US Import Terminals—Conclusion: Interest grows in gas interchangeability, quality

Oct. 24, 2005
The interchangeability and quality of natural gas have become increasingly scrutinized as the US capacity to import LNG has expanded.

The interchangeability and quality of natural gas have become increasingly scrutinized as the US capacity to import LNG has expanded. In addition to concerns related to btu content and dewpoint levels, the composition of regasified LNG is of heightened interest.

This second article in a two-part series examines these issues and provides examples of cases in which they’ve already had an effect.

The first part of the series (OGJ, Oct. 17, 2005, p. 54) discussed the issues facing the US Federal Energy Regulatory Commission (FERC) in approving applications for new LNG import terminals, particularly in terms of safety and security. It also addressed the effect of the new energy legislation on LNG terminal development, with particular attention paid to remaining state and local authority in light of FERC’s mandate.

Gas quality, interchangeability

Fig. 1 shows the considerable range of heating values for LNG produced worldwide. Some LNG streams may not be interchangeable with US natural gas pipeline systems. Given the interconnected nature of the US pipeline grid, interchangeability is an issue that must be addressed by all new import developers.

Click here to enlarge image

Interchangeability has been defined as the measure of the degree to which the combustion characteristics of one gas resemble those of another. Two gases are said to be interchangeable when they can be substituted under the same conditions without affecting the performance of the gas burner.1

While the chemical composition of natural gas produced in the US does not differ dramatically from that produced around the world, the US petrochemical industry has developed an infrastructure to extract non-methane hydrocarbons, including ethane and propane, from the natural gas stream to be sold separately as liquids. Consequently, the US natural gas consuming market has grown accustomed to leaner domestic gas as compared to other parts of the world.

The ability to receive the full range of heating values available world wide will result in more supply options for US LNG buyers, placing downward price pressure on natural gas. In order to allow a broader range of LNG import options, the National Petroleum Council recommended that FERC and the US Department of Energy develop new standards for interchangeability.2

At about the same time that these issues were being considered, the US gas processing industry was experiencing unusually high natural gas prices relative to crude. The infrastructure to extract heavier hydrocarbons from the natural gas stream is premised on the hydrocarbons having more value as liquids sold separately than as sources of additional heating content in the gas stream. Because the value of liquids is related to crude oil prices, as long as oil prices remain high relative to natural gas prices, the economics favor processing of the heavier hydrocarbons as liquids.

Beginning in 2002, however, this relationship began to reverse, with natural gas prices increasing and oil prices remaining steady. These “upside-down” economics favored keeping the heavier hydrocarbons in the gas stream. The pipelines, however, quickly became concerned about the potential for operational problems caused by liquid drop out.

Some pipelines filed revised tariff provisions to set maximum limits on the btu value or the hydrocarbon dewpoint of gas entering their systems. Several pipelines issued notices to shippers restricting the introduction of unprocessed gas. Shippers, however, complained that such notices violated the Natural Gas Act by imposing stricter btu limits than are permitted in the pipelines’ tariffs. In other cases, producers filed complaints requiring pipelines to establish reasonable hydrocarbon dewpoint specifications. FERC now has pending before it several proceedings involving issues of gas quality, including appropriate hydrocarbon dewpoint limits.

Of course, liquid drop out problems are not generally a concern for LNG developers. The heavier hydrocarbons that increase dewpoint in the gas stream (pentanes and heavier) have largely been removed during the liquefaction process. Thus, while LNG may generally have higher concentrations of ethane and propane (and thus higher btu content), these concentrations yield hydrocarbon dewpoints that would meet most pipeline standards, even the more restrictive standards at issue in the proceedings.

Nevertheless, serious issues regarding gas quality have arisen for LNG developers.

Gas-quality issues arose during restarts of both the Cove Point and Elba Island terminals.

Dominion Cove Point LNG proposed raising the heating value of gas permitted under its tariff, but Washington Gas Light Co., the local distribution company serving customers near the terminal, argued that changes in the gas quality would lead to serious safety and operational problems. Ultimately, FERC concluded that Cove Point LNG had not met its burden of demonstrating that its proposal to increase the heating value under its tariff was in the public interest.3

Similarly, Southern LNG proposed to blend existing supplies with LNG cargoes having higher heating values. Atlanta Gas Light Co., a downstream local distributor, argued that Southern had failed to address the potential impacts of the lack of btu-stabilization options. FERC prevented Southern LNG from waiving its tariff standard to permit LNG cargoes with higher heating values until either the capacity to reduce the heating content to tariff standard is achieved or interchangeability studies can show the acceptability of regasified LNG with higher heating values.4

Against this backdrop, FERC instituted proceedings to address gas quality and interchangeability.5 At a conference in February 2004, FERC was briefed on the efforts of industry stakeholders under the leadership of the Natural Gas Council to address these issues. The council established working groups to draft white papers on gas quality and interchangeability in order to establish a common understanding of the technical aspects of these issues.

