Click Here to Add Date February 11, 2015. Introduction An Alternative Perspective of Compression Recycling of Residue Gas Relative Costs of Dehydration

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UNBUNDLING - A CLOSER LOOK AT COMPRESSION &

DEHYDRATIONFebruary 11, 2015

Mark R. Lambert&

John W. Emory

2

Agenda

Introduction

An Alternative Perspective of Compression

Recycling of Residue Gas

Relative Costs of Dehydration

Q&A

3

Functional Allocation of Compression

An Alternative Perspective of Compression

4

Transportation & Processing Compression

BOOSTING COMPRESSI

ON

CRYO UNIT

ARMS-LENGTH THIRD PARTY TRANSPORTATION

100 psig

400 psig

375 psig

750 psig

PLANT INLET COMPRESSION

RESIDUE COMPRESSOR

700 psig

900 psig

700 psig

(Royalty Measurement

CDP Point)

COMPRESSOR TWO

COMPRESSOR ONE

700 psig7# H2O2% CO2

300 psig

COMPRESSOR FOUR

100 psig

600 psi processing25 psi tran

COMPRESSOR THREE

50 psi tran

GAS PLANT PROCESSING

GAS MAINLINE TRANSPORTATION

FIELD GATHERING SYSTEM

Transportation and Processing Example

5

RoyaltyMeasurement

Point(ie. WH or CDP)

Compressor One

TransportLosses

CompressorTwo

TransportLosses

CompressorThree

ProcessingLosses

CompressorFour

0

100

200

300

400

500

600

700

800

900

1,000

Pres

sure

, psig

Mainline Pressure Requirement

Transport Losses

Transport Losses

Processing Losses

Pipeline (Transportation) Plant (Processing)

Compression:From Wellhead to Mainline

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ONRR Application of MCR For Compression

ONRR Methodology:

Compression required to reach mainline pressure is not allowed.

Compression is allowed once mainline pressure is achieved.

Residue “Boosting” compression at plant is not allowed (per regulation).

However, ONRR methodology:

Does not consider actual function of compression

Eliminates actual transportation and processing costs which are allowable deductions

Results in different outcomes based on location and arrangement of compressors and/or type of plant

Lessee bears costs for lessor’s value enhancement (i.e., lessee pays twice)

7


RoyaltyMeasurement


Compressor One

TransportLosses

CompressorTwo

TransportLosses

CompressorThree

ProcessingLosses

CompressorFour

0

100

200

300

400

500

600

700

800

900

1,000

Pres

sure

, psi

g


Transport Losses

Transport Losses

Not Allowed:Below Mainline

PressureNot Allowed:

“Boosting”


Processing Losses

Allowable Compression Per ONRR Methodology

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Allocate compression to:– Meeting mainline pressure requirements– Transportation function– Processing function

Considers “function” of compression regardless of location within the system.

Recognizes the transportation and processing function of compression that exceed the services necessary to place the gas into marketable condition.

RoyaltyMeasurement


Compressor One

TransportLosses

CompressorTwo

TransportLosses

CompressorThree

ProcessingLosses

CompressorFour

0

100

200

300

400

500

600

700

800

900

1,000

Pres

sure

, psig

Not Allowed:Below Mainline Pressure



Transport Losses

Transport Losses

Processing Losses

Not Allowed:Below Mainline Pressure

Allowed: Compression for Transportation & Processing

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Allowable Compression – Functional Allocation


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Methodology Comparison

COMPRESSION

CompressorNumber

SuctionPressure

(psig)

DischargePressure

(psig)

PressureDifference

(psi)

One 100 400 300

Two 375 750 375

Three 700 900 200

Four 300 700 400

Total 1175

PER ONRR

Allowable Calculation

Allowed %

Not MC 0%

(750 – 700)750 6.67%

Processing 100%

“Boosting” 0%

225

FUNCTIONAL ALLOCATION

AllowableCalculation Allowed %

(400 – 300)(400 – 100) 33.33%

(750 – 375)(750 – 375) 100%

Processing 100%

“Boosting” 0%

675

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Allocation of Residue Gas Recompression

The ONRR has labeled residue gas recompression as “boosting,” which is not an allowable deduction per the regulations (CFR 1202.151(b)).

