Wednesday, April 18, 2018

Our Natural Gas Problem

Nova Scotia's offshore natural gas fields have turned out to be a curse rather than a blessing. The promise of great volumes of cheap natural gas nearby has led to the buildout of a significant gas infrastructure within the province, and now that the offshore gas is nearly gone we are left with lots of buildings and industrial boilers fitted to consume more natural gas than we have access to, which means that in the dead of winter the price of gas spikes - not really spikes; more like skyrockets. That's never a good thing.

When the Sable Offshore gas finds were developed in the late 1990's there were no local markets for gas, as there had never been pipelines into the Maritimes to deliver the gas. Natural gas is ubiquitous in many other parts of the country - when my wife built a new home in Burlington, Ontario in the late 1990's there were three utilities laid down on her street as the subdivision was developed - water and sewer, electricity, and natural gas. The gas was used for space heating and cooling, hot water and a gas fireplace, and it was incredibly cheap. I expect that gas was mostly from western Canada, brought to Ontario by pipeline.

Five years later Beth had a new house built in a suburb of Dartmouth; no natural gas was available so the furnace burned oil, the fireplace burned propane and there was no air conditioning. There is still no gas in that neighbourhood.

Over the last ten or fifteen years there has been a big push to convert large users of oil over to natural gas. Some of the big apartment complexes in Halifax use gas now, also the hospitals and universities, the NS Power Tufts Cove plant can burn gas or oil, the pulp plants can burn gas, and some of the towns in northern Nova Scotia have gas mains to service large industries (Oxford Frozen Foods, for example). Gas lines have also been run through many neighbourhoods in Halifax Regional Municipality to serve household needs. But the depletion of the offshore gas fields is causing a lot of problems for the homes and businesses that converted, because the price of gas can rise so dramatically in winter.

Natural gas has some interesting properties. Gas in the pipe is principally methane  (CH4), but as it comes out of the ground it is a mixture of many useful gases, including methane, ethane, propane, butane, pentane and helium. Along with these there is often water vapour, nitrogen, hydrogen sulfide and other nasty contaminants. The gas is treated at a fractionating plant to clean out the contaminants and to separate out the useful gases. The propane and butane are easily stored and sold, and the ethane is increasingly picked out and sold for the production of ethylene, which becomes polyethylene plastic bags and film among among other useful things. Some of the pentane is dissolved into gasoline. At one time some of the ethane was put back into the natural gas stream, although there were limits as ethane has fewer Btu's per volume than methane.

One of methane's less desirable properties is that it is effectively impossible to use pressure to liquefy it. We are all familiar with propane as a liquid - it comes to us in one-pound steel or plastic tanks to fuel the camp stove. The big propane delivery trucks carry the gas as a liquid and pump it as a liquid from one pressure tank (on the truck) to another (in your yard). Many will remember butane as the gas in cigarette and barbecue lighters - a simple plastic container will keep the butane as a liquid; open the valve and the gas will boil off and burn as you "flick your Bic". Ethane also can be shipped as a liquid in pressurised ocean tankers. But methane would require such a strong pressurised container that it would be prohibitively expensive to build and move around, and it would explode like a bomb if the tank ever weakened.

So, natural gas is almost always moved as a gas under pressure on land by pipeline, and over oceans as Liquefied Natural Gas. Gas can be pumped tremendous distances through pipelines - Siberian gas is now pumped all the way to Europe, under the English Channel to customers in Britain, and then under the Irish Sea to customers in the Republic of Ireland. That's a long way, and the gas travels though many jurisdictions, and if some of them are squabbling that makes the countries down the line a bit nervous. Most of the natural gas pipelines from the Soviet Union passed through the Ukraine, which became a problem when the Soviet Union broke up and Russia and Ukraine could not agree on commercial terms, so Russia shut off the gas for ten days one winter and Europe shivered. Security of supply is paramount, for Nova Scotia as much as for Europe. Russia now supplies almost half of the gas that Europe uses each year, so when the Americans demand that Europe inflict economic sanctions on Russia it becomes a delicate dance of balancing priorities.

Gas can be liquefied and shipped by boat to pretty much anywhere in the world. The gas has to be very clean (pure) and when it is cooled to -260°C it becomes a liquid and can be contained in well-insulated tanks at a pressure of only 5 psi (car tires, by contrast, run at 32 psi). When gas is shipped by LNG tankers a little bit boils off - typically less than 1% per day, and that gas is often re-liquefied and put back into the cargo tank. When the ship reaches its destination the liquefied natural gas is allowed to vapourise again and is fed into storage and into a pipeline system.