On Feb. 28, 2005, the Natural Gas Council filed two reports: the “White Paper on Liquid Hydrocarbon Drop Out in Natural Gas Infrastructure” and the “White Paper on Natural Gas Interchangeability and Non-Combustion End Use.” The gas-quality white paper examined the technical issues regarding the occurrence of hydrocarbon liquids in natural gas streams and the measures used to control hydrocarbon liquid drop out. The report concludes that using the cricondentherm hydrocarbon dewpoint as a control parameter offered the greatest operational flexibility for all stakeholders.

The interchangeability white paper similarly examines the technical issues regarding development of acceptable ranges of natural gas characteristics that can be consumed by end users maintaining safety, reliability, and environmental performance. In general, the report concludes that the Wobbe number provides the most efficient and robust single index measure of gas interchangeability. The report offers interim guidelines for new gas supplies that allow for a ±4% variation from the Wobbe number of local historical average gas, subject to a maximum Wobbe number of 1,400 and a maximum heating value of 1,110 btu/scf.

The Natural Gas Council presented these reports to FERC at an open meeting on Mar. 2, 2005. FERC is now faced with the policy implications of establishing gas quality and interchangeability standards.

Composition

A more recent controversy has arisen that will likely take this debate in an entirely new direction. Interchangeability and quality issues have been associated with btu management (how to address the high btu content of regasified LNG) and solutions have been btu driven (blending with nitrogen or other domestic supplies, or processing out the propanes or butanes to achieve a certain btu level). A dispute between Washington Gas Light (WGL) and Cove Point LNG, however, may add an extra dimension.

WGL reported a higher incidence of leaks in its distribution system during the winter of 2004-05, which it attributed to deterioration of seals in certain mechanical couplings.6 WGL contends that these leaks were caused in part by the composition of regasified LNG from the Cove Point terminal. According to WGL, the lower concentration of heavy hydrocarbons (pentanes and hexanes) in the gas stream resulted in deterioration of the seals, thereby causing the leaks, and that reintroduction of the heavy hydrocarbons into the regasified LNG stream would reverse the deterioration.7

Dominion has disputed WGL’s assertions, arguing that WGL’s aging distribution system is the culprit. According to Dominion, WGL’s findings are inaccurate, and the regasified supply from Cove Point has met all applicable tariff standards.

This dispute is not about the btu level in the gas stream but about the composition of the elements within the gas stream.

Disputes regarding gas quality and interchangeability will continue to be brought before FERC as stakeholders come to grips with the implications of a changing gas-supply portfolio. As described above, FERC already has a number of individual proceedings before it on these issues, as well as a generic proceeding to develop industry standards. LNG developers may be forced to consider gas quality and interchangeability as part of the FERC approval process.

LNG developers may also need to consider management systems that not only control for the overall btu level of the gas stream but also for the specific elements within the gas stream.

Stakeholders interested in the development of LNG import facilities in this country will need to develop strategies to address these and other issues as part of the federal regulatory process in order achieve the goal of increasing our capacity to import needed natural gas supplies.

References

1. National Petroleum Council, “Balancing Natural Gas Policy: Fueling Demands of a Growing Economy,” Vol. V, Appendix E, p. E-1, 2003.

2. National Petroleum Council, “Balancing Natural Gas Policy: Fueling Demands of a Growing Economy,” Vol I, p. 64.

3. “Cove Point LNG L.P.,” 97 FERC, 61, p. 43, 2001.

4. “Southern LNG, Inc.,” 94 FERC, 61, p. 188, 2001.

5. “Natural Gas Interchangeability,” FERC Docket No. PL04-3-000, Jan. 15, 2004.

6. Paley, Amit R., “Leaks Won’t Affect Cove Point Growth, Dominion Says,” The Washington Post, July 10, 2005.

7. “Regasified LNG Said To Cause Washington Gas Leaks,” Inside F.E.R.C., July 11, 2005.