Residue gas recompression is an integral part of many NGL extraction facilities, especially those that incorporate turbo-expand or J-T technology.– Without the recompressors, gas would not flow through the plant, a pressure drop across the expander

would not be created, the gas would not refrigerate and NGLs would not condense from the gas stream

Residue gas recompression is used to restore energy lost from processing for NGL extraction.

To the extent that the inlet gas has already achieved marketable condition, residue gas recompression is a processing function.

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Allowable Percentage Formula

ONRR’s formula for compressors underestimates allowable percentage.

ONRR Formula*:

Compressor Two: (750 – 700) = 6.67% 750

Allowable percentage should be based on pressure

differential.

Compressor Two: (750 – 700) = 13.33%(750 – 375)

(Discharge Pressure of Unit – Marketable Condition Pressure)(Discharge Pressure of Unit)*% =

* From ONRR “How to Calculate a Transportation UCA.”

(Discharge Pressure of Unit – Marketable Condition Pressure)(Discharge Pressure of Unit – Suction Pressure of Unit)% =

13

Allowable Percentage Formula Comparison

PER ONRR

Formula Percentage

Allowable (750 – 700)750 6.67%

Non-Allowable

(700 – 375)750 43.33%

Total 50%

PRESSURE DIFFERENTIAL

AllowableCalculation Percentage

Allowable (750 – 700)(750 – 375) 13.33%

Non-Allowable

(700 – 375)(750 – 375) 86.67%

Total 100%

Results from a comparison of the two methodologies supports the approach of basing the allowable percentage on the pressure differential.

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Questions?

15

Residue Recycle

Recycling of Residue Gas

16

Residue Recycle

Federal regulation (CFR 1202.151(b)):“A reasonable amount of residue gas shall be allowed royalty free for operation of the processing plant, but no allowance shall be made for boosting residue gas or other expenses incidental to marketing, except as provided in 30 CFR part 1206.”

A basic design characteristic of turbo-expander plants is the necessity to recompress the residue gas due to the substantial pressure drop incurred to achieve cryogenic temperatures.

Since its original development, various improvements to the design of turbo-expander plants have allowed increased recovery of NGLs.

17

Residue Recycle

Relative Recovery Ethane Recovery *

Many design improvements utilize the recycling of residue gas back to the demethanizer.

* Derived from Figure 16-23 in Section 16 “Hydrocarbon Recovery” of the Gas Processors Supplier Association Engineering Data Book, 12th Edition

Maximum Ethane Recovery

Conventional 80%

Residue Recycle 95%

Gas Subcooled Process 93%

Cold Residue Recycle 98%

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Residue Recycle

Conventional turbo-expander flow diagram*:

* Figure 16-19 from Section 16 “Hydrocarbon Recovery” of the Gas Processors Supplier Association Engineering Data Book, 12 th Edition (with PWM adjustments).

Residue

Compression

19

Residue Recycle

Turbo-expander flow diagram with residue recycle*:

* Figure 16-20 from Section 16 “Hydrocarbon Recovery” of the Gas Processors Supplier Association Engineering Data Book, 12 th Edition

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Residue Recycle

Amount of residue gas recycled back to the demethanizer can vary from 0% to greater than 25%.

The increase in total residue gas flow (net residue gas to pipeline plus recycle) requires additional residue gas recompression horsepower.

The incremental recompression horsepower should be allowable as a processing cost consistent with ONRR regulations.

– i.e. For a gas plant where 25% of the total residue gas recompressor flow is recycled back to the demethanizer, 25% of residue gas recompression costs and fuel are directly associated with processing.

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Residue Recycle

Questions?

