Fortnightly Magazine - September 2004


Imported natural gas contains more Btus and fewer impurities than the domestic variety, raising questions for LNG development.

It started as a small problem that was supposed to stay small. When Federal Reserve Chairman Alan Greenspan called for a global natural gas market in 2003, the industry knew inherently that the quality and composition of natural gas imported from places like Qatar and Nigeria would vary from the gas used domestically in the United States.

But utility execs were not fazed much. Many assumed that the American gas utility sector could resolve the problem without much effort-as the Europeans and Australians, who import sizeable qualities of LNG, have already done.

After all, if the oil majors could manage to blend and standardize the world's diverse grades of crude oil to accommodate any automobile driven around the globe, then surely the natural gas industry could do the same. Gas-fired generation is not rocket science. Neither is the home furnace, the kitchen stove, or the basement water heater.

Yet today, more than a year after Greenspan's speech, this small issue has morphed into a major obstacle-one that experts say could delay LNG development plans. The challenge of gas interchangeability has raised questions about reliability, finance, and environmental compliance, with very few answers to come by.

In a nutshell, most gas-fired equipment and appliances in America are not calibrated to the enhanced combustibility of LNG, which boasts a higher quality and fewer impurities than domestically produced and process gas.

The American Gas Association, for its part, does not believe that domestic end-use equipment will have to be altered in any major way, as different proposals call for a standardization of natural gas quality that would include foreign sources. In addition, several injection and techniques do exist for blending gas (such as with nitrogen, air, or lower Btu natural gas). Those techniques could be used to lower the combustibility or Btu content of imported LNG.

But the gas industry in its history has never had to set a gas quality standard or decide on a gas interchangeability number.

The Cost of Upgrades

Rhone Resch, vice president of energy markets at the Natural Gas Supply Association, which is part of a coalition working on the problem of gas interchangeability, believes the industry effort will be worth the wait. "We are going to come up with a characterization of value," he says.

"If we go too fast, we won't have the necessary equipment and blending capability. In order to go into the market, I as an LNG developer have to meet the correct pipeline specifications."

Resch adds that LNG developers will want to know in advance what equipment they will require, as upgrades have proven costly in the past. He cites the example of an LNG terminal operator having to install a $200 million nitrogen injection system after the fact to meet a customer's gas quality specs.

By contrast, Resch believes that high-cost upgrades for LNG gas will not be needed for appliances and similar end-use equipment, but many in the power generation sector are not convinced. They point to the fact that the affect on equipment has never been studied, and the risks to safety and operations are not well known.

Don Santa, president of the Interstate Natural Gas Association of America, who is also heading up the effort, outlined some of the problems stemming from uncertainty over the quality and composition of imported natural gas in a meeting held at the Federal Energy Regulatory Commission (FERC) in late July:

"In some cases, the tolerances for such compositional variations have not been studied. And perfectly available information has not yet been developed.

"Second, for many customers, particularly residential gas users, the lack of controls or mitigated responses that can be taken should a potentially harmful gas composition make its way to their gas-burning appliances presents an issue.

"Third, there is the effect that rapid changes in the compositional variation of gas could have on the reliability, safety, and integrity of the equipment used by major end-users.

"Fourth, there's the exploration of the role of both historical gas composition variability and regional gas composition differences and how end-users have responded to this to date."

Power Plants: An Operational Nightmare?

To establish a baseline of natural gas quality, the gas industry will have to establish a gas tolerance range for electric generating equipment and a host of other devices in which the higher-Btu LNG, even where blended, may not prove compliant. Many utilities executives are concerned about the costs, as well as other issues.

There already have been instances in which utilities have had to shut down their equipment as a result of inconsistent fuel quality.

In New York, the gas utility KeySpan Energy was forced to shut down a plant several times in 2003 after receiving unprocessed fuel that differed significantly from "what the plant was originally designed to handle," according to a document filed at FERC.

Robert D. Wilson, director of environmental operations at KeySpan Energy, notified FERC on March 22 that "the assumption that existing appliances will not be significantly impacted by gas quality variability would not be prudent and additional technical evaluation is needed prior to drawing any conclusions."

The Edison Electric Institute's Chuck Linderman, appearing at the above-mentioned FERC conference in late July, also raised environmental and structural issues associated with generating plant.

"The environmental side is not as well understood as is the combustion side yet, even though there are, in some cases, continuous emissions monitors on some of these units," said Linderman. "The wrong kind of fuel," he added, "has the potential to create vibration inside the unit. Bear in mind that these are machine-made to very tight tolerances that may create operational difficulties or potential failure of the units."

Impact on Air Emissions

"Certainly," notes Linderman, "with the NOx pressures in this area during the summertime and on the East Coast as a whole, we don't want to do anything inadvertently that raises NOx limits or creates units that are out of compliance with the Clean Air Act in the midst of a heat storm."

At the FERC meeting, Linderman reported that appliance and turbine manufacturers such as General Electric (GE) and Westinghouse were coordinating on the issue, but that conclusions are mixed. According to Linderman, GE says it can design a machine "for any specification of fuel." But he quotes a different manufacturer as warning that "the only thing that that machine can't do is, it can't take changes in fuel quality on a basis that's just flowing through the pipeline." That manufacturer says it will need to have a quality standard to rely on that is generally available and that "the machine is designed for."

Meanwhile, an editorial in the July 2004 issue of Appliance magazine carries this warning: "Trying to fuel your basic range-top, oven, water heater, dryer, furnace, or hearth product with [LNG] imports could result in some unpleasant risks, namely elevated carbon monoxide emissions, increased yellow tipping, and firing rates that exceed nameplate ratings."

While the gas industry is not yet ready to admit it, there may be a high price to pay to deal with the differences that come from an increase in imports of natural gas from overseas. But the alternative of not paying to avert a natural gas crisis would be irreconcilable.


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