The principal supplier countries of LNG worldwide are Australia and Qatar. Russia sells some, as does Indonesia, and Trinidad has been an exporter of gas for many years. In the 1990's there were a number of LNG import terminals built along the Eastern Seaboard of the USA as there was a shortage of gas looming. With the development of fracking the USA has become a major natural gas producer, and some of those import terminals were re-configured to become export terminals. There are four big new export terminals coming onstream in Louisiana this year; they have already begun to ship American liquefied natural gas to the world  (mostly Asia).

The Irving refinery in Saint John has an import terminal, and they receive several cargoes per year.

A truck for moving compressed natural gas to PEI
It is also possible to move natural gas overland as Compressed Natural Gas. One basically builds a big pressurised tank and the gas can be compressed to about 1,000th of its normal volume, but it is not terribly efficient. Moving natural gas as CNG only makes economic sense when the cost of gas is low, to offset the cost of transport. Some large gas users who are miles from any pipeline will sometimes accept compressed gas by truck; I think that Acadia University gets its gas this way.  I took this picture of a natural gas delivery truck at the Big Stop in Truro about 3 years ago; I think that there was a customer on PE Island that got its gas this way.

Our own Emera, the company that operates Nova Scotia Power, also has a stake in electricity generating plants on several Caribbean islands (including Grand Bahamas), and they operate a fleet of ships that carry compressed natural gas from Palm Beach, Florida to their plants. Natural gas in Florida is very inexpensive because there is so much gas and so much pipeline capacity to move it. I have heard that Emera's vessels can make two round trips per day. This is economically feasible because the transport distance is so short and the fuel is so inexpensive.

Storage of natural gas is not easy because it requires such a huge volume. Liquid hydrocarbons (which are very energy-dense) will sit quietly in huge steel tanks until they are needed, but gas (which is not energy-dense) needs to be stored in huge volumes or in expensive pressurised tanks. In the USA most storage happens in old, depleted gas or oil wells where the gas is sent back down into the earth and is recovered when it is needed. Others store their gas in salt caverns (as AltaGas proposes to do near Stewiacke) but these can have their problems - a storage facility failed in California a few years ago and all the gas escaped into the atmosphere and many neighbourhoods were evacuated for months.

Natural gas works best as a utility, like drinking water or electricity. Gas arrives at your property line at the correct pressure and in the needed volume, and you pay for what you use. You don't have to store it onsite (like furnace oil) and there is little risk of environmental damage if there is a spill (leak). And ideally, the price does not vary much. It's the price that has been causing trouble in Nova Scotia these past two years, and that is because our local gas supply is failing.

The Sable Offshore Energy Project has been producing natural gas since the late 1990's. The gas comes from a number of wells sunk into the ocean floor, and these are all linked to a submarine pipeline that carries everything to shore in Guysborough County. From there, the natural gas is purified and sent into the Maritimes & Northeast pipeline and on to customers in Nova Scotia and the USA. The other components are piped to a fractionating plant at Point Tupper on Cape Breton Island, where they are distilled out and prepared for sale.

I have heard that the Sable Offshore project has been plagued by two problems - decreasing gas pressure and an increasing water cut. Natural gas flows from the wells by reservoir pressure - we don't pump it to the surface like crude oil. So when the gas stops flowing, that's that! And the second problem is that many other gases and liquids come to the surface with the gas - especially water, which has to be cleaned and disposed of. Our offshore wells have both problems, so much so that for the past few years the wells have only been allowed to flow in winter when the price of gas is so much higher.

A third complication is that the project is operating in a very high-cost environment. Across the American midwest and in parts of Alberta an astonishing amount of the crude oil production comes from old "stripper" wells that are visited once a week or so by their operators, who set the donkey pumps running and pump 10 or 20 barrels of crude oil into a truck and then shut the well off again. Over the next interval oil will slowly drain through the reservoir to the bottom of the well, and it will be pumped up again on the next visit. These are very low-cost environments - the wellsite is clean and maintained and there is little worry about spills. Eventual decommissioning is relatively inexpensive because it is all being done on land at the end of a road. Pick a fine week in summer and gather up all your equipment and pumps, pour concrete down the well, cut off the top of the pipe, and you're done.

Offshore oil and gas wells, by contrast, have very expensive operating environments. A lot of the equipment is on the ocean floor and the operators are up on production platforms, all of which have to be manned and maintained. Decommissioning costs are not insignificant. So when the gas flow starts to falter, the operating costs continue and something has to give. You can't run an offshore production facility as if it were a stripper well.

So here we are, with infrastructure for gas distribution all installed, and no close supply of gas. The operators plan to shut in the offshore wells by 2019 and de-commissioning of the offshore platforms will begin right away. The facilities in Guysborough County will be closed.

Any gas that we get to service our needs in Nova Scotia will have to come through the Maritimes and Northeast Pipeline from New England, and that will be problematic. As a matter of fact, it already is causing problems.

More in Part 2, coming soon.

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