Natural Gas 101:
A Primer Natural Gas Investors
The Basics
The Basics
Natural gas is invisible, and until recently, it’s barely been visible in business media as well. Crude oil always seems to capture the headlines.
But natural gas is taking on an ever-increasing share of America’s energy burden. According to the American Petroleum Institute, 23 percent of all U.S. energy needs are met by natural gas, and that share is rising every year.
As we become more and more dependant upon natural gas, it becomes increasingly important for us to know more about what it is, how we get it, and how we use it.
Natural gas is a gaseous fossil fuel primarily composed of methane. However there are also significant quantities of propane, butane, helium, nitrogen and hydrogen sulfide contained in natural gas as well.
Natural gas is found when drilling for oil, in natural gas fields, and in coal beds (known as coalbed methane).
In order for natural gas to be suitable for fuel, it must be processed to remove everything but the methane. Propane, butane and helium are commercially sold, widely-used gasses which are gleaned from the processing of natural gas.
Chemical composition
How natural gas is found and delivered
Uses for Natural Gas
Safety
The Fuel of the Future
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Chemical Composition
The exact composition of natural gas varies slightly from field to field, but its primary component is methane, the shortest and lightest hydrocarbon molecule, which accounts for its clean-burning properties. Natural gas will dissipate into the atmosphere if released, since it is lighter than air.
Even though natural gas is tasteless and odorless, it is odorized by distributors to end-users to assist in detecting leaks. Natural gas is harmless to the human body, and is only dangerous when compressed into a closed space, displacing enough air so that oxygen becomes scarce or causes an explosion, though this is rare.
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How natural gas is found and delivered
The process of drilling for natural gas is not so very different than that of drilling for oil. Much of the same drilling equipment is used, and many of the same techniques are employed.
The details of typical drilling operations and procedures can be found here.
Rather than repeat that information in this section, perhaps it would be best to focus on what happens to the gas once it’s above ground. That’s where the real differences lie between oil and gas development.
Gas flowing from higher to lower pressure is the fundamental principle of the natural gas delivery system. The amount of pressure in a pipeline is measured in pounds per square inch.
From the well, the natural gas goes into "gathering" lines, which are like branches on a tree, getting larger as they get closer to the central collection point.
A gathering system may need one or more field compressors to move the gas to the pipeline or the processing plant. A compressor is a machine driven by an internal combustion engine or turbine that creates pressure to "push" the gas through the lines. Most compressors in the natural gas delivery system use a small amount of natural gas from their own lines as fuel.
Some natural gas gathering systems include a processing facility, which performs such functions as removing impurities like water, carbon dioxide or sulfur that might corrode a pipeline, or inert gases, such as helium, that would reduce the energy value of the gas. Processing plants also can remove small quantities of propane and butane. These gases are used for chemical feedstocks and other applications.
From the gathering system, the natural gas moves into the transmission system, which is composed of about 272,000 miles of high-strength steel pipe ranging from 20 inches to 42 inches in diameter.
These large transmission lines for natural gas can be compared to the nation's interstate highway system for cars. They move large amounts of natural gas thousands of miles from the producing regions to local distribution companies (LDCs). The pressure of gas in each section of line typically ranges from 200 pounds to 1,500 pounds per square inch, depending on the type of area in which the pipeline is operating. As a safety measure, pipelines are designed and constructed to handle much more pressure than is ever actually reached in the system. For example, pipelines in more populated areas operate at less than one-half of their design pressure level.
Many major interstate pipelines are "looped" -- there are two or more lines running parallel to each other in the same right of way. This provides maximum capacity during periods of peak demand. The pipeline rights of way are usually 100 feet wide and are leased from landowners with restrictions on construction activities to minimize the potential for accidental damage.
Compressor stations are located approximately every 50 to 60 miles along each pipeline to boost the pressure that is lost through the friction of the natural gas moving through the steel pipe. Many compressor stations are completely automated, so the equipment can be started or stopped from a pipeline's central control room. The control center also can remotely operate shut-off valves along the transmission system. The operators of the system keep detailed operating data on each compressor station, and continuously adjust the mix of engines that are running to maximize efficiency and safety.
Natural gas moves through the transmission system at up to 30 miles per hour, so it takes several days for gas from Texas to arrive at a utility receipt point in the Northeast. Along the way, there are many interconnections with other pipelines and other utility systems, which offers system operators a great deal of flexibility in moving gas.
When the natural gas in a transmission pipeline reaches a local gas utility, it normally passes through a "gate station." Utilities frequently have gate stations receiving gas at many different locations and from several different pipelines. Gate stations serve three purposes. First, they reduce the pressure in the line from transmission levels (200 to 1,500 pounds) to distribution levels, which range from ¼ pound to 200 pounds. Then odorant is added, such that consumers can smell even small quantities of gas. Finally, the gate station measures the flow rate of the gas to determine the amount being received by the utility.
From the gate station, natural gas moves into distribution lines or "mains" that range from 2 inches to more than 24 inches in diameter. Within each distribution system, there are sections that operate at different pressures, with regulators controlling the pressure. Some regulators are remotely controlled by the utility to change pressures in parts of the system to optimize efficiency. Generally speaking, the closer natural gas gets to a customer, the smaller the pipe diameter is and the lower the pressure is.
