It's Time To Rethink Gas Infrustructure Development
Written by Elsie Ross Tuesday, 20 December 2011 00:00
Speakers at a recent natural gas conference had a blunt message for the industry: there’s a massive freight train of unconventional gas heading their way and they need to change their approach to infrastructure development if they want to be competitive.
For the past 50 years, developers have focused on their own operations, on plants and on fields; they haven’t focused strategically on areas, Bob Child, a principal with consultant Gas Processing Management Inc. (GPMi), told the Gas Processing Association Canada conference in November. However, unless they start to do so, existing conventional gas could be left in the ground as older plants close and new tight gas infrastructure is developed, he warned.
“We need to find a way as an industry to…use the available capital and coordinate the development of area infrastructure,” he said. The driver is reduced operating expense capital on both the new and existing resource, while optimizing recovery of the existing resource base.
“The overarching thing that sometimes gets lost when we talk about individual projects is that it’s a competitive North American market and our basins have to be competitive with them,” said Bill Armstrong, also a principal with GPMi. “We have to find ways to reduce our costs or we will not access the markets that we are trying to access.”
In 2000, conventional gas accounted for about 85 per cent of the 17 billion cubic feet per day of gas produced in western Canada, the conference heard. That means that in areas where that conventional gas has been produced, there’s more than 17 billion cubic feet per day of existing gas processing capacity.
Over the next 10 years, there will be a major change not only in that production volume but in the makeup of the production, said Child. By 2020, production in the basin is forecast to decline to 14 billion cubic feet per day with conventional gas volumes representing only about 35 per cent of the total.
A lot of the new tight gas, which is sweet, and in some cases liquids-rich, is found in areas where there is existing infrastructure, such as gas processing plants and pipelines, he said. “There’s already steel in the ground, which in many cases could be used to process that development gas.”
For example, the utilization rate at senior sour plants in Alberta is about 50 per cent on average on the gas side and about 30 per cent on the sulphur side. “In 10 years, we are going to have most of our big sour plants in real difficulties,” Child told the conference.
Over the last 30 years, the conventional gas business has moved away from big pools and big plants to smaller pools that are much more competitive on gas recovery and production, he said. “As a result, what became the norm is that producers built their own facilities for their own production at their own plants, and we are seeing that behaviour now well-entrenched in our business.”
GPMi, though, believes there’s a different way of doing things.
In the 1960s and 1970s, operators built large joint-venture plants when they found big pools in areas of large production opportunities, Child pointed out. “We got savings of scale, savings of operating costs,” he said. “We think there is a lot left; we think the new tight gas is genuine. Some of the issues that caused us to act differently in the 1960s and 1970s are now back.”