface. This process includes evaluating the pressure and temperature of the formation, running casing and tubing, and using the proper equipment to ensure an efficient flow of natural gas out of the well. A piece of equipment, referred to as a “Christmas tree” fits on top of the well, and contains tubes and valves that control the flow of gas and other fluids out of the well. It contains many branches and is shaped somewhat like a tree. The “Christmas tree” is the most noticeable part of a well, and allows people on the surface to monitor and regulate the production from a producing well. A typical “Christmas tree” is about six feet tall.

A gas field is developed with sufficient wells to produce gas as an economic project. Field pipeline and separation and dehydration facilities are installed and gas is delivered to a transmission pipeline that can transport gas to market, or in the case of LNG transports, the natural gas to an LNG processing plant.

A typical LNG processing plant includes the following major parts: a gas handling and treating section, a liquefaction section, a refrigerant section, a fractionation section, an LNG storage section, an LNG loading section and a utility section.

The three basic steps of the liquefaction process are the removal of impurities and recovery of natural gas liquids (NGLs), the refrigeration of the gas until it liquefies, the movement of the LNG to storage and eventually into a tanker.

After the liquefaction process, the LNG is pumped into a storage tank. These tanks are typically doublewalled, with an outer wall of reinforced concrete and lined with carbon steel and an inner wall of nickel steel. Between the two walls is insulation to prevent air from warming the LNG. The LNG is stored in these tanks until a tanker is available to take the LNG to market.

The capital cost of a liquefaction plant is a critical component of the overall cost of an LNG delivery chain. In fact, total costs of a facility can run into the billions. This is obviously a huge expense, but costs have dropped significantly in the last 20 years.

LNG-101-Week-Three-tank-pictureThe reduction in costs is due to a number of influences. New technology has helped to gain economies of scale. In addition, organizational learning, research and development, project management, and supplier competition have had a hand in reducing the cost of liquefaction.

A June 2013 article with the headline “Liquefaction plant single largest cost for Alaska LNG project” was posted on the website of the Office of the Federal Coordinator for Alaska Natural Gas transportation Projects.

Author Stan Jones provides the following description: “The biggest building on Earth is Boeing’s wide-body assembly plant in Everett, Washington. It covers an area as large as 18 Manhattan city blocks, stands 11 stories tall, and encloses almost 500 million cubic feet of space.”

He then suggests that the reader, “Imagine you have six of those buildings, all filled with natural gas from Alaska’s North Slope.” Jones suggests that, based on early estimates from energy experts, “the gas plant being considered for Alaska by Exxon Mobil, BP and Conoco Phillips could cost $20 billion or more to construct.”

Jones also points out that a 2012 CNN Money survey of the 10 most expensive energy projects in the world included five LNG projects expected to cost more than $30 billion each.

In our next issue, we’ll look at LNG shipping and technology. This is the third in a 10-part series produced by the Alaska Support Industry Alliance to educate the public about liquefied natural gas.

Author: cbutcher

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