Bringing stranded gas to market has long been considered a possibility for exploration and production companies, but finding economical ways to do — without building new pipelines — has been the problem. However, as the thirst for natural gas grows in North America, several companies are stepping up their efforts to move stranded gas to market. Most of the news has centered on liquefied natural gas (LNG), but the interest in compressed natural gas (CNG) is growing, and may be more of a real possibility now than ever before.

Most of the attention to date has been on plans to build more LNG facilities for North American markets, with supplies coming from remote onshore and offshore areas via LNG carriers. However, as gas prices have fallen, only expansions of existing LNG facilities have been completed thus far. In May, for instance, El Paso Corp. revised its previous strategy of building LNG facilities and instead said it would build multiple offshore systems to bring gas through subsea pipes (see NGI, May 13).

In a more quiet manner, other companies are considering CNG as a way to bring gas from remote areas. Houston-based EnerSea Transport LLC set up an alliance with Atlantic Canada officials in early June to bring CNG from its remote offshore locations. And in late June, EnerSea took the next step in a partnership with the largest shipbuilder in the world, Hyundai Heavy Industries Co. Ltd. (HHI), to build marine transport vessels. Once vessels are ready, EnerSea has an ambitious plan to initiate gas transportation and sales between 2005-2006, said John Dunlop, Enersea’s vice president of business development.

“Yesterday’s stranded gas is much closer to market today,” said Paul Britton, EnerSea’s managing director. EnerSea developed what it calls “VOTRANS” technology that is capable of moving up to 2 Bcf of CNG per ship over distances of up to 4,000 miles at a “significantly lower total cost than LNG or pipelines.” LNG cargoes typically are about 2.6 Bcf.

He said that VOTRANS, which stands for “Volume Optimized Transport and Storage” is a “virtual sea-going pipeline comprised of long, large-diameter pipes contained within an insulated structure integrated onto a ship.” The system apparently improves on previous CNG concepts by combining optimal storage efficiency, the ability to transport both lean and rich gas, an innovative offloading process and significantly lower (around 40%) compression requirements to increase vessel capacities and reduce costs.

Dunlop noted that while CNG vessels are more expensive than LNG tankers on a per-unit of gas basis, “we more than make this up through having a lower overall cost (i.e., no liquefaction or LNG regasification facility costs). Savings lie in the overall process.

Independent engineering, naval architecture and economic analyses have been performed so far by Paragon Engineering, Alan C. McLure Associates and Groppe, Long & Littell that “confirm technical viability and indicate that EnerSea could sell natural gas into U.S. markets for substantially less than $3.00/Mcf,” said Britton. That would be less than current estimates for LNG transport, which are around $3.50/Mcf.

Houston-based Zeus Development Corp., which is working on an in depth CNG study, noted that in its initial research, most of the CNG ocean transport designs were working to exceed only 9,000 cubic feet per displacement ton, which would compare unfavorably with LNG carriers, which carry around 30,000 cubic feet. However, with compressed gas, “operators avoid the daunting challenge of placing liquefaction processes onboard an offshore production platform.”

Zeus’ Bob Nimocks said recently that the advantage of CNG is its “simple design.” He noted that producers in deep water need solutions to move gas associated with oil production to market, “and the CNG option for the most part can use equipment already on the topside.”

Currently, the most common method to get rid of unwanted gas when pipelines are unavailable is through flaring, but Zeus noted that oil producers are “rapidly eliminating this option” because of environmental commitments. “This leaves re-injection or abandonment,” he said. “Both are costly, skyrocketing the cost of managing associated gas.”

Zeus held an in depth two-day conference in Houston in late June to discuss prospects for CNG, and has found interest is growing for E&Ps to find market-based alternatives to recover stranded gas. North American E&P companies participating in the CNG conference included BP, ChevronTexaco, Marathon Oil Co., Shell Global Solutions International and Trans-Canada Pipelines Ltd. EnerSea also participated.

There are rigs in the North Sea that use the natural gas to produce and transmit electricity onshore through underwater cables, but Zeus noted that “this has only limited applications.” Other alternatives include CNG, LNG, methanol, syncrude or eventually hydrates. Today, Nimocks noted that “competition among CNG designers is leading to improved costs and better efficiency. The race is between CNG and the offshore liquefaction of gas. Given CNG presents fewer design challenges, I believe we’ll see it before any of the other options.”

Britton called his company’s alliance with HHI “a defining moment in the commercialization of CNG marine transport.” Initially, the partnership will complete vessel design and obtain ‘class approval in principle’ certification for Enersea’s VOTRANS CNG vessels. Once the certification is completed, HHI will build the first VOTRANS-equipped fleet of vessels for CNG transport. HHI has already built 41 LNG and liquefied petroleum gas-carrying vessels to date, and is building 13 new ones.

Because the company’s technology is basically a “portable pipeline,” Britton said it could “provide a domestic alternative by delivering Alaskan or deepwater Gulf of Mexico gas more cheaply than proposed pipelines.”

EnerSea also created affiliate EnerSea Canada Inc. in June with AMI Offshore Inc. to develop a transport system in Atlantic Canada. The affiliate will be based in St. John’s, and Britton said the alliance will “advance a host of new possibilities” for Canadian gas offshore.

“This alliance and the creation of EnerSea Canada marks the beginning of an exciting new phase in our petroleum industry,” said Roger Grimes, premier of Newfoundland and Labrador. “This is a very important and significant step in our maturation as a petroleum producer and as an emerging player in the global marketplace.”

St. John’s also will be the site for the world’s first Centre of Excellence for the large-scale transportation and use of CNG. The industry-based center, funded partly by EnerSea, will promote and coordinate the participation of government, academia, the E&P community and offshore service companies for what Canadian officials hope is an emerging industry.

In what would be another boost for North American CNG business, the U.S. Coast Guard announced in May that it would begin studying the safety of using CNG containment vessels to move gas produced from the deepwater Gulf of Mexico drilling sites to market. And in June, offshore LNG and CNG terminals moved closer to reality with the passage of H.R. 3983 by the House of Representatives (see NGI, June 10). If the Maritime Transportation Antiterrorism Act of 2002 becomes law in its current form, among other things it would allow the Department of Transportation to license offshore port facilities for both LNG and CNG, an option currently reserved only for oil.

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