Assessing the Natural Gas Processing Market

This week marks the 70th annual Instrumentation and Automation Symposium for the Process Industries at Texas A&M University. The goal of the symposium is to educate professionals and students in the instrumentation and automation industry.

Emerson's Chuck Miller

Chuck Miller
Global Gas Processing Sales & Marketing Director

One of the keynote presentations will be given by Emerson’s Chuck Miller. He will kick off the proceedings at 8am January 27 with a presentation, Gas Processing Market Assessment. His keynote address explores the natural gas market in North America, the impact of falling oil prices, and the challenge in this economic environment to the automation industry.

Chuck shared an advance copy of his presentation so I’ll highlight a few things from it. Growth in natural gas production in the United States has been massive over the past 5 years. This growth is expected to continue through 2018, particularly with high-BTU “rich” natural gas. Propane, butane and natural gasoline production from gas processing plants has increased by nearly 30 percent since early 2010 and will continue to grow over the next 10 years.

Chuck notes how formations with production diversity—crude oil, natural gas and natural gas liquids (NGLs) can better handle the economic uncertainties involved with rapidly changing prices. Examples of these formations include the Permian Basin and Eagle Ford Shale regions in Texas.

The boom in U.S. crude production over the past three years has been mostly light crude. An increasing portion of this crude output is more correctly termed condensate – a very light liquid hydrocarbon with gravity typically over 50 degrees API. Similarly, the production of plant condensate, also called natural gasoline or pentane plus, has also increased, although on a smaller scale. This increase production of wet natural gas is driving the need for increased processing and fractionation capacity.

The industry has responded with more than 75 new greenfield projects to increase natural gas processing and overall capacity. Projects also include liquefied natural gas (LNG) regas conversions, additional gas and NGL pipelines, fractionator projects, hydrocarbon product export docs, and ethylene plants. Together this totals more than $56 billion (USD) in processing plants, transportation systems, chemical plants, and export facilities.

Floating Liquefied Natural Gas (FLNG) Vessel

Click to enlarge

Chuck explains how trends in global energy and chemical trading is being driven by the need for cleaner, more secure energy sources, which in turn is driving demand for technology solutions that improve the efficiency of monetizing natural gas. Some of these innovations including floating LNG (FLNG) vessels, floating storage and regasification units (FSRU), compressed natural gas (CNG), micro LNG for LNG-fueled engines, and measurement devices to help comply with new emissions standards.

He explorers the impact of falling crude oil prices on the current outlook. The cost to produce crude oil varies from a low of $27/bbl. onshore in the Middle Easy to $75/barrel in the Arctic region. Much of the world’s production falls in the $40-55/barrel range of production costs with North American shale estimated at around $65/bbl.

Given current prices under $50/bbl., project economics and ongoing production levels are being reevaluated. The net effect of the steep drop in oil prices is to boost the economic growth outlook for oil consuming countries by 0.3 to 0.5 percent in 2015.

For hydrocarbon energy producers the cure for low prices is low prices. Low prices impact investments in new production which eventually leads to production undershooting demand, which increases prices and improves cash flow, which increases investment levels, which increases production levels, until production growth outpaces demand. This again leads to a down cycle like current times.

I’ll save for a future post the ways instrumentation and automation can help in reducing production costs to be able to better handle the drops in crude, natural gas and NGLs.

You can connect and interact with other oil & gas professionals in the Oil and Gas group in the Emerson Exchange 365 community.

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