EBF 301
Global Finance for the Earth, Energy, and Materials Industries

Reading Assignment: Lesson 6


Reading Assignment:

From Wellhead to Burnertip

While reading each of these short descriptions, try to visualize the movement of the natural gas through each stage and what exactly is occurring. We will go into more detail for each of these steps in the mini-lectures.

Read the following sections on the NaturalGas.org website.

Please go to this page "Understanding Henry Hub" from the CME Group. Read the content on the page and watch the video (2:59).

Optional Reading and Viewing


Natural Gas 101 Video (3:38 minutes)

Click for a transcript of the Natural Gas 101 Video.

Natural gas-- natural gas is primarily methane or CH4 with smaller quantities of other hydrocarbons. It was formed millions of years ago when dead organisms sunk to the bottom of the ocean and were buried under deposits of sedimentary rock. Subject to intense heat and pressure, these organisms underwent a transformation in which they were converted to gas over millions of years.

Natural gas is found in underground rocks called reservoirs. The rocks have tiny spaces called pores that allow them to hold water, natural gas, and sometimes oil. The natural gas is trapped underground by impermeable rock called a cap rock and stays there until it is extracted.

Natural gas can be categorized as dry or wet. Dry gas is essentially gas that contains mostly methane. Wet gas, on the other hand, contains compounds such as ethane and butane in addition to methane. These natural gas liquids or NGLS for short can be separated and sold individually for various uses such as in refrigerants and to produce products like plastics.

Conventional natural gas can be extracted through drilling wells. Unconventional forms of natural gas like shale gas, tight gas, sour gas, and coalbed methane have specific extraction techniques. Natural gas can also be found in reservoirs with oil and is sometimes extracted alongside oil. This type of natural gas is called associated gas. In the past, associated gas was commonly flared or burned as a waste product, but in most places today it is captured and used.

Once extracted, natural gas is sent through a small pipeline called gathering lines to processing plants, which separate the various hydrocarbons and fluids from the pure natural gas to produce what is known as pipeline quality dry natural gas before it can be transported. Processing involves four main steps to remove the various impurities-- oil and condensate removal, water removal, separation of natural gas liquids, sulfur and carbon dioxide removal. Gas is then transported through pipelines called feeders to distribution centers or is stored in underground reservoirs for later use.

In some cases, gas is liquefied for shipping in large tankers across oceans. This type of gas is called liquefied natural gas or LNG. Natural gas is mostly used for domestic or industrial heating and to generate electricity. It could also be compressed and used to fuel vehicles and is a feedstock for fertilizers, hydrogen fuel cells, and other chemical processes.

Natural gas development, especially in the United States, has increased as a result of technological advances in horizontal drilling and hydraulic fracturing.

When natural gas is burned, there are fewer greenhouse gas emissions and air pollutants when compared to other fossil fuels. In fact, when used to produce electricity, natural gas emits approximately half the carbon emissions of coal. Despite fewer emissions, natural gas is still a source of CO2.

In addition, methane is a potent greenhouse gas itself, having nearly 24 times the impact of CO2. During the extraction and transportation process, natural gas can escape into the atmosphere and contribute to climate change. Natural gas leaks are also dangerous to nearby communities because it is a colorless, odorless, highly toxic, and highly explosive gas. That's natural gas.

Credit: Student Energy

A History of Natural Gas Video (11:57 minutes)

Click for a transcript of A History of Natural Gas Video.

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Credit: Chesapeake Energy

Natural Gas from Shale Video (9:22 minutes)

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Credit: Chevron

Using Hydraulic Fracturing and Horizontal Drilling for Natural Gas Production Video (3:09 minutes)

Click for a transcript of the Using Hydraulic Fracturing and Horizontal Drilling for Natural Gas Production video.

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Credit: Chevron

Natural Gas Pipelines Operations Video (8:45 minutes)

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Credit: Spectra Energy

Natural Gas Liquids Video (11:14 minutes)

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Credit: Penn State Extension

How a Gas Turbine Works Video (2:39 minutes)

Click for a transcript of the How a Gas Turbine Works video.

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Credit: GE Power

How does a Steam Turbine Work? Video (5:42 minutes)

Click for a transcript of the How does a Steam Turbine Work? video.

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Credit: Learn Engineering

Liquefied Natural Gas (LNG) 101 Video (2:23 minutes)

Click for a transcript of the Liquified Natural Gas 101 video.

LNG, Liquefied Natural Gas. LNG is natural gas that has been cooled to at least minus 162 degrees Celsius to transform the gas into a liquid for transportation purposes.

To understand why liquefying natural gas is important, we first need to understand natural gas's physical properties. Methane has a very low density and is therefore costly to transport and store. When natural gas is liquefied, it occupies 600 times less space than as a gas.

Normal gas pipelines can be used to transport gas on land or for short ocean crossings. However, long distances and overseas transport of natural gas via pipeline is not economically feasible. Liquefying natural gas makes it possible to transport gas where pipelines cannot be built, for example, across the ocean.

The four main elements of the LNG value chain are, one, exploration and production, two, liquefaction, three, shipping, four, storage and regasification. At the receiving terminal, LNG is unloaded and stored before being regasified and transported by pipe to the end users.

The demand for LNG is rising in markets with limited domestic gas production or pipeline imports. This increase is primarily from growing Asian economies, particularly driven by their desire for cleaner fuels and by the shutdown of nuclear power plants.

The largest producer of LNG in the world is Qatar with a liquefaction capacity in 2013 of roughly one-quarter of the global LNG production. Japan has always been the largest importer of LNG and in 2013 consumed over 37% of global LNG trade.

The extraction process also has environmental and social issues to consider. LNG projects require large energy imports for liquefaction and regasification and therefore have associated greenhouse gas emissions.

Spills pose concerns to local communities. There have been two accidents connected to LNG. But in general, liquefaction, LNG shipping, storage, and regasification have proven to be safe. LNG projects require large upfront capital investments, which can be a challenge in moving projects ahead.

That's LNG.

Credit: Student Energy