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LNG's Final Hurdle

Interchangeability issues threaten to delay vitally needed LNG projects.

Fortnightly Magazine - March 2006

lead in researching and collecting data on interchangeability impacts on large equipment and appliances, and on developing recommendations based on that research for use by FERC and the industry.

Whether FERC chooses to initiate a formal rulemaking process remains uncertain. Stakeholders in the U.S. gas industry are watching closely to see how that policy takes shape, as it will define the path forward for important natural gas infrastructure projects.

Two Trends

Every natural-gas field in the world is unique.

Different gas resources—in North America and around the world—originate from different types of biomass, cooked under a variety of conditions. This results in variation in gas supplies from field to field in, among other things, the level of each hydrocarbon component in the gas stream.

Left unchecked, such differences can create operational problems for end-users. Gas with excessive non-methane hydrocarbons, such as ethane and butane, for example, can burn too hot in low-NOx burners, to the detriment of efficiency and environmental performance. Also heavy hydrocarbons—pentane and longer hydrocarbon chains (C5+)—can condense inside pipelines, sometimes accumulating in a “slug” of liquids that can suddenly “glug” through the pipe, with undesirable results for end-use equipment. This problem can be particularly acute at the local distribution company (LDC) citygate, where the pressure is reduced for distribution.

Historically, FERC-regulated interstate gas pipelines have had minimal provisions, if any, in their tariffs addressing gas quality and interchangeability. The standards usually were limited to maximum or minimum Btu criteria. However, two significant industry trends brought gas quality and interchangeability to the forefront of the industry and have resulted in major efforts to identify and specify in pipeline tariffs more detailed gas composition standards.

The first trend involves what the industry terms hydrocarbon liquid dropout. Historically, the heavier hydrocarbons in the natural gas stream had more value when extracted from the gas and sold in the liquids market. As natural-gas prices started to rise, however, companies chose not to strip out gas liquids because the comparatively low petroleum prices made C5+ hydrocarbons more valuable in the gas stream than they were as gas liquids. As a result, hydrocarbon liquid dropout issues have become more pressing since the mid-1990s, and increasing volumes of “wet” gas in the domestic supply have spurred efforts to tighten gas composition specifications in pipeline tariffs.

For example, in December 2005 a FERC administrative law judge issued an initial decision in favor of Natural Gas Pipeline Co. of America over a dispute lasting several years concerning “the appropriate permanent safe-harbor hydrocarbon dew point figure.” The ALJ deferred, in this case, to the pipeline owner’s judgment that hydrocarbon dropout should not occur until temperatures fall below 15 degrees F. 2

The second industry trend involves interchangeability and LNG. With rising natural gas prices, prospects for increased imports of LNG became a reality with the reactivation of the Elba Island, Ga., and Cove Point, Md., LNG terminals in 2000 and 2001, respectively. From early on, the industry was aware, however, that increasing imports of LNG could result in operational problems for LDCs, power generators, and industrial end-users because most