The Application of Mid Range LNG

Process to Small Scale Liquefaction

(Proteus LNG)

Reference: 960-XR-001

Brian Songhurst
Director of LNG

Energy & Power

22 Newman Street
London W1T 1PM
United Kingdom

+44 20 7307 5100

brian.songhurst@energyandpower.co.uk
 The Application of Mid-Range LNG
Process to Small Scale Liquefaction (Proteus LNG)

CONTENTS

1 AUTHOR’S NOTE .................................................................................................................3

2 ABSTRACT ..........................................................................................................................3
3 WHY SMALL SCALE LNG? ....................................................................................................4
4 THE PROTEUS LNG TECHNOLOGY .......................................................................................6
4.1 Unique and Patented Technology ................................................................................. 6
4.2 Flow Scheme ............................................................................................................ 6
4.3 Equipment Selection .................................................................................................. 8
4.4 Layout and Modularisation .......................................................................................... 8
4.5 Safety...................................................................................................................... 9
4.6 Operations, Control and Maintenance ......................................................................... 10
4.7 High Efficiency ........................................................................................................ 10
4.8 Capital Cost and Project Schedule .............................................................................. 11
5 THE OPPORTUNITIES .......................................................................................................11
5.1 Producing Energy from Currently Uneconomic Gas Reserves .......................................... 11
5.2 Small Onshore Gas Fields ......................................................................................... 12
5.3 Small Offshore Gas Fields ......................................................................................... 12
5.4 Flared Gas from Oil Production .................................................................................. 12
5.5 Coal Bed Methane (CBM) or Coal Seam Gas (CSG) ....................................................... 12
5.6 Waste Site Methane and Biomass............................................................................... 13
5.7 Sustainability .......................................................................................................... 13
5.8 End of Pipeline (Pipeline ‘Extension’) .......................................................................... 13
5.9 New LNG Producers and Operators ............................................................................. 13
5.10 New Equipment Manufacturers .................................................................................. 14
6 STATUS & NEXT STEPS .....................................................................................................14
7 CONCLUSIONS..................................................................................................................14

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1 AUTHOR’S NOTE

Since submitting the application to present this paper at the China Power & Gas Conference the Mid
Range LNG (MRLNG) process has be renamed Proteus LNG and this new name has been used in
this paper.

2 ABSTRACT

Over the past 40 years the focus has been on the development of larger and larger LNG
liquefaction plants. Over that period single train throughput has increased from 1 million tons per
annum (MTPA) to nearly 8 MTPA. The development of these larger plants has focused on major gas
fields or associated gas from large scale oil field production. However more than 50% of the proven
gas reserves in the world are currently reported as not economic for development and referred to
as stranded gas. Additionally, even more gas exists in very small fields not included in these
estimates, gas currently flared during small oil field production, gas trapped in coal beds and waste
tips. These additional gas sources need to be produced to meet our future energy needs.

The Mid Range LNG liquefaction process, now called Proteus LNG, has been targeted for the
development of these small reserves with production rates of between 30 t/d and 3,000 t/d
(10,000 TPA – 1 MTPA). The process is able to offer high efficiencies similar to complex multi liquid
refrigerant systems and twice that of the simple nitrogen expander process typically used for small
scale liquefaction. This results in the production of more LNG per unit of gas feed.

The design of a 3,000 t/d unit has been completed and detailed discussions held with potential
major equipment suppliers who have confirmed their equipment is able to perform the required
duties. Further they are prepared to offer process guarantees. Due to the simple process and small
equipment count a 3,000 t/d plant can be supplied as a single module excluding the cold box.

Engineering studies indicate that the capital investment would be in the range of US$220-250 per
TPA on a FOB basis. The EPC contract schedule has been estimated at 30 months, considerably less
than a conventional LNG plant and providing earlier revenue...

A commercial demonstration unit producing 10 t/d is currently planned to commence operation in

2009. Produced LNG will be exported by road tanker to local markets. Design studies are underway
with several potential operating companies for units to be located both onshore and offshore. This
ability to be able to supply the liquefaction unit as a single module offers many benefits for remote
and offshore locations.

In addition to being an enabling technology for the economic development of small gas reserves
Proteus LNG provides opportunities for new equipment suppliers and manufacturers to enter the
lucrative LNG market. It will also enable small gas producers to enter the expanding LNG market
given the relatively low investment costs.

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3 WHY SMALL SCALE LNG?

The first commercial production of LNG for export was in Algeria in 1964 and comprised 3 trains
each rated at 1.1 MTPA using the single mixed refrigerant process. The LNG was shipped to the UK
and France. Since then over 80 further trains have been constructed around the world to provide
an economic method of transporting large gas volumes over long distances where pipelines are not
economic. The growth in LNG production is shown in Figure 3.1.

LNG Worldwide Production

200
175
150
125
MTPA

100
75
50
25
0
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Figure 3.1 - LNG Worldwide Production Growth

This world scale development of LNG liquefaction plants has focused on larger and larger units to
gain the economies of scale. The size of these plants has been limited by the size of the gas
turbines to drive the refrigeration compressors. Early plants used Frame 5 equivalent machines,
then Frame 7 equivalent and most recently Frame 9 equivalent for Qatar Gas where the plant
throughput is 7.8 MTPA. The growth in plant size is shown in Figure 3.2.

Liquefaction Plant Capacity Growth

9
8
7
6
MTPA

5
4
3
2
1
0
1960 1970 1980 1990 2000 2010 2020

Figure 3.2 – Growth in LNG Plant Size

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For these large plants the main technology providers have been ConocoPhillips with the Optimised
Cascade process using plate fin exchangers and Air Products with their propane pre-cooled mixed
refrigerant process using a proprietary designed and supplied spiral wound cryogenic heat
exchanger.

These world scale developments have resulted in the market being served essentially by the two
major technology providers stated above, a limited number of vendors for the major equipment
(gas turbine compressors and heat exchangers) and a limited number of EPC contractors. With the
increasing demand for LNG the result of these limitations has contributed to the rapid increase in
project cost causing many projects to be put on hold and leaving smaller gas fields as not
economic to develop.

The time has come to shift the paradigm from large scale and few suppliers to smaller plants with
new technologies, new equipment suppliers, lower development costs and shorter schedules.

These large plants developments require very large gas supplies to be economic e.g. a 6 MTPA
plant requires a 200 BCM gas field for an economic production life of 25 years. This paradigm shift
will enable the economic development of much smaller gas fields which are currently overlooked
and regarded as ‘stranded gas’ and provide additional energy supplies to meet the needs of
growing industrial markets.

The application of Proteus LNG liquefaction technology enables this paradigm shift for the following
reasons:-
¾ Simple flow scheme with