This graphic illustrates the various steps in the process of getting crude oil and natural gas from the wells all the way to market. As you can see, there is wellhead aggregation (gathering), the "cleaning" of the raw stream, and production of valuable natural gas liquids (processing or refining), the transportation and storage, and finally, the distribution and retail delivery to the various end-users. As you will see, each step along this "path" will have some costs associated with it and most will represent an opportunity for generating revenue. These will add to the total profit that can be derived from the initial wellhead product.
At the successful completion of this lesson, students should be able to:
This lesson will take us one week to complete. There are a number of required activities in this module. The chart below provides an overview of the activities for Lesson 4. For assignment details, refer to the location noted.
All assignments will be due Sunday, 11:59 p.m. Eastern Time.
REQUIREMENT | LOCATION | SUBMITTING YOUR WORK |
---|---|---|
Reading Assignment: Natural Gas - From Wellhead to Burner Tip | Reading Assignment page | No submission. |
Mini-lecture: Production and Gathering | Mini-lecture: Production and Gathering page | No submission. |
Mini-lecture: Processing and Natural Gas Liquids | Mini-lecture: Processing and Natural Gas Liquids page | No submission. |
Mini-lecture: Transmission Pipelines | Mini-lecture: Transmission Pipelines page | No submission. |
Mini-lecture: Storage | Mini-lecture: Storage page | No submission. |
Mini-lecture: End-Users | Mini-lecture: End-Users page | No submission. |
Lesson 4 Activity | Lesson 4 Activity page | Submitted through the course blog |
Lesson 4 Quiz | Summary and Final tasks page | Submitted through ANGEL. |
Discussion forum participation | Course Blog | Submitted through the course blog |
If you have any questions, please post them to our Questions? discussion forum (not e-mail), located under the Communicate tab in ANGEL. The TA and I will check that discussion forum daily to respond. While you are there, feel free to post your own responses if you, too, are able to help out a classmate.
Please also download and review the American Association of Petroleum Landmen Form 610 - 1989 [3] before proceeding.
The first step in the movement of natural gas from the “wellhead-to-burnertip” is to determine the "deliverability," or sales volume of the well and then get it connected to a pipeline. This is normally done by midstream companies who gather wells together and deliver the gas to processing plants or directly into transmission pipelines.
The following mini-lecture explains these concepts in detail.
While watching the Mini-Lecture, keep in mind the following key points and questions:
Having made the necessary gathering connections, raw natural gas needs to be purified of all contaminants and inert gases and have heavy hydrocarbons removed to make it safe for commercial use. This takes place at a processing plant where the resultant residue gas is almost 98% pure methane and is what is known as “marketable” natural gas. In addition, processing plants remove the more volatile hydrocarbons, or “natural gas liquids,” (NGLs) which can then be sold separately. This is also a safety issue; end-users of natural gas cannot have more than methane in their supply because explosions could occur.
The following mini-lecture walks through each step of this process and explains the nature of natural gas liquids (NGLs) in detail.
While watching the Mini-Lecture, keep in mind the following key points and questions:
Once the raw natural gas stream has been processed, it is now “commercial grade,” or “pipeline quality,” natural gas. The outlet, or residue, side of the processing plant delivers the gas to the transmission pipelines. The primary function of transmission pipelines is to move the gas from the producing basins to the market areas.
The following mini-lecture will illustrate the function and operation of the transmission pipeline systems.
While watching the Mini-Lecture, keep in mind the following key points and questions:
Natural gas storage facilities provide the industry with flexibility. During times of “peak” demand such as harsh winters or extremely hot summers, utilities can rely on supplies stored beneath the ground. Likewise, during times of low demand, excess supplies can be stored for when they are needed. For savvy marketers, storage capacity can be used to take advantage of the price fluctuations in the market. There are three main types of storage facilities: depleted oil & gas reservoirs, salt caverns, and aquifers.
The following lecture covers the types of natural gas storage, traditional and current uses, and the industry players who use storage capacity and why.
While watching the Mini-Lecture, keep in mind the following key points and questions:
The final step in the logistics chain for natural gas is delivery to the burner-tip. This can be accomplished by Local Distribution Companies (“gas companies”), or pipelines can deliver gas directly to connected end-users. We generally classify the end-users as utility, residential, commercial, and industrial.
The following lecture explains the function of Local Distribution Companies (LDCs) and presents various other natural gas end-user groups.
While watching the Mini-Lecture, keep in mind the following key points and questions:
1) Using the Energy Commodities Logistics diagram, identify areas of cost and/or revenue along the value chain for natural gas. (E.G. – production is a cost but also represents revenue when it is sold.)
2) Using the Energy Commodities Logistics diagram, identify areas of cost and/or revenue along the value chain for crude oil.
Post your answers on the course Blog. Also be sure to read and comment on other students' blog entries.
You will be graded on the quality of your participation. See the grading rubric for specifics on how this assignment will be graded.
All pipelines are regulated by the Federal Energy Regulatory Commission, which has rules for how they conduct business. The services that pipelines provide and the rates they charge must be posted on their websites. These requirements came about after years of heavy regulation, which eventually led to de-regulation of the industry and a more competitive environment. Lesson 5 will trace the history of this development.
You have reached the end of Lesson 4. Double-check the list of requirements on the first page of this lesson to make sure you have completed all of the activities listed there before beginning the next lesson. (To access the next lesson, use the link in the "Course Outline" menu at left.