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Natural Gas From Well Head to Burner

Exploration

The practice of locating natural gas and petroleum deposits has been transformed dramatically in the last 20 years with the advent of extremely advanced, ingenious technology. In the early days of the industry, the only way of locating underground petroleum and natural gas deposits was to search for surface evidence of these underground formations. Those searching for natural gas deposits were forced to scour the earth, looking for seepages of oil or gas emitted from underground before they had any clue that there were deposits underneath. However, because such a low proportion of petroleum and natural gas deposits actually seep to the surface, this made for a very inefficient and difficult exploration process. As the demand for fossil fuel energy has increased dramatically over the past years, so has the necessity for more accurate methods of locating these deposits.

Sources of Data

Technology has allowed for a remarkable increase in the success rate of locating natural gas reservoirs.

Geological Surveys

Exploration for natural gas typically begins with geologists examining the surface structure of the earth, and determining areas where it is geologically likely that petroleum or gas deposits might exist. It was discovered in the mid 1800s that 'anticlinal slopes' had a particularly increased chance of containing petroleum or gas deposits. These anticlinal slopes are areas where the earth has folded up on itself, forming the dome shape that is characteristic of a great number of reservoirs. By surveying and mapping the surface and sub-surface characteristics of a certain area, the geologist can extrapolate which areas are most likely to contain a petroleum or natural gas reservoir. The geologist has many tools at his disposal to do so, from the outcroppings of rocks on the surface or in valleys and gorges, to the geologic information attained from the rock cuttings and samples obtained from the digging of irrigation ditches, water wells, and other oil and gas wells. This information is all combined to allow the geologist to make inferences as to the fluid content, porosity, permeability, age, and formation sequence of the rocks underneath the surface of a particular area.

 

Surface Geology

Surface Geology

Source: Anadarko Petroleum Corporation

Once the geologist has determined an area where it is geologically possible for a natural gas or petroleum formation to exist, further tests can be performed to gain more detailed data about the potential reservoir area. These tests allow for the more accurate mapping of underground formations, most notably those formations that are commonly associated with natural gas and petroleum reservoirs. These tests are commonly performed by a geophysicist, one who uses technology to find and map underground rock formations.

 

Extraction

Once a potential natural gas deposit has been located by a team of exploration geologists and geophysicists, it is up to a team of drilling experts to dig down to where the natural gas is thought to exist. This section will describe the process of drilling for natural gas, both onshore and offshore. Although the process of digging deep into the Earth's crust to find deposits of natural gas that may or may not actually exist seems daunting, the industry has developed a number of innovations and techniques that both decrease the cost and increase the efficiency of drilling for natural gas. Advancements in technology have contributed greatly to the increased efficiency and success rate for drilling natural gas wells.

 

A Natural Gas Processing Plant Worker

Source: Anadarko Petroleum Corporation

 

Determining whether to drill a well depends on a variety of factors, including the economic potential of the hoped-for natural gas reservoir. It costs a great deal of money for exploration and production companies to search and drill for natural gas, and there is always the inherent risk that no natural gas will be found.

The exact placement of the drill site depends on many factors, including the nature of the potential formation to be drilled, the characteristics of the subsurface geology, and the depth and size of the target deposit. After the geophysical team identifies the optimal location for a well, it is necessary for the drilling company to ensure that it completes all the necessary steps so that it can legally drill in that area. This usually involves securing permits for the drilling operations, establishment of a legal arrangement to allow the natural gas company to extract and sell the resources under a given area of land, and a design for gathering lines that will connect the well to the pipeline.

There are a variety of potential owners of the land and mineral rights of a given area. If the new well, once drilled, does in fact come in contact with natural gas deposits, it is developed to allow for the extraction of this natural gas, and is termed a 'development' or 'productive' well. At this point, with the well drilled and hydrocarbons present, the well may be completed to facilitate its production of natural gas. However, if the exploration team was incorrect in its estimation of the existence of a marketable quantity of natural gas at a wellsite, the well is termed a 'dry well', and production does not proceed.

On shore and off shore drilling, present unique drilling environments, requiring special techniques and equipment.

Processing Natural Gas

Natural gas, as it is used by consumers, is much different from the natural gas that is brought from underground up to the wellhead. Although the processing of natural gas is in many respects less complicated than the processing and refining of crude oil, it is equally as necessary before its use by end users.