The gas utility's central control center continuously monitors flow rates and pressures at various points in its system. The operators must ensure that the gas reaches each customer with sufficient flow rate and pressure to fuel equipment and appliances. They also ensure that the pressures stay below the maximum pressure for each segment of the system. Distribution lines typically operate at less than one-fifth of their design pressure.
Sophisticated computer programs are used to evaluate the delivery capacity of the network and to ensure that all customers receive adequate supplies of gas at or above the minimum pressure level required by their gas appliances.
Natural gas runs from the main into a home or business in what's called a service line. Today, this line is likely to be a small-diameter plastic line an inch or less in diameter, with gas flowing at a pressure range of over 60 pounds to as low as ¼ pound. When the gas passes through a customer's gas meter, it becomes the property of the customer. Once inside the home, gas travels to equipment and appliances through piping installed by the home-builder and owned by the customer, who is responsible for its upkeep.
When the gas reaches a customer's meter, it passes through another regulator to reduce its pressure to under ¼ pound, if this is necessary. (Some services lines carry gas that is already at very low pressure.) This is the normal pressure for natural gas within a household piping system, and is less than the pressure created by a child blowing bubbles through a straw in a glass of milk. When a gas furnace or stove is turned on, the gas pressure is slightly higher than the air pressure, so the gas flows out of the burner and ignites in its familiar clean blue flame.
How natural gas is measured and sold
In the U.S. natural gas is usually measured in cubic feet. Each cubic foot of natural gas produces around 1000 British Thermal Units (BTUs). In the U.S. natural gas is traded as a futures contract on the New York Mercantile Exchange. Each contract equals 10 billion BTU's, or 10 million cubic feet.
When natural gas is sold at wholesale, in the U.S. it is usually sold in units of therms (1 therm = 100,000 BTU = approx. 100 cubic feet). This way purchasers know they are buying actual energy content, because the combustible power of natural gas can vary slightly from source to source. Large wholesale transactions are generally conducted in decatherms (one decatherm = ten therms).
The low density of natural gas creates difficulties when it comes to transportation and storage. As mentioned, most of the natural gas used in the U.S. travels by airtight pipeline from wellhead to market. But there are other ways gas can be shipped and utilized.
Natural gas can be supercooled to create liquefied natural gas (LNG) which can then be shipped across oceans and regassified at the point of entry. Domestically, compressed natural gas (CNG) can be trucked over shorter distances for limited applications.
Natural gas is often found along with crude oil, and in the past this presented something of a problem for drillers. The only alternative was to burn the gas at the field (called flaring). Today, however, gas can be reinjected back into the formation for possible recovery later.
Since natural gas is lighter than air, long-term storage is obviously a challenge. Two places natural gas can be stored are underground caverns from depleted gas reservoirs and salt domes. These serve as reserves for periods of especially high demand. But generally, natural gas is not as fungible as crude oil and is most economical via the national pipeline system.
Uses for Natural Gas
Power generation
In recent years natural gas has become the most popular fuel for electricity generation. Gas is used to power turbines for electrical generation across North America. According to the American Petroleum Institute, 90 percent of all electricity capacity built in the last five years was designed to be powered by natural gas. One reason is the clear environmental advantage of gas over other fossil fuels. Natural gas produces about 30 percent less carbon dioxide than petroleum-based products and about 45 percent less than coal.
Natural gas vehicles
Compressed natural gas is increasingly being used for urban bus systems and other large fleets. Engines running with CNG are approaching the efficiency of gasoline, and CNG emits less particulate pollution. Because of these advantages, an estimated 130,000 gas-powered vehicles operate on U.S. roads today, and that number is climbing every year.
Residential
Over half of U.S. homes are now heated by natural gas. Along with gas-fired furnaces, gas cookstoves, clothes dryers and water heaters are also gaining in popularity. In fact, according to the American Petroleum Institute, 62 million U.S. homes use 22 trillion cubic feet of natural gas every year.
Agriculture
Ammonia is the main ingredient in the manufacture of fertilizer, and natural gas is the primary feedstock for the production of ammonia.
Industry
Five million commercial customers use natural gas for a wide variety of energy needs. Gas is also used in the manufacture of fabrics, glass, paint, plastics and countless other products.
Safety
The first major natural gas accident in the U.S. occurred in 1937, at the New London School in New London, Texas. Over 300 students and teachers died when a buildup of gas in the school went unnoticed and ultimately ignited.
As a result of this tragedy, odorants began to be added to natural gas in order to tip off users to leaks. Usually this odorant smells like rotting cabbage or eggs. It is not harmful to humans in the miniscule amounts contained in commercially available natural gas.
Despite these precautions, however, a few times each year a gas-fueled explosion occurs in the U.S. This is usually a result of a buildup of gas within a building or boat which ultimately ignites. But since odorized gas is almost always detected in an occupied space before a dangerous buildup occurs, most gas explosions take place in unoccupied structures. Considering the many millions of structures that use natural gas, the danger of using gas has proven to be remarkably low, and natural gas enjoys an enviable safety record in the U.S.
The Fuel of the Future
We hope this sketch outline of the natural gas industry and market was helpful and informative. For more information on the future of natural gas and its indispensable role in our energy picture, see our informative, free article: “Natural Gas: Fuel of the Future or Commodity in Short Supply?”