Benchmarking study
"Benchmarking study compares LNG plant costs" (OGJ, Apr. 14, 2003, p. 56) demonstrates why comparing different LNG project costs has always been considered to be just like comparing apples and oranges. LNG plants have different inlet gas compositions and are built with different scopes and technologies, at different times, by different contractors, at different locations, and for different owners' specifications. In addition, the authors of such studies do not have the accurate and detailed information needed to compare different projects on the same basis. And this commissioned benchmarking study is no exception.
We would like to address only the inaccuracies in the article relating to Atlantic LNG (ALNG). It is the only project in this study which is compared as a single train. It is obvious that the costs of two-train plants (the other plants in this comparison) are inherently lower in terms of dollar per ton of LNG simply because much of the required infrastructure, controls, marine facilities, LNG storage, etc., is common to two trains. Surprisingly, the authors chose not to consider the fact that a second train at ALNG has indeed been built and has been operating successfully for almost a year.
The authors' costs for ALNG Train 1 are inaccurate. EPC costs for Train 1 have been quoted as approximately $610 million and, unlike some of the other projects listed, included significant dredging. Train 1 actual capacity has been about 3.0 million tonne/year (tpy) over 3 years. When one considers the deep propane recovery practiced in Trinidad, actual capacity for comparison is higher still. EPC costs in $/tpy LNG for ALNG Train 1 are about $200/ton. Escalating ALNG 1 costs to 2000 and adjusting for a Qatar location does not have a big impact, since the two almost cancel each other. However, the correct comparison would have been vs. ALNG Trains 1 and 2. EPC costs of ALNG Trains 1 and 2 are about $150/tpy—making it the lowest-cost baseload LNG plant built to date by a wide margin. The fuel-related CO2 emissions of ALNG Trains 1 and 2 are less than 0.3 tonnes CO2/tonne of LNG. Fuel efficiency is a design parameter that is mostly related to the gas turbines used to drive the refrigeration compressors, and to other design parameters. Phillips Optimized Cascade process LNG trains have been designed for efficiencies of between 0.23 and 0.32, spanning the range shown in the article.
Comparing different projects using only a few criteria and incomplete data can be deceptively simple, but it may not adequately take into account the many differences between projects.
Amos Avidan
Manager of Petroleum & Chemicals Technologies
Bechtel Corp.
Rick Hernandez
Manager LNG Technology Licensing
ConocoPhillips Corp.
Three world oil forecasts predict peak production
In his article (OGJ, May 26, 2003, p. 18), Richard Duncan provides a new way of looking at oil production data to obtain information about the peak of world production. The article draws attention to the importance of the post peak production change rate (the post peak PCR). Knowing the post peak PCR would help us estimate how much time we have to switch to a new energy regime. The article leaves the impression that it provides support for a much slower post peak PCR (slower production decline rate) than predicted by the three forecasts cited—forecasts from studies by Campbell, Duncan, and Monnin; and Smith and Douglas-Westwood. I believe the article does not provide support for this impression.
The article's only calculation of post peak PCR is for a set of 24 producing countries that are post peak. This group, the "All 24" is divided into the "Big 6" largest producers that have already peaked and another "Other 18" smaller producers that have already peaked. Both the Big 6 and the All 24 peaked in 1978, while most of the Other 18 peaked much later. The later peaking of the Other 18 offsets the high rate of decline of the Big 6 giving an aggregate 20 year average post peak PCR for the All 26 of minus 0.23%/ year. By contrast, the 20 year average post peak PCR predicted for the world by the other three studies cited is minus 2.52%/ year—a rate of decline ten times greater.
The All 24 is clearly not representative of the world. It would seem, to the contrary, that the structure of the peaking sequence for the world as a whole is the reverse of that of the All 24. The largest producers in the Middle East seem likely to peak within a few years of each other; they seem likely to peak after almost all other producers; their aggregate peak seems likely to occur within a few years of the peak of the whole world. These are at the very least plausible statements that would have to be shown to be untrue before we could accept the All 24 post peak PCR behavior as suggesting anything about the world post peak PCR.
These cursory observations suggest that the world is more likely to experience the higher decline rate of the cited studies rather than the lower decline rate of the All 24. In any case, contrary to the impression it leaves, the article provides no evidence against the higher decline rate of the cited studies.
David M. Delaney
Ottawa, Ont.
Duncan's reply
It's important to broaden our information base before answering David Delaney's constructive criticisms about my article (OGJ, May 26, 2003, p. 18).1 In that regard, consider the following statement from a recent report by the International Energy Agency (IEA).
"The world has abundant energy resources for the coming 30 yearsU. The [IEA] Reference Scenario projects continuing rapid growth in energy demand from now till 2030U. Fossil fuels will remain the dominant sources of energy, filling more than 90% of the coming increase in demandU. Global oil demand will rise by about 1.6%/ year, from 75 million b/d in 2000 to 120 million b/d in 2030U. however, enormous investments will be required to increase production to meet rising world demand—and to move that production to market." 2,3
The report was prepared by some twenty experts from the IEA in collaboration with specialists from the World Bank, the Institut Francais du Petrole, the Norwegian Ministry of Energy, and OPEC, among others.
