22nd October 2013

John BaldwinManaging DirectorCNG Services Ltd

john.baldwin@cngservices.co.ukwww.cngservices.co.uk

07831 241217

• CNG Services Ltd

• UK Gas Grids

• Lessons from biomethane

• Option for test gas flows

• NTS Connections for commercial flows

• Gas quality

• Conclusions

Getting Shale Gas to Market in UK

CNG Services Ltd

• Supports projects to inject biomethane into the gas grid– Developer of Didcot and Poundbury biomethane to grid projects– Working on 25 further biomethane injection projects in UK

• CNG as a fuel for trucks– Owner of UK’s largest CNG station in Crewe– Winner of £2M funding for 3 gas for trucks projects

• Supporting development of onshore gas fields and gas storage projects– Wingas Gas Storage Project at Saltfleetby– Ryedale Gas Field Project

We focus on getting gas into the grid

Crewe CNG Station

• Official opening of our Crewe CNG filling station on 8th March 2013 – largest ever collection of CNG vehicles

• Filling dual fuel trucks for GIST/M&S, Brit European

• http://www.youtube.com/watch?v=orxBtoXyjos

Largest grid supplied CNG station in UK – now selling biomethane via Green Gas Certificates

UK Gas Grids

• Gas Distribution Network – for Extended Well Tests– Started being built in 1850 ish

– Used for biomethane injection

• Flows of 1,000 m3/hr typical (2.5 mmscfd = 3 million th/annum)

• National Transmission System – for large volumes of LNG displacement gas– Started being built in 1967

– UKCS decline has left capacity

Gas Distribution Network

• Started in 1850 ish

• £900 million a year mains replacement programme

• Over 80% of domestic customers connected

• Heat demand is 4 x power demand

The National Transmission System

• Owned by National Grid

• Started being built in 1967 (West Sole)

• At least £20 billion to build it now and around 200 years for planning

• Last major investment in 2005-08 related to Langeled coming to Easington and LNG at Milford Haven and Isle of Grain

• Onshore peak shaving LNG plants closed/closing

• No onshore gas field has ever connected directly into the NTS

Map courtesy of P. Heather, OIES, 2010

http://www.oxfordenergy.org/2010/08/the-evolution-

and-functioning-of-the-traded-gas-market-in-britain/

The Jewel in the Crown of the UK Energy Industry

Injecting gas from onshore production into the gas grid?

• Wytch Farm

• Biomethane

• Never been done to NTS

Wytch Farm

Gas Distribution Network – for Extended Well

Tests

• Used for biomethane

• Flows of 1,000 m3/hr typical (equal to around 3 million

th/annum)

Poundbury

• UK’s first commercial scale biomethane to grid project

• Nov 2012

• 500 m3/hr into grid (around 1 million therms)

• Development is a JV between Duchy of Cornwall and some of its tenants

Vale Green near Evesham

• Approximately 600 m3/hr biogas

• 490 kWh CHP

• Live from August 2013

• Waste CO2 liquefied and used to grow more tomatoes

Future Biogas - Doncaster

• Agricultural

• Approximately 900 m3/hr biogas to biomethane

• 499 kWh CHP

• Go live Q4 2013

Severn Trent Water - Minworth

• Sewage derived biogas

• Approximately 1200 m3/hr biogas

• Existing 9 MWh CHP

• Go live Q2 2014

UK Biomethane Market Forecast

Likely to be >20 BtG projects in UK in period to 2014/15Subsidy of 213 p/therm (on top of gas price)

• The are 5 main sectors:

• Agricultural

• Waste

• Animal manure

• Crops for Energy

• Commercial food waste

• Food manufacture

• Biodegradable waste

• Local authority garden/food waste

• Sewage sludge

Connections to the Gas Distribution

Networks

• Biomethane goes mostly into 2 – 7 bar pipelines

• We are working on 25 potential projects for completion by 1 April 2015

• 12 are definite

• Ofgem led Energy Market Issues for Biomethane(www.gasgovernance.co.uk/emib) has reviewed the connection process for biomethane flows

