Chapter 1 - All About LNG

1.01 - Where Does LNG Come From? (14 min.) Sample Lesson Quiz: 1.01 - Where Does LNG Come From?
1.02 - Pipelines & Hubs (18 min.) Quiz: 1.02 - Pipelines & Hubs
1.03 - LNG Markets & Use (19 min.) Quiz: 1.03 - LNG Markets & Use
1.04 - LNG Facilities (21 min.) Quiz: 1.04 - LNG Facilities
1.05 - LNG In The Energy Transition (12 min.) Quiz: 1.05 - LNG In The Energy Transition
1.06 - Shipping LNG (15 min.) Quiz: 1.06 - Shipping LNG
1.07 - Course Summary (2 min.)

LNG - 101 / Chapter 1 - All About LNG

Lesson 1.01 - Where Does LNG Come From?

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Transcript

01. Lesson 1.01: Where Does LNG Come From?02. Course Overview 03. Learning Objectives 04. Where Does LNG Come From?05. 1.1: Wells 06. 1.2: Products 07. 1.3: What's in a Gas Well?08. 1.4: Canadian Gas

01. Lesson 1.01: Where Does LNG Come From?

My name is Teresa Waddington and I'm on a mission to turn my dad's oilpatch into my daughter's energy garden. I say my dad's oilpatch, but my mom was there too, as are both my siblings. We're (all 5 of us) engineers. So it was basically a genetic requirement that I'd graduate with an engineering degree. And after I did that, I joined Shell where I held jobs in projects (commercial front-end development, maintenance operations, HSSE), and now in corporate relations. I now work for LNG Canada and I really love my job. I really get a chance to talk a lot about LNG in Canada and how specifically Canadian LNG fits a very key niche in today's global energy mix, including as a reliable, responsible, lower GHG option for gas within the marketplace.
In this course, we're going to talk a lot about LNG's role, the geopolitics of energy, where LNG comes from, how it's manufactured and how it's exported, the shipping routes and complexities that occur around LNG, as well as anything you might want to know at a very high level. So I hope this gives you a lot of context and conversation points for your next dinner party and that you learn alot.

02. Course Overview

So this course is going to cover a variety of topics, all at quite a high level, really geared towards non-technical people being able to appreciate the broader world of LNG and for technical people to be able to talk a little bit about the politics and the drivers behind LNG development in the globe. So we're going to follow the molecule from its home underground and a little bit on how it got there, to how it's cleaned up and liquefied, to shipping and use in domestic and international markets. We're going to go into the politics of some of those markets and how those politics have driven both where LNG is used and why it's kind of a hot topic right now. And again, this is a really high level. It's intended to familiarize people with the broader LNG industry and to zoom out on Canada's place in global trade.

03. Learning Objectives

So, learning objectives. Like I said, we're going to understand LNG and its relationship to other hydrocarbon gases because you don't get just methane coming out of those reservoirs. Understanding the common routes to market. We're going to look at the use cases, political and geopolitical considerations for LNG and understand LNG's role in the energy transition. And I will put out there that is a hotly contested topic. So I'm going to talk about, in general, some of the different ways that LNG is considered, both on the people who believe it is an energy transition element and for those that believe maybe not, maybe it's a little bit more contentious.

04. Where Does LNG Come From?

I'm going to show at the very beginning all of the slides that we'll talk about, just to give you an overview. As you can see, all of this beautiful artwork was done by me. Definitely not that beautiful, but hopefully a little bit more interesting as we go through.

