Spike

[Brew Swillis]

From the Bernstein report: "...the cost to spike LNG to meet the calorific requirements of the Japanese and Korean grids would cost another US$1mscf."

What does it mean to spike the gas?  Any idea what this entails?  Sure seems like a waste of VO.

[petrengr1]

From the Bernstein report: "...the cost to spike LNG to meet the calorific requirements of the Japanese and Korean grids would cost another US$1mscf."

What does it mean to spike the gas?  Any idea what this entails?  Sure seems like a waste of VO.

In order to raise the heating value of the LNG which is mostly Methane (CH4), the stream must be “spiked” with some heavier hydrocarbons i.e. Ethane, butane and propane.

[Brew Swillis]

Thank you sir.

[SamAdams]

Pet, thanks as always. During last December's meetings, MH & DS commented how Japan had unique requirements and that the PNG gas was a good match. MH said they would have to leave some of the liquids in the gas for that market. So in trying to understand that $1 per mcf cost would that be higher or lower than say gas coming from the Mideast which might need more/less spiking. I can see where more spiking would raise costs but my take from last year was IOC's gas was a good fit for the Japanese market already so not sure if the $1 per mch is a good/bad thing or just a thing.

[petrengr1]

Pet, thanks as always. During last December's meetings, MH & DS commented how Japan had unique requirements and that the PNG gas was a good match. MH said they would have to leave some of the liquids in the gas for that market. So in trying to understand that $1 per mcf cost would that be higher or lower than say gas coming from the Mideast which might need more/less spiking. I can see where more spiking would raise costs but my take from last year was IOC's gas was a good fit for the Japanese market already so not sure if the $1 per mch is a good/bad thing or just a thing.

Sam- To “spike” the LNG stream might be poor terminology. It may be more of a decision about how much of the heavier hydrocarbons to leave with the LNG to get the desired heating value.

The boiling point of the various components at atmospheric pressure is:

Methane -164 degrees C
Ethane      -89 degrees C
Propane    -42 degrees C
Butane      -0.5 degrees C

As the gas is cooled down the heavier components will liquefy first so they will have to decide what they want the heating value of the LNG to be and then decide how much of the Butane and Propane to keep and how much to leave with the LNG. I think all of the Ethane will go with the LNG.

If they do not want to have the LPG (Butane and Propane) for the local market or for export they could just leave all of the hydrocarbon gases with the LNG and give it a little more heating value. Maybe the Japanese will pay a premium for the extra BTU’s.

I believe the acid gases, carbon dioxide (CO2) and hydrogen sulfide (H2S), will be removed at the CSP in the Antelope Field. The gas stream to the LNG plant will be all hydrocarbon gases.

[SamAdams]

Perfect, thanks.

[Stavros]

I think there's some mis-understanding of the statement made by Neil Beveridge in his Bernstein Research Report on IOC.

The report said the following on page 40 in relation to US-based LNG ... The Report did not speak to IOC's need to spike LNG:

"In addition to the erroneous perception that the US will flood the global LNG market, we do not believe that the cost to deliver US LNG to Asia will be as cheap as some believe. Assuming a Henry Hub Price of US$5/mscf, delivery costs (15% of Henry Hub) liquefaction plus fuel costs (another US$3.50/mscf to US$4.00/mscf) then FOB pricing would be US$9-US$10/mscf. Shipping costs a further US$3/mscf and the cost to spike LNG to meet the calorific requirements of the Japanese and Korean grids would cost another US$1mscf. All in all, the cost to deliver gas from the US to Asian markets will result in a delivered price of US$12-14/mscf"

Neil is absolutely correct (he's a smart guy) ... Henry Hub gas has lower heating value than that required by Korean and Japanese markets. It has only methane and a good bit of nitrogen. Anyone who takes Henry Hub Gas as feedstock to a new LNG plant will be required to buy ethane and propane to spike the LNG's calorific content if it is shipped to Japan or Korea. If the LNG is destined to other countries in Asia, less or zero spike will be required.

As mentioned by other posters, I also believe that PRL 15 gas has some nitrogen but about 4 or so volume percent ethane plus some propane and butane. The calorific value is high and may be good enough to meet Japan and Korean specifications. If it's not high enough, it will only require minor spike.

[Palm]

Agree; some time ago this was mentioned as another advantage that LNG from PNG would have over Australian CBM. PNG gas meets the strict requirements of Japan's power generation fuel with little or no need for "spiking". Would be interesting to know whether PNG LNG is "spiking" its LNG as the first shipment went to Japan.

[SamAdams]

I think there's some mis-understanding of the statement made by Neil Beveridge in his Bernstein Research Report on IOC.

The report said the following on page 40 in relation to US-based LNG ... The Report did not speak to IOC's need to spike LNG:

"In addition to the erroneous perception that the US will flood the global LNG market, we do not believe that the cost to deliver US LNG to Asia will be as cheap as some believe. Assuming a Henry Hub Price of US$5/mscf, delivery costs (15% of Henry Hub) liquefaction plus fuel costs (another US$3.50/mscf to US$4.00/mscf) then FOB pricing would be US$9-US$10/mscf. Shipping costs a further US$3/mscf and the cost to spike LNG to meet the calorific requirements of the Japanese and Korean grids would cost another US$1mscf. All in all, the cost to deliver gas from the US to Asian markets will result in a delivered price of US$12-14/mscf"

Neil is absolutely correct (he's a smart guy) ... Henry Hub gas has lower heating value than that required by Korean and Japanese markets. It has only methane and a good bit of nitrogen. Anyone who takes Henry Hub Gas as feedstock to a new LNG plant will be required to buy ethane and propane to spike the LNG's calorific content if it is shipped to Japan or Korea. If the LNG is destined to other countries in Asia, less or zero spike will be required.

As mentioned by other posters, I also believe that PRL 15 gas has some nitrogen but about 4 or so volume percent ethane plus some propane and butane. The calorific value is high and may be good enough to meet Japan and Korean specifications. If it's not high enough, it will only require minor spike.

Thanks for that as well Stavros.  That matches up with my takeaways on suitability.

[Brew Swillis]

I think there's some mis-understanding of the statement made by Neil Beveridge in his Bernstein Research Report on IOC.

No misunderstanding here, though in hindsight I should have included more context to avoid confusing others.