Likewise, the "Energy Bears" are represented by many distinguished scientists and engineers. For example, there's the Association for the Study of Peak Oil & Gas (ASPO). Quoting from their website: "ASPO is a network of scientists, affiliated with European institutions and universities, having an interest in determining the date and impact of the peak and decline of the world's production of oil and gas, due to resource constraints. Its mission is to:
- Define and evaluate the world's endowment of oil and gas.
- Model depletion, taking due account of demand, economics, technology, and politics.
- Raise awareness of the serious consequences for mankind. 4
A recent issue of the ASPO newsletter forecasts that peak oil will occur in 2010 followed by an average post peak production change rate (PCR) of minus 2.1%/year from 2010 through 2030 (and beyond).
Thus we have the Energy Bulls and the Energy Bears, each represented by many respected professionals in their special fields. Notice that by adding IEA's bullish 1.6%/year to ASPO's bearish minus 2.1%/year we get an in-between PCR of minus 0.5%/year. Hence came the phrase "on the order of minus 0.23%/year" at the conclusion of my OGJ article.
With the foregoing discussion in mind, the first and last conclusions remain exactly as in my OGJ article. The middle conclusion, however, is expanded into two conclusions (Items 2 and 3 below) as follows:
- The historic peaking rate of All 24 post peak nations supports the three world oil forecasts that predict world oil production will peak during 2003 and 2016.
- The post peak PCR of the All 24 nations combined neither supports nor rejects the post peak PCR predicted by the three world oil forecasts.
- In years to come, the world's post peak PCR could range from slightly negative to steeply negative.
- If the actual world oil post peak PCR turns out to be on the order of minus 0.23%/year for several decades, then—with coordination and planning—manageable transition to a new world energy regime is conceivable.
Should the If-Then condition (Item 4 above) prove unachievable, a possible scenario is found in my presentation to the Geological Society of America, Summit 2000, Pardee Keynote Symposia, Reno, Nev., 13 Nov. 2000 (i.e., Reference 7 of my OGJ article).
References
- Duncan, R.C., "Three world oil forecasts predict peak oil production," OGJ, May 26, 2003, pp. 18-21.
- IEA, The world energy outlook 2002, International Energy Agency, IEA/Press(02)22, Osaka, Japan, Sept. 21, 2002. www.iea.org/
- IEA, The world energy outlook 2002: Executive Summary, International Energy Agency, Paris, September 2002. www.iea.org/
- ASPO, Association for the Study of Peak Oil & Gas, Uppsala, Sweden. www.peakoil.net/
Richard C. Duncan
Institute on Energy & Man
SeattleThe conservation curmudgeon?
As an 8-year subscriber to Oil & Gas Journal, I've learned two things about your magazine: You know a lot about supply, but you fall down on the consumption side.
Consider your recent editorial, "Gas market needs supply" (OGJ, June 9, 2003, p. 17). No question that we need expanded supply, especially given accelerating first-year depletion rates across North America. But don't be blind to efficiency. Yet you are, repeatedly.
"Conservation comes at the expense of economic activity." Sometimes yes, sometimes no. But efficiency is not a four-letter word.
Consider last year, when roughly 5 tcf fueled 58 million homes heated with natural gas. In 1970 we used an identical 5 tcf to heat just 35 million homes. So, 65% more houses heated for the same amount of gas. And that's not even counting the fact that the average home increased in size by about 15% over those 30-plus years.
With a concerted 5-year effort, there's a lot of low-hanging fruit still to be picked in the housing sector. Based on my 23 years in the residential field–which I'm about to exit–we could shave 10-15% off current residential consumption, saving roughly 1.0 to 1.5 bcfd.
What's the proposed size of the McKenzie Delta pipeline–1.0-1.5 bcfd, right? (Assuming that Canadian gas isn't hijacked by the McMurray oilsands operations by 2008.) And it might take about another 5 years to show up, for a few billion, right? Might you counter that the billions spent to insulate homes better came "at the expense of economic activity?" Well, instead of having to drill for an extra 1.5 bcfd, we drilled empty wall cavities in homes and filled them with insulation, along with loads of related efforts. Families in those homes save by paying lower energy bills that offset slightly higher mortgages. No net loss to the economy. The homes are more comfortable and worth more when resold. What's not to like?
What's missing, both in your magazine and at the national level, is a broad awareness that there are no magic bullets here in the big energy picture. The supply side thinks it has the only answer, but battles depletion daily. The demand side thinks the same, but has its own shortcomings. Let's have more balanced systems thinking.
Steve Andrews
Energy consultant
DenverGas market, needs supply
"Incredible! California's government wrecked the State's energy market with price controls and other manipulationsU," states (OGJ, June 9, 2003, p. 17). Right on, but California is responsible for a lot more that sends a louder warning than the editorial implies. One doesn't want to emulate them with inactivity, only learn from their horrendous mistakes. If one understands socialism, one will understand why California got into its mess.
Human ingenuity is the best creator, and problem solver, for what humans desire. All governments do is get in the way. Socialism's failures start with its conception because its planners never give consideration to what humans demand. Instead they tell them what they should have. California, a dozen or so years ago, went with price controls, counterproductive measures, and unsound economic foresight that limited, then killed, their ability to supply their energy needs.
Toby Elster
Consulting Geologist
Wichita