05. 1.1: Wells

Let's start with where natural gas comes from. This is a broad overview of a well, and they're actually a little more complicated than I've made it look here, but I try and look at the subsurface and at the well itself and how we get these things to market. So natural gas or methane actually comes from reservoirs, and reservoirs exist in certain geological formations. The reservoirs have alike a sponge. They've got these little holes in them that are kind of connected and held structurally solid by the rocks that are there. The gas in a reservoir is different, as a mixture of different components. So it's not just methane within the reservoir, and that natural gas or that that's in that reservoir has occurred as a result of decomposition of organic materials (like dinosaurs) being eaten by microbes over geological timewith pressure and heat. And that creates different types of fossil fuels and different types of contaminants within that fossil fuel.
To find reservoirs that might have gas in them, geologists use things like and they drill test wells to go and see what's down in the Earth. They're hoping to find a reservoir that has large quantities of gas and that is well-interconnected, because that ability for gas to flow is what makes it economically possible to have a well produce the gas to the surface. So if you're lucky and your reservoir has good and good communication and good quality gas, that means that the gas can flow to the well. And if the reservoir has tighter pore space or shale layers and is kind of fragmented, then the gas can't get to the well as well. And you have to do things like frac'ing to create hairline fractures within those buffering layers to be able to let the gas flow, or drill multiple wells into different pockets throughout the reservoir, which is obviously more costly.
So wells are drilled with really specific designs because it's incredibly important that you only produce from the zone that you're licensed to produce from. As you can see in my drawing there, you've got kind of aquifers and different areas of colored subsurface rock-stuff (it doesn't really matter). The key point is that you are targeting a very specific zone and there's lots of different regulations and monitoring that's done to ensure that you only produce from that zone.
When you put the well into the earth, you put in a tubing and a casing (it doesn't really matter what those are, basically it's a hose within the concrete well itself) and then you perforate out into the reservoir. When you perforate out into the reservoir, it allows the gas that's there to flow to the well. And the reason it does that is because your reservoir is highly pressurized and your well is usually not, and so the gas comes into the well in order to flow up. It's a little bit like when you shake up a can of pop and you put a straw in it, it'll suddenly go out. Or open the can, it'll come shooting out the top. It's exactly the same with the gas reservoir under pressure. So the gas flows up the well into the wellhead and then down the flow line to a facility that can separate out the different components. So let's look at those components a little more closely. So we're going to look at what is actually in a gas reservoir.

06. 1.2: Products

So what are the different components? In a gas reservoir it really depends on the reservoir itself exactly what you get out of it and the volume of the different components in it. But generally speaking, if you're targeting gases you're going to get different volumes of these different elements.
First is methane. That's the simplest hydrocarbon. It's a carbon with 4 hydrogens on it. It's typically what you're targeting when you talk about natural gas wells and natural gas reservoirs. That's what you see in your stove at home when you turn it on (if you've got a gas stove). It often runs your furnace. If you're in an area that has natural gas infrastructure, you'll have a gas furnace.
The next component is ethane. Ethane is a slightly more complex molecule with 2 carbons. It's typically used as a building block for the chemicals industry and for plastics. So polypropylene is basically ethane. It makes things like LEGO and other different commodities that you'll see in your day-to-day life.
Then propane. Propane is also a fuel (you probably got it in your barbecue). The cool thing about propane is it liquefies at -40, so it's quite easy to get it to a liquid state. And it's very, very portable, so you can put it in a tank. And it's used in alot of areas where there's not a lot of infrastructure or not alot of gas supply available. For instance, I've got an off-grid cabin, and that cabin has a big propane cylinder, and that propane provides heat for our boiler and for our hot water. It's also used in alot of developing nations and propane's actually a little underappreciated (I think) in North America, for just how important it can be in having cleaner cooking fuels and heat in places that are more remote.
Then comes butane. Butane is another heating element. It's often used in places like in warmer climates. I used to live in Scotland, and in England they often use butane for home heating and things like that because it liquefies at about -1. So if it's really cold, you won't be able to get it into gas form to burn it. So typically it's used in warmer places, but it's the same that can be used for general heating.
Pentane, which is also often called. That's a kind of liquid. It starts to liquefy at more normal temperatures like 20°C. Condensate is often used for a diluent to dilute and other products. It's used in refining. It's kind of a high-end fuel, a very light-end fuel as well.
And then finally heavy ends, which is anything larger than C₅, or heavier than C₅. Those come in very small quantities in a gas well. And finally impurities, so H₂S, CO₂, and others. Often those impurities are there as a result of the decomposition process. So it depends on what was in the organic material that was decomposing, whether it was aerobic or in that reservoir. All kinds of things cause different impurities, but your common ones are H₂S, CO₂, sometimes a little bit of mercury and other things.

07. 1.3: What's in a Gas Well?

