civil government services the economics of oil, gas & … · 2014-10-27 · tom jones, pe...

The Economics of

Monetizing North American

Natural Gas

Tom Jones Chemicals Technology Manager

Lee Schmoe Bechtel Fellow

David Ladd Senior Process Engineer

Tara Fatima Study Manager

CIVIL

GOVERNMENT SERVICES

MINING & METALS

OIL, GAS & CHEMICALS

POWER

EFI Gas-to-Market & Energy Conversion Forum

October 21-23, 2014

Omni William Penn Hotel

Pittsburgh, Pennsylvania, USA

Outline

© 2014 Bechtel Hydrocarbon Technology Solutions | 2 THE ECONOMICS OF MONETIZING NORTH AMERICAN NATURAL GAS

North American Construction Environment

Economics

Agriculture: Ammonia

Energy: LNG, GTL

Chemicals: Methanol, Ethylene, Propylene

Photo Cheniere Energy’s Sabine

Pass LNG terminal will be the first

LNG Export terminal in the US

since the last one was constructed

at Kenai, AK in 1969.

North American

Construction

Environment


Recent Bechtel Gas Monetization Projects


NO

RT

H A

ME

RIC

AN

CO

NS

TR

UC

TIO

N E

NV

IRO

NM

EN

T

USGC Construction Outlook Challenging Environment


Project Intelligence provided by Industrial Info Resources

NO

RT

H A

ME

RIC

AN

CO

NS

TR

UC

TIO

N E

NV

IRO

NM

EN

T

Capital Cost Indices Expectations vs. Reality


Source Chemical Engineering Magazine

NO

RT

H A

ME

RIC

AN

CO

NS

TR

UC

TIO

N E

NV

IRO

NM

EN

T

Process driven economics ─ Developing realistic capital cost

expectations

─ Clear operating cost definition

Proper project scope definition ─ Feasibility studies

─ Process Optimization

─ Conceptual plot plan development

─ Constructability & logistics reviews

Modularization ─ Reduces site congestion and

average construction manpower

─ Reduced site construction

infrastructure

─ Site specific

Strategies for success in challenged cost conditions


Photo Module movement from Roll on Roll Off area to

permanent location on the APLNG Project Queensland, Australia

NO

RT

H A

ME

RIC

AN

CO

NS

TR

UC

TIO

N E

NV

IRO

NM

EN

T

Economics Agriculture

Energy

Chemicals


Terminology


EC

ON

OM

ICS

TE

RM

INO

LO

GY

Net Natural Gas Imports United States (1973-2040)


Source EIA

NA

TU

RA

L G

AS

EC

ON

OM

ICS

Natural Gas Price Forecasts 2014-2020


Sources EIA, IMF

NA

TU

RA

L G

AS

EC

ON

OM

ICS

Agriculture Ammonia


Trade Balance Ammonia


Data Source IFA

AM

MO

NIA

/ U

RE

A

Ammonia Economics Becoming price competitive with Russia


Pricing Sources Yara, ICIS

Economics Source BHTS

AM

MO

NIA

Energy Liquefied Natural Gas (LNG)

Gas to Liquids (GTL)


World LNG Trade Market dominated by Qatari export, Japanese imports


Data Source GIINGL

EN

ER

GY

LN

G

LNG Capacity New players emerging to challenge Qatar


Source Various Sources, Bechtel Internal Project Intelligence

LN

G

Economics North American LNG second lowest cash cost in the world


Pricing Source IHS, Bechtel Internal Project Intelligence

Economics Source BHTS

EN

ER

GY

LN

G

Capital Investment Gas to Liquids

© 2014 Bechtel Hydrocarbon Technology Solutions | 19 MONETIZING US NATURAL GAS Source BHTS Project Intelligence

EN

ER

GY

GT

L

Gas to Liquids Economics Significant capital outlay limits viability

© 2014 Bechtel Hydrocarbon Technology Solutions | 20 THE ECONOMICS OF MONETIZING NORTH AMERICAN NATURAL GAS Source BHTS

EN

ER

GY

GT

L

Gas to Liquids High refining margins = long term low gas price hedge


Source BP, ExxonMobil, Total, BHTS

EN

ER

GY

GT

L

Chemicals Methanol

Ethylene

Propylene


Value Chain Methanol


CH

EM

ICA

LS

ME

TH

AN

OL

Source Various Sources

Economics Methanol


CH

EM

ICA

LS

ME

TH

AN

OL

Pricing Source Methanex

Economics Source BHTS Internal Economic Model

Value Chain Propylene


Source The Dow Chemical Company, BASF

CH

EM

ICA

LS

PR

OP

YLE

NE

Propylene Pricing Low propylene yields from conversion to ethane cracking → market shortage


CH

EM

ICA

LS

PR

OP

YLE

NE

Pricing Source ICIS, EIA

Propylene Economics Gas based conversion to olefins emerging as viable option to conventional approaches


CH

EM

ICA

LS

PR

OP

YLE

NE

Source BHTS Internal Economic Model

Value Chain Ethylene


Source The Dow Chemical Company, BASF

CH

EM

ICA

LS

ET

HY

LE

NE

Ethylene Production Economics Two Strategic Shifts


CH

EM

ICA

LS

ET

HY

LE

NE

A structural shift in natural gas supply will lead to increased investment in gas

monetization projects in a wave not seen in 30 years.

North America’s net import position on Ammonia / Urea presents strategic

opportunities for new investment in Ammonia / Urea facilities. Russia and

Middle Eastern facilities will still enjoy a FOB price cost advantage.

New LNG business models will shift global pricing from JCC to Henry Hub

basis as increased North American gas provides competition for Middle

Eastern and Russian sources.

Large scale gas to liquids economics will remain challenged due to high capital

investment hurdles. Only well capitalized companies will invest or those with

stranded gas plays.

Olefins economics favor investment in ethane cracking. Methanol to Propylene

technologies could replace lost propylene production capacity from feedstock

switching to ethane and disconnect pricing from historical oil dependence.

Process driven economics, proper project scope definition and strategic use of

modularization will ensure project financial success in a challenging cost

environment.

Summary


SU

MM

AR

Y

Important Notice


This presentation is the exclusive property of Bechtel Hydrocarbon

Technology Solutions (BHTS). The conclusions and recommendations

presented herein are preliminary in nature and shall not be used as a

basis for final financial and management decisions or as a basis of any

financial transaction. Any use of or reliance on this presentation or any

information contained within is at the using party’s sole risk and

responsibility. BHTS, to the maximum extent permitted by law, disclaim all

liability (including for losses or damages of whatsoever nature) to any third

party, howsoever arising with respect to or in connection with the use of

this presentation or any information contained within, including any liability

caused by negligent acts or omissions.


Lead Analyst / Economics

David Ladd, P.Eng Senior Process Engineer [email protected]

Technical Consultants

Tom Jones, PE Chemicals Technology Manager [email protected]

Lee Schmoe, PE Bechtel Fellow, Manager of Front End Studies [email protected]

Tara Fatima Study Manager [email protected]

Dale Dowden Study Manager, Utilities & Offsites [email protected]

Construction

David Marl Construction Manager – Proposals [email protected]

Estimating

Joginder Kundra, PE Lead Estimator [email protected]

Plant Design

Jorge Gonzalez Plant Design Engineering Group Supervisor [email protected]

mailto:[email protected]








civil government services the economics of oil, gas & … · 2014-10-27 · tom jones, pe...

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