• Competitive ownership model

• This has led to lower overall costs and risks and shorter timeframe

• <12 months from start to injection

• Issues for shale gas producers:

• Addition of propane may be needed to meet Flow Weighted Average Calorific Value (ethane and inerts issue)

National Transmission System – for LNG

Displacement Flows

• For large volumes

NTS Connection – Physical Connection

• The physical connection to the NTS must be completed and commissioned and measurement equipment must be validated

– Straightforward, £1.5 Million, no major issues

– Allow 2.5 - 3 years for this (there has never been one), process below:

NTS Connection – Flowing Gas

• To flow gas, shippers must have obtained sufficient NTS

Entry Capacity via the relevant entry capacity

mechanisms

– This is location dependent, capacity may be available or a long

term capacity bid may be required

– In the case of connection in an area with no capacity, NG funds

the capex to make capacity available but the gas producer

underwrites the costs through use

There is an established process – for most shale gas areas NTS Capacity exists due to declining UKCS flows – see next slide

The NG 2012 Ten Year Statementshows the decline in flows from StFergus, Teesside, Barrow:http://marketinformation.natgrid.co.uk/Gas/CapacityReports.aspx

By far the best place in UK to find shale gas is under Lancashire – NTS capacity available

Capacity in the NTS

NTS

ROV &

Telemetry

Kiosk

Wellhead

National Grid AGI

Producer

Compound

NGG Producer

IJV

T

Meter

VRM

Metering and

Gas Quality

Signals

Bypass

Bypass

V

V

F

NG Minimum Connection and Producer Facilities

Sample Point

Sample Point

Separation

Dew PointControl

Compression

20

D

Min

Hot Tap

Connection

20

D

Min

Regulator Filter

R F

ESD

ESD

Producer

Facilities

V

Construction

Valve

42”

8”

8”

CV & Gas Quality Measurement

Existing pipeline excavatedGrouted/welded tee being fitted

Below ground fabrication of

the connection and bypass NG AGI Works for Supply to CCGT

Gas Quality Requirements

• Gas Safety (Management) Regulations set out gas quality, basic parameters for shale gas producers are:

– No H2S

– Dry gas

– Wobbe within a range

– Total inerts (CO2/N2) limit (7%)

• North Morecambe, for example, has high N2 and has to liquefy methane to reduce the N2

• Shale gas may be like Southern North Sea gas?

• NTS Network Entry Agreement has no restriction on Calorific value

• GDN entry may need enrichment with propane or blending (level of ethane and inerts is key) due to increase in grid average CV in last 30 years due to decline in Southern North Sea gas and replacement with high CV Norwegian gas and LNG

The key cost issues are high levels of H2S, CO2 and N2

For connection pipeline to NTS, two options are available for theconstruction process:

– Pipeline is designed, constructed, owned and operated by Shale Gas Producer (along with processing plant and gas gathering system)

– Pipeline is designed, constructed, owned and operated by NG

Gas Connection Pipeline

Likely that pipeline will be owned by Shale Gas Producer - no GT Licence

Timetable for Grid Injection

• Critical path is planning consent (apologies for stating the obvious) for shale gas production facilities

– Well pads and sub surface

– Gas gathering system

– Gas processing plant

– Export connection to NTS

• NTS connection – there may be upstream reinforcement

– If you are unlucky (and you can always have on the day or interruptible capacity)

• GDN connection – depends on level of flow

– We are working with National Grid to bring down costs and time for LTS Connections to support biomethane and shale gas injection projects

– Aim for 15 months start to finish

• For well testing flows (up to around 1,000 m3/hr) it may be possible to flow directly into MP/IP grid

– 12 months project from start to finish

It’s a lot easier than it would have been pre biomethane!

Conclusions

• Gas Quality:– 4% ethane would be perfect

– Oil always a good idea

– Avoid CO2, N2 and H2S if possible!

• Location:– NW in particular is very attractive for gas due to existing gas grid, capacity

available

• UK regime for gas injection is fine, getting an NTS or lower pressure connection is unlikely to be critical path

• Biomethane market is perfect model for Extended Well Tests, start to finish in less than a year

We have waited 350 million years, we are ready!