So if you want to watch a short animation of what's in a gas well (not an animation, it's a video). It's me sorting M&Ms. It was actually really difficult to talk about the different components while sorting the M&Ms, so if I'm talking slower or sound like I really don't know what's going on, that's why. But it is a good overview of what exactly are these different components and how does it work.Teresa Waddington - "What’s in a Gas Well"

08. 1.4: Canadian Gas

So we'll go into Canadian Gas. Now this is a map of Canada and it's supposed to show the different areas of gas deposits within Canada. Of note, what determines if a place has gas, oil, or petroleum deposits in general, is the ancient shallow seas and river deltas that used to exist. They would deposit large volumes of organic matter and then with exactly the right and geology and time, potentially you would have reservoirs form. Now for a reservoir to form, you need to have that large volume of organic matter, you need to have decomposition and then need to have a cap rock of some kind, something that's impermeable so it couldn't just kind of bubble up and disappear, in order for there to be deposits of gas and oil. So it really is like just the geological lottery on if you happen to have this kind of hydrocarbon. And it's not something that exists everywhere. It's not something that you can create out of nothing. It just is if it is, and Canada has it in quite a big abundance. So as you can see, that green blob kind of goes through Manitoba, Saskatchewan, and Alberta for the most part, and then it starts to go north. The green areas are gas and oil producing areas, they already have gas and oil. The yellow areas are where there's been established discoveries, and then the pink and reddish, purplish areas are not discovered, but it's geologically possible that oil and gas could exist there.
So when we talk about Canadian gas and what the specific value proposition is around Canadian gas, it's 4 key elements that are listed there: it's available, it's reliable, it's regulated, and it's secure.
When I talk about available, Canada holds 77 trillion ft³ of proven gas as of 2017 (so plus or minus a couple trillion by now, I'm sure). That ranks it in about 18th in the world, accounting for about 1% of the world's total natural gas reserves. That's alot of gas in one very specific area. And probably more relevant in terms of Canada's case as an exporting country, is that we have proven reserves equivalent to 17.5x our annual consumption. So we have way more gas than we need. And when we talk about proven reserves, reserves have different classifications. And basically if it's there and it's economically viable, that's when you start to talk about the more quality reserves. So there's actually more gas then that, depending on what you consider to be an accountable reserve. We are the 5th largest gas producer in the world right now. And considering Canada's population base, that is very significant. So we do not have alot of people, but we do have alot of natural gas.
When we talk about reliable, Canadian infrastructure is well maintained. We have production beyond our domestic needs, meaning it is available for export, and those 2 things are not commonly true around the globe.
Regulated. Of the top 10 gas producing nations, only Canada and Norway have an economy-wide price on carbon. So when we talk about energy transition and natural gas's role as a within the energy transition space, Canada and Norway have the most stringent methane regulations in the world. So we're really looking at a country that does this in a way that's considerate of what that overall value chain of emissions looks like. So price on carbon is important. regulations are also stringent in Canada. So gas from our reservoirs is monitored for leaks for any kind of methane release, and methane releases are important because methane is actually a higher intensity than CO₂. Depending on the time frame that you're looking at it, it's notionally quoted as being 25x more damaging than CO₂ for the same volume. So it's really important that if you do have any kind of methane leak around your upstream production and transmission, that it is managed. Gas from our reservoirs is low CO₂ in some cases, so it just naturally has lower carbon dioxide in the produced gas at the outset. And labor and environmental laws that exist in Canada ensure that the gas is exported and produced in ethical ways. So we have strong human rights laws and we do uphold them. Those things are increasingly important as you look at a globe where we are sourcing fossil fuels from increasingly less democratic countries. So it is really important that these types of regulations exist, and that it's considered in the geopolitical context of where we get energy from. I'll talk more about that later on.
And finally, it's secure. Canada is democratic, it has virtually no violent conflict, and has a strong free market. And that's simply not true for many, many producers of gas.
So in general, Canadian gas is widely available, it's very reliable, the infrastructure is maintained, you can predict when it will be available, it's highly regulated and it is a secure country from which to source gas.
That's it for this lesson. In the next lesson we're going to talk a little bit about the pipelines (upstream) and the ways that we transport and manage gas.