22

Dehydration

Relative Costs of Dehydration

23

Dehydration

There are two main technologies utilized to dehydrate natural gas:– Glycol absorption– Molecular sieve adsorption

Glycol absorption – Absorption of water from natural gas through contact with a glycol such as

TEG (tri-ethylene glycol)– Practical for bulk water removal– Typically only effective to reduce the water content to about 4-5 lbs. of

water / mmscf

Molecular sieve adsorption – Adsorption of water from natural gas through the use of a solid material

such as molecular sieve.– Reduces the water content of natural gas to essentially zero (“bone dry”),

which is a requirement for cryogenic processing.– Significantly more expensive than glycol absorption (up to 10x).

24

Dehydration

A typical dehydration system for a turbo-expander or J-T plant might consist of glycol units (either in the field and/or at the plant) upstream of a molecular sieve system (typically at the plant).

The glycol units will typically achieve pipeline water content specification (i.e. 7 lbs./mmscf).

It is not uncommon for processors to forego glycol dehydration and utilize a mole sieve system only.

ONRR’s methodology allows the deduction of dehydration costs once the MCR has been met.

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Dehydration Allowable Percentage

The linear approach suggested by the ONRR tends to allow relatively small percentages of dehydration costs to be deducted.

ONRR’s methodology*:

Example: » 38 lbs. / mmscf inlet » 0 lbs. / mmscf outlet

» 7 lbs. / mmscf pipeline specification

Allowable Percentage:

(Marketable Condition Specification– Outlet Measurement)(Inlet Measurement)**% =

(7 - 0)(38) = 18.0% Allowed

* From ONRR “How to Calculate a Transportation UCA.”** The denominator should be ‘(Inlet Measurement – Outlet Measurement)’ to properly allocate.

26

Dehydration

The ONRR methodology is based on water content and is not consistent with the relative costs of the dehydration functions

Allowable percentages for dehydration costs should be based on the relative costs to achieve marketable condition and to facilitate cryogenic processing.

Allocating based on relative costs results in a more accurate functional allocation.

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Dehydration Allowable Percentage: Example

Example: Glycol and Molecular Sieve units– 250 mmscfd– 38 lbs. / mmscf inlet – 0 lbs. / mmscf outlet– 7 lbs. / mmscf pipeline specification

– Estimated capital cost of a glycol unit to reduce the water content from 38 lbs. / mmscf to 7 lbs. / mmscf:

• $2,500,000

– Estimated capital cost of a molecular sieve to reduce the water content from 7 lbs. / mmscf to 0 lbs. / mmscf:

• $10,000,000

– Allowable Percentage: $10,000,000 x 100% = 80.0% (based on relative costs) $12,500,000

– Allowable Percentage: (7 – 0) x 100% = 18.0%

(based on ONRR methodology) 38

New slide

28

Dehydration

For a system without upstream glycol units, the relative incremental cost to remove 3-10x as much water should be considered.

The cost of a molecular sieve system is significant, even if a glycol unit is installed upstream of the molecular sieve.

ONRR’s linear methodology is not reflective of dehydration costs associated with MCR and for processing; thus another methodology should be used.

29

Dehydration Allowable Percentage: Example

Example: Molecular Sieve Unit Only– 250 mmscfd– 38 lbs. / mmscf inlet – 0 lbs. / mmscf outlet– 7 lbs. / mmscf pipeline specification

– Actual capital cost of a molecular sieve to reduce the water content from 38 lbs. / mmscf to 0 lbs. / mmscf:

• $11,300,000

– Estimated capital cost of a molecular sieve to reduce the water content from 7 lbs. / mmscf to 0 lbs. / mmscf:

• $10,000,000

– Allowable Percentage: $10,000,000 x 100% = 88.5% (based on relative costs) $11,300,000

– Allowable Percentage: (7 – 0) x 100% = 18.0% (based on ONRR methodology) 38

30

Dehydration

Questions?

Documents

Click Here to Add Date February 11, 2015. Introduction An Alternative Perspective of Compression Recycling of Residue Gas Relative Costs of Dehydration