The natural gas used by consumers is composed almost entirely of methane. However, natural gas found at the wellhead, although still composed primarily of methane, is by no means as pure. Raw natural gas comes from three types of wells: oil wells, gas wells, and condensate wells. Natural gas that comes from oil wells is typically termed 'associated gas'. This gas can exist separate from oil in the formation (free gas), or dissolved in the crude oil (dissolved gas). Natural gas from gas and condensate wells, in which there is little or no crude oil, is termed 'nonassociated gas'. Gas wells typically produce raw natural gas by itself, while condensate wells produce free natural gas along with a semi-liquid hydrocarbon condensate. Whatever the source of the natural gas, once separated from crude oil (if present) it commonly exists in mixtures with other hydrocarbons; principally ethane, propane, butane, and pentanes. In addition, raw natural gas contains water vapor, hydrogen sulfide (H2S), carbon dioxide, helium, nitrogen, and other compounds.

Natural gas processing consists of separating all of the various hydrocarbons and fluids from the pure natural gas, to produce what is known as 'pipeline quality' dry natural gas. Major transportation pipelines usually impose restrictions on the make-up of the natural gas that is allowed into the pipeline. That means that before the natural gas can be transported it must be purified. While the ethane, propane, butane, and pentanes must be removed from natural gas, this does not mean that they are all 'waste products'.

In fact, associated hydrocarbons, known as 'natural gas liquids' (NGLs) can be very valuable by-products of natural gas processing. NGLs include ethane, propane, butane, iso-butane, and natural gasoline. These NGLs are sold separately and have a variety of different uses; including enhancing oil recovery in oil wells, providing raw materials for oil refineries or petrochemical plants, and as sources of energy.

 

A Natural Gas Processing Plant

A Natural Gas Processing Plant

Source: Duke Energy Gas Transmission Canada

 

While some of the needed processing can be accomplished at or near the wellhead (field processing), the complete processing of natural gas takes place at a processing plant, usually located in a natural gas producing region. The extracted natural gas is transported to these processing plants through a network of gathering pipelines, which are small-diameter, low pressure pipes. A complex gathering system can consist of thousands of miles of pipes, interconnecting the processing plant to upwards of 100 wells in the area. According to the American Gas Association's Gas Facts 2000, there was an estimated 36,100 miles of gathering system pipelines in the U.S. in 1999.

In addition to processing done at the wellhead and at centralized processing plants, some final processing is also sometimes accomplished at 'straddle extraction plants'. These plants are located on major pipeline systems. Although the natural gas that arrives at these straddle extraction plants is already of pipeline quality, in certain instances there still exist small quantities of NGLs, which are extracted at the straddle plants.

 

Natural Gas Pipeline

 

Transportation

The efficient and effective movement of natural gas from producing regions to consumption regions requires an extensive and elaborate transportation system. In many instances, natural gas produced from a particular well will have to travel a great distance to reach its point of use. The transportation system for natural gas consists of a complex network of pipelines, designed to quickly and efficiently transport natural gas from its origin, to areas of high natural gas demand. Transportation of natural gas is closely linked to its storage: should the natural gas being transported not be immediately required, it can be put into storage facilities for when it is needed.

There are three major types of pipelines along the transportation route: the gathering system, the interstate pipeline system, and the distribution system. The gathering system consists of low pressure, small diameter pipelines that transport raw natural gas from the wellhead to the processing plant. Should natural gas from a particular well have high sulfur and carbon dioxide contents (sour gas), a specialized sour gas gathering pipe must be installed. Sour gas is corrosive, thus its transportation from the wellhead to the sweetening plant must be done carefully.

Pipelines can be characterized as interstate or intrastate. Interstate pipelines are similar to in the interstate highway system:  they carry natural gas across state boundaries, in some cases clear across the country. Intrastate pipelines, on the other hand, transport natural gas within a particular state. This section will cover only the fundamentals of interstate natural gas pipelines, however the technical and operational details discussed are essentially the same for intrastate pipelines

Storage

Natural gas, like most other commodities, can be stored for an indefinite period of time. The exploration, production, and transportation of natural gas takes time, and the natural gas that reaches its destination is not always needed right away, so it is injected into underground storage facilities. These storage facilities can be located near market centers that do not have a ready supply of locally produced natural gas.--

Traditionally, natural gas has been a seasonal fuel. That is, demand for natural gas is usually higher during the winter, partly because it is used for heat in residential and commercial settings. Stored natural gas plays a vital role in ensuring that any excess supply delivered during the summer months is available to meet the increased demand of the winter months. However, with the recent trend towards natural gas fired electric generation, demand for natural gas during the summer months is now increasing (due to the demand for electricity to power air conditioners and the like). Natural gas in storage also serves as insurance against any unforeseen accidents, natural disasters, or other occurrences that may affect the production or delivery of natural gas.

Natural gas, like most other commodities, can be stored for an indefinite period of time. The exploration, production, and transportation of natural gas takes time, and the natural gas that reaches its destination is not always needed right away, so it is injected into underground storage facilities. These storage facilities can be located near market centers that do not have a ready supply of locally produced natural gas.

Traditionally, natural gas has been a seasonal fuel. That is, demand for natural gas is usually higher during the winter, partly because it is used for heat in residential and commercial settings. Stored natural gas plays a vital role in ensuring that any excess supply delivered during the summer months is available to meet the increased demand of the winter months. However, with the recent trend towards natural gas fired electric generation, demand for natural gas during the summer months is now increasing (due to the demand for electricity to power air conditioners and the like). Natural gas in storage also serves as insurance against any unforeseen accidents, natural disasters, or other occurrences that may affect the production or delivery of natural gas. 

Distribution

Distribution is the final step in delivering natural gas to customers. While some large industrial, commercial, and electric generation customers receive natural gas directly from high capacity interstate and intrastate pipelines (usually contracted through natural gas marketing companies), most other users receive natural gas from their local gas utility, also called a local distribution company (LDC). LDCs are regulated utilities involved in the delivery of natural gas to consumers within a specific geographic area. There are two basic types of natural gas utilities: those owned by investors, and public gas systems owned by local governments.

 

Installing Small Diameter Distribution Pipe

Installing Small Diameter Distribution Pipe

Source: Duke Energy Gas Transmission Canada

Local distribution companies typically transport natural gas from delivery points located on interstate and intrastate pipelines to households and businesses through thousands of miles of small-diameter distribution pipe. The delivery point where the natural gas is transferred from a transmission pipeline to the local gas utility is often termed the 'citygate', and is an important market center for the pricing of natural gas in large urban areas. Typically, Utilities take ownership of the natural gas at the citygate, and deliver it to each individual customer's meter. This requires an extensive network of small-diameter distribution pipe

 

Because of the transportation infrastructure required to move natural gas to many diverse customers across a reasonably wide geographic area, distribution costs typically make up about half of natural gas costs for households and small volume customers. While large pipelines can reduce unit costs by transmitting large volumes of natural gas, distribution companies must deliver relatively small volumes to many more different locations

Marketing

Natural gas marketing is a relatively new addition to the natural gas industry, beginning in the mid-1980's. Prior to the deregulation of the natural gas commodity market and the introduction of open access for everyone to natural gas pipelines, there was no role for natural gas marketers. Producers sold to pipelines, who sold to local distribution companies and other large volume natural gas users. Local distribution companies sold the natural gas purchased from the pipelines to retail end users, including commercial and residential customers. Price regulation at all levels of this supply chain left no place for others to buy and sell natural gas. However, with the newly accessible competitive markets introduced gradually over the past fifteen years, natural gas marketing has become an integral component of the natural gas industry. In fact, the first marketers were a direct result of interstate pipelines attempting to recoup losses associated with long term contracts entered into as a result of the oversupply problems of the early 1980s.

Natural gas marketing may be defined as the selling of natural gas. In even looser terms, marketing can be referred to as the process of coordinating, at various levels, the business of bringing natural gas from the wellhead to end-users. The role of natural gas marketers is quite complex, and does not fit exactly into any one spot in the natural gas supply chain. Marketers may be affiliates of producers, pipelines, and local utilities, or may be separate business entities unaffiliated with any other players in the natural gas industry. Marketers, in whatever form, find buyers for natural gas, ensure secure supplies of natural gas in the market, and provide a pathway for natural gas to reach the end-user. It is natural gas marketers that ensure a liquid, transparent market exists for natural gas. Marketing natural gas can include all of the intermediate steps that a particular purchase requires; including arranging transportation, storage, accounting, and basically any other step required to facilitate the sale of natural gas.

Essentially, marketers are primarily concerned with selling natural gas, either to resellers (other marketers and distribution companies), or end users. On average, most natural gas can have three to four separate owners before it actually reaches the end-user. In addition to the buying and selling of natural gas, marketers use their expertise in financial instruments and markets to both reduce their exposure to risks inherent to commodities, and earn money through speculating as to future market movements.