a Midstream Fundamentals in the Oil and Gas Value … Midstream Fundamentals in the Oil and Gas Value Stream a March 30, 2016 About the Rocky Mountain Pipeliners Club • Formed in

The Rocky Mountain Pipeliners Club Presents:

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Midstream Fundamentals in the Oil and Gas Value Stream

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March 30, 2016

About the Rocky Mountain Pipeliners Club

• Formed in April 2015 to provide:– Networking Opportunities– Scholarships– Foster Education and Training

It is our belief that the most important commodity in our industry is our workforce. We serve our members and constituents in a number of

ways, but the club’s primary purpose is to provide scholarships to men and women looking to advance their careers through education. We differentiate ourselves in that we support licensed field workers as much or more than degreed professional

employees.

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Midstream Fundamentals

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TYPES OF FLUIDSMidstream incorporates the transportation of a variety of fluids utilized in the energy industry, including: Crude Oil Natural Gas Natural Gas Liquids Biofuels Carbon Dioxide Produced Water Refined Products

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Pipelines

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Pipelines

• Components• Engineering• Economics• Operations• Control• Maintenance• Construction

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Pipelines - Components

• Pipe• Coatings• Fittings• Valves• Actuators• Pump & Compressors• Prime Movers• Meters

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Pipelines - Engineering

• Hydraulics• Route Selection• Line Size, Wall Thickness• Pump Selection• Flow & Pressure Control• Storage• Station Layout

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Pipelines - Economics

• $/BBL• Investment Decisions

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Pipelines - Economics

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Pipelines - Operations

• Measurement• Product Quality• Control Room• Scheduling• Pump Station Control

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Pipelines - Operations

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Pipelines - Control

• SCADA• Pressure Control Valve• Variable Frequency Drive• Leak Detection

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Pipelines - Maintenance

• Product Releases – Third Party Damage, Corrosion

• Damage Prevention Program• Integrity Management Plans• Repairs• Hydro-static Testing• Internal Line Inspections

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Pipelines - Construction

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Pipelines - Construction

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Measurement

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Measurement• Goal

– Volume In = Volume Out

• Applications– Custody Transfer– Check Meters/Leak Detection

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Measurement

• Must Measure– Volume– Pressure– Temperature

• May Use– Quality Sampling– Prover

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Measurement

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Measurement

• Meter Types– PD– Turbine– Orifice– Ultrasonic– Coriolis

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Measurement

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PROCESSING

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PROCESSINGMidstream processing may be required to accommodate third party crude oil or natural gas specifications. This may include:

Midstream Crude Oil Processingo Oil / Water Separationo Crude Oil Polishing / Stabilization

Midstream Natural Gas Processingo Vapor-Liquid Separationo Dehydration (Glycol, Dry Desiccant)o Gas Sweetening

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PROCESSINGMidstream Natural Gas Processing Vapor-Liquid Separation

o 3-Phase Separation: Gas / Hydrocarbon Liquid / Produced Watero Typical Equipment Slug Catcher – Knockout Bulk Liquids Vortex Separator – Knockout Fine

Liquids Coalescing Filters / Separators –

Knockout Fine Mists

1,000 bbl Slug Catcher Holms Mesa Compressor Station 32

PROCESSINGMidstream Natural Gas Processing Glycol Dehydration

o Gas Initially Saturated in Watero Counter-Current Flow of Glycol Gas Flows Up The Tower Glycol Flows Down The Tower

o Packed Bed or Trayso Operates @ High Pressure &

Temperature (>1,000 psig, 120 oF)o Reduce Water Content ~4 lbm H2O / MMSCF Gas

Glycol Dehydration System PetroWiki

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PROCESSINGMidstream Natural Gas Processing Dry Desiccant Dehydration

o Remove More H2O Than GlycolDehydration - ~Low PPM Levels

o Desiccant Beds Must Be Regenerated

Desiccant System PetroWiki

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PROCESSINGMidstream Natural Gas Processing Gas Sweetening

o Required for High Levels of H2S and CO2

o Three (3) Common Techniqueso Amine, SulfaTreat, UltraFab

Gas Sweetening - Amineo Similar Process to Dehydrationo Counter-Current Flowo Packed Bed or Trayso Gas Leaves Tower Saturated

in H2O

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PROCESSINGMidstream Natural Gas Processing Gas Sweetening - SulfaTreat

o Physical Absorption (Iron Oxide)o Reacts with H2S to Form Pyriteo Once Chemical is Used, Must Be Replaced

Gas Sweetening - UltraFabo Flooded Tower – Triazine Reacts with H2So Once Chemical is Used, Must Be Replaced

SulfaTreat System West Compressor Station

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Storage

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BULK STORAGEThere are various types of bulk storage equipment / methods utilized in Midstream. Liquids

o Atmospheric Storage API 650 Bulk Storage Tanks – Fixed Roof, Floating Roof (Internal / External), 500

Bbl to 350+ MBbl API 12F Bulk Storage Tanks – Fixed Roof, 90 Bbl to 750 Bbl Typical

o Pressurized Storage Bullet Tanks – 18,000 gallon to 90,000 gallon Pressurized Spheres – 1,000 to 75,000 Bbls

Natural Gaso Underground Storage – Salt Caverns, Mines, Acquifers, Depleted Reservoirs,

Hard-Rock Caverns

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BULK STORAGEAtmospheric Storage API 650 & 12F Fixed Roof Tanks

o Maximum Internal Pressure of 2.5 psig

o Tanks Must Breath During Normal Operations

o 500 Bbl to 350+ MBbl

Douglas Rail Facility, Douglas WY140,000 Bbl API 650 Tanks

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BULK STORAGEAtmospheric Storage API 650 External Floating Roof Tanks

o Used for Low Vapor PressureProducts (i.e. Crude Oil)

o Minimal Vapor Losseso Roof Floats on Liquid Surfaceo Open Roof so Rain & Snow Can

Accumulate

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BULK STORAGEAtmospheric Storage API 650 Internal Floating Roof Tanks

o Combination of Fixed and FloatingRoof Design

o Minimal Vapor Losseso Roof Floats on Liquid Surfaceo External Roof Prevents

Accumulation of Precipitation onFloating Roof

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BULK STORAGELiquid Storage - Pressurized Bullet Tanks

o ASME Section VIIIo High Vapor Pressure Products

o Natural Gas Liquids (“NGL”)’so Refined Products

o No Breathing Requiredo 18,000 to 90,000 gallono 250 psig @ 125 oF

Pressurized Sphereso 1,000 – 75,000 Bbl

Centennial Gas Plant, Briggsdale CO30,000 gallon

Propane Sphere - Wikipedia42

BULK STORAGENatural Gas – Underground Storage Underground Storage

o Salt Cavernso Mineso Aquiferso Depleted Reservoirso Hard-Rock Caverns

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Marketing

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Creating Value Through Marketing

• Minimize your Differential, Maximize Well Head Price Realizations

Differential = Index Pricing Minus Transportation Fees,Minus Processing or Terminal FeesPlus/Minus Quality & Quantity Adjustments (BTU or API Gravity)

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Natural Gas Value ChainWell Head Pipeline Processing Plant

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Residue Gas Natural Gas Liquids “NGL’s”

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Crude Oil Value Chain

Well Head

Pipeline, Truck, Rail

Terminal or Storage

Hubs

Refining

Diesel Gasoline Jet Fuel 47

Index Pricing

• NYMEX - New York Mercantile Exchange

• WTI - West Texas Intermediate– Priced at Cushing, Oklahoma.The largest

storage facility, most liquid market (most buyers and sellers)

• Henry Hub - Erath, Louisiana– Connects to many interstate pipelines and

can transmit gas to many end-users.

• Mt. Belvieu - Mont Belvieu, Texas– Largest NGL Processing Hub

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Fees

• Infield Gas Trans.– Gathering ($/Mcf)– Compression ($/Mcf)

• Gas Processing– Transportation ($/Mcf)– Fractionation ($/Gal)– Fuel ($/Mcf or % of

Inlet)• Or

– Percent of Proceeds (% of Sales Revenue)

• Infield Crude Trans.– Pipeline Gathering ($/bbl)– LACT Metering ($/bbl)– Trucking ($/bbl)

• Long Haul – Terminalling/Pump

Over ($/bbl)– Storage ($/bbl/month)– Long Haul Pipeline

($/bbl)– Rail ($/bbl)

Natural Gas Crude Oil

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Natural Gas Processing - PoP ExampleNo Processing Processing

Prod

uctio

n WH Volume 1,000 1,000BTU - Wet Well Head 1,350 BTU - Dry, Net of NGLs 950Gallons Per Million (GPM) 10

Index Price ($/Mmbtu) $2.00 $2.00

Eco

nom

ics

Transportation ($/Mcf) -$0.50 -$0.50Compression ($/Mcf) -$0.05 -$0.05Fuel (% of Inlet) 2%Fractionation ($/Gal) -$0.10PoP (25% of NGL Value) -$0.74PoP (25% of Residue Value) -$0.34NGL Processing Uplift $2.21

Net WH Price ($/Mcf) $2.15 $3.22

Processing EconomicsComponent % of Gallons Gallons $/Gallon $/Component Frac Fee 25% PoP Net Revenue $/WH McfEthane 40% 3,800 $0.17 $646 $ (380) $ (67) $ 200 $0.20 Propane 25% 2,375 $0.45 $ 1,069 $ (238) $(208) $ 623 $0.62 IsoButane 12% 1,140 $0.55 $627 $ (114) $(128) $ 385 $0.38 Normal Butane 11% 1,045 $0.55 $575 $ (105) $(118) $ 353 $0.35 Natural Gasoline 12% 1,140 $0.86 $980 $ (114) $(217) $ 650 $0.65

Residue Gas Economics

Component Mcf less Fuel MMBtus $/Btu RevenueTrans Fee Comp Fee 25% PoP Fee Net Revenue

$/WH Mcf

Methane 980 931 $2.00 $ 1,862 $ 466 $49 $ 337 $1,011 $ 1.01

Processing can add immense value to your gas stream

+50% uplift

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THANK YOU CSM!

• Andy Siegfried - President Zion Engineering

• Quinn Bailey - COO Zion Engineering

• Stephen Parmentier - Project Engineer Vanderpool Pipeline Engineers

• Josh Stevens - Director Finance 3 Bear Energy, President Rocky Mountain Pipeliners Club

1550 LarimerSuite 774

Denver, CO 80202www.rmpipeliners.org

[email protected]

Documents

a Midstream Fundamentals in the Oil and Gas Value … Midstream Fundamentals in the Oil and Gas Value Stream a March 30, 2016 About the Rocky Mountain Pipeliners Club • Formed in