5/25/16 · per aga based on eia and colorado school of mines = 2,170 tcf = almost 100 year supply...

© 2016 Energy Solutions Center Inc. – All Rights Reserved

Understanding the Natural Gas Industry

5/25/16

Eric Burgis, Energy Solutions Center

2 © Energy Solutions Center Inc. – All Rights Reserved

What is natural gas? Market information Gas wells Gas Storage and LNG Pipeline Operations & Delivery Winter Peak Operation Gas measurement Gas Rates Natural gas advantages

Presentation Outline


What is Natural Gas


Natural gas is a nonrenewable source of energy used primarily for heating and generating electricity

Combustible hydrocarbon

Primarily Methane (CH4)

Found in underground reservoirs

Natural Gas


Natural Gas Accounts for Roughly 1/4 of Primary Energy Consumption

Coal

Oil

Other

Natural Gas

Source: Dept. of Energy, Energy Information Administration


Millions of years ago remains of plants & animals decayed and built up in thick layers

Mud & soil changed to rock, covered & trapped the organic material beneath the rock

Pressure & heat changed some of this organic material into coal, oil & gas

How Gas Is Formed


Locating the Gas Geologists and Scientists look for types of

rocks typically found near natural gas deposits and then use seismic surveys to try and pinpoint areas to drill

Locating Natural Gas


VIBRATOR TRUCK

How we Find Natural Gas

RECORDING TRUCK

RETURNING SOUND WAVES

GEOPHONE RECEIVERS

Source: Terrex Seismic


Natural Gas Market Info


Stable Pricing Predicted Into the Future

Source: Rethinking Natural Gas, A Future for Natural Gas in the U.S. Economy.


Supply Future

NG Undiscovered Resources NG Reserves (EIA)

Trill

ion

cu

bic

fe

et


North American Natural Gas Production

Source: www.eia.gov/oiaf/aeo/tablebrowser/#release=IEO2011&subject=0-IEO2011&table=6-IEO2011&region=0-0&cases=Reference-0504a_1630

0

5

10

15

20

25

30

35

40

2005 2010 2015 2020 2025 2030 2035

Vo

lum

es

(Tc

f)

Mexico

Canada

United States

Historic Projected


Natural Gas Supply Source - U.S.

United States 84%

Canada 15%

LNG 1%


Consensus on Long Term Supply

Source: www.eia.gov/tools/faqs/faq.cfm?id=58&t=8

How much natural gas does the United States have and how long will it last?

100 Years !

Per EIA 2,203 Tcf @ 24 Tcf/year = 92 Years

Per AGA Based on EIA and Colorado School of Mines = 2,170 Tcf = almost 100 year supply

Based on CGA 22,521 Cubic Metres @ 144 cubic metres / year = 156 years in Canada


In 2012, the Low Income Home Energy Assistance Program (LIHEAP provided approximately $3.5 billion to help utility customers pay their energy bills

622,000 jobs are directly involved in exploring for, producing, transporting and distributing natural gas(direct employment)

Economic Impacts

Natural gas distribution employment provided between 116,000 and 122,000 (nearly 20%) of these direct jobs


Commercial Energy Price History & Forecast

EIA Short Term Energy Outlook as of 3/17/16

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Average Retail Commercial U.S. Energy Prices including Short Term EIA Outlook ($/MMBTU)

Heating Oil Commercial Electric Commercial Natural Gas

Electric

Oil

Gas


Gas Wells


Drilling Rig

T raveling Block

Hook

Swivel

Draw Works

Mud Pump Rotary Table

Kelly

Mud Hose

Crown Block

Casing

Drill Pipe

Bit


Directional Drilling

Source: American Petroleum Institute

Gas

Oil Water


North American Shale Gas Deposits

Source: www.cga.ca/wp-content/uploads/2011/12/CGA_bulletin_SUPPLY-Billingual.pdf


Shale – One Source of Natural Gas

Sedimentary Rock - combination of clay, silica, carbonate and organic materials

Typically collects at the bottom of large lakes, deep seas or oceans

Bacteria feeds on the organic material, producing oil and natural gas Dark layers are shale, light layers are

limestone. A writing pen is shown for scale. Source: National Energy Board - Canada A Primer for Understanding Canadian Shale Gas - Energy Briefing Note ISSN 1917-506X


Pump Fluid into the well at high pressure

Pressure creates Fractures in the shale

Filler material mixed with fluid keeps fractures open

Natural Gas then able to move to the well

Basics of Fracking

Source: National Energy Board - Canada A Primer for Understanding Canadian Shale Gas - Energy Briefing Note ISSN 1917-506X

Source: www.neb.gc.ca/clf-nsi/rnrgynfmtn/nrgyrprt/ntrlgs/prmrndrstndngshlgs2009/prmrndrstndngshlgs2009-eng.html#s8


Horizontal Drilling for Shale Gas

Operators have strong economic incentives to ensure that fractures do not propagate beyond the shale

Waste of materials, time, and money

Potential loss of the well and the associated gas

Lead to excess water production from adjacent strata – increasing production costs

Source: www.netl.doe.gov/technologies/oil-gas/publications/EPreports/Shale_Gas_Primer_2009.pdf


Drilling for Shale Gas

Drill Rig Water Storage

Diamond Drill Bit


Producing Shale Well

Well Heads and Sand Traps

Heaters

Control Shed


Natural Gas Storage & LNG


Gas can be stored in huge storage tanks, in underground wells, or in liquefied form

How Gas is Stored and Delivered

CONTINUED

28 © Energy Solutions Center Inc. – All Rights Reserved 28 © Energy Solutions Center Inc. – All Rights Reserved

Underground Gas Storage

http://www.eia.gov/cfapps/ngqs/images/storage_2010.png

CenterPoint Energy has underground storage in MN


LNG is natural gas that has been chilled down to minus 160 degrees Celsius and compressed.

Roughly 600 CF of natural gas can fit in 1 Cubic foot of LNG.

LNG is constantly boiling off vapor.

LNG can be stored or transported.

LNG is often used to meet peak day demands

LNG must be re-gasified before use with consumers

Liquefied Natural Gas (LNG)


LNG Storage Tank

CenterPoint Energy has an LNG Facility in MN


LNG Transportation

Tanker Truck

Rail Car

Tanker Ships

CenterPoint Energy sells LNG in MN


How Gas is Stored and Delivered

Natural Gas Delivery System

Transmission Underground

Storage

City Gate Processing

Plant

1700 Electric Power Plants

Compressor Station

Regulator/ Meter

INTERSTATE TRANSMISSION

LINES

Gathering Lines

Producing Wells

Utility Underground

Storage

66 Million Households

5 Million Commercial Customers Offices, Hospitals, Hotels & Restaurants

Regulator Meter

Regulator Meter

Regulator Meter

Regulator Meter

LDC Regulator

Supplemental Fuels – LNG, LPG

Approx. 2.4 million

Miles in U.S.

Distribution and Service

Pipelines

189,000 Factories And Manufacturers


Transportation System

CITY GATE REGULATORS &

METERING

PRODUCING WELLS

OFF SHORE WELLS

GATHERING LINES

GATHERING LINES

COMPRESSOR STATION

COMPRESSOR STATION

PROCESSING PLANT

UNDERGROUND STORAGE

LNG/LPG

RESIDENTIAL

CUSTOMERS

COMMERCIAL

CUSTOMERS

INDUSTRIAL

CUSTOMERS

TRANSMISSION LINES


Natural Gas Pipeline Operation & Delivery


Pipeline Operations

Compression

Maintenance

Underground Storage

Distribution Operations

Gate Stations

Mains and Services

Metering

Operations


Compressor stations are facilities that assists the transportation process of natural gas from one location to another

Natural gas, transported through a gas pipeline, needs to be re-pressurized at intervals of about 40 to 100 miles

Gas Compressor Station


2.4 million mile underground system

2.1 million LDC, 300,000 Transmission

Interstate Pipeline Network

Source: AGA


On-going Maintenance Projects

Composite Wraps

Cast Iron Joint Sealing Robots

Cast Iron Replacement Programs

Beltline replacement project underway in twin Cities for safety and reliability

Pipeline Maintenance


Facility owned and operated by the interstate pipeline and interconnects the long-distance interstate pipeline with a local distribution network

Gate Stations

Town Border Stations are composed of valves, pipes, and pressure reduction devices to allow gas to be delivered safely to customers

Odorant is often added at the City gate Station


Mains and Services

Gas Main Line

Customer Service Line

Customer Meter & Regulator

Customer Meter & Regulator


Winter Operation & Peak Demand


Natural Gas Demand Peaks in Winter

0%

20%

40%

60%

80%

100%

Natural Gas Demand Peaks in

the Winter


The Gas Utility meets peak demand in a number of ways

Uses base load from pipeline

Draws from gas storage

Potentially draw down line pack pressure

Potentially interrupts customers on interruptible rates

CenterPoint Energy also meets peaks with LNG

CenterPoint Energy uses Propane-Air facilities

Meeting Peak Day Requirements


Natural Gas in Underground Storage

Source: U.S. Energy Information Administration, Natural Gas Monthly and Weekly Natural Gas Storage Report. Note: Data for March 31, 2015 is an interpolated value, based on the Weekly Natural Gas Storage Report. http://www.eia.gov/naturalgas/weekly/archive/2015/04_09/index.cfm

Start of winter

Withdrawals

End of withdrawal season


Natural Gas Measurement


LDC (Gas Utility) buys natural gas in Therms

Buy on heating value

LDC meter measures gas usage in Cubic Feet (U.S.) 1 British Thermal Unit (BTU) is the

amount of heat required to raise 1 Pound of water by 1°F at atmospheric conditions

CenterPoint bills in Therms 1 Therm = 100,000 BTU

Natural Gas Measurement


Natural Gas Rates


Regulatory authorities allow rates to vary within classes based on distinctions in the service rendered

The two most common types of service distinctions are

Type of service

Quality of the service provided to the customer

Rate Design is Based on Service Distinctions


Bundled Natural Gas Sales and Distribution Service

Prior to the 1980s, nearly all natural gas sold to customers was sold as a bundled product of natural gas commodity and natural gas delivery service

Utilities owned the gas commodity and passed through the commodity cost

In addition, utilities recovered the cost of service for the distribution service they provided to customers

Distinctions Based on Type of Service Sales Service


Unbundled Transportation Service Customers who wish to purchase their natural gas

commodity from a third party supplier or marketer take transportation service from the utility, which delivers but does not buy the gas

The administrative costs of acquiring and managing gas supply are removed from the transportation cost of service

The customer class that makes the greatest use of transportation service is the industrial class

Distinctions Based on Type of Service Transportation Service


Firm Service

Firm service comes with the utility’s commitment to provide all the natural gas demanded by the customer, even at times of peak usage and strained capacity

Distinctions Based on Quality of Service


Interruptible Service Interruptible service is a lesser quality service that may be cut

off at the utility’s discretion.

Many industrial and some larger commercial customers have the ability to shut down operations or switch to an alternate fuel during times that the utility would be strained to serve all customers equally.

By interrupting these customers, the utility is able to serve its residential and smaller commercial customers without having to invest in additional facilities that might be used only during extremely peak times.

For this lesser service, the customer pays a reduced rate.

Distinctions Based on Quality of Service


Advantages of Natural Gas


Natural gas is the cleanest burning fossil fuel

When burned, it produces virtually no emissions of sulfur dioxide or particulate matter and far lower levels of "greenhouse" gases and nitrogen oxides than oil or coal

Unlike the oil, coal and nuclear processes, the natural gas process produces virtually no solid waste

Natural gas is delivered to the customer with around 90% efficiency, compared to electricity which is around 30%

Gas and the Environment


Electricity:

Natural Gas:

Site vs. Source


Domestic Product

Approximately 85 % of natural gas is produced in the US with almost all the remainder coming from Canada

Reliable

Ample supply

Competitively priced

Environmentally friendly

Greater comfort

Advantages of Natural Gas


Questions???

5/25/16 · per aga based on eia and colorado school of mines = 2,170 tcf = almost 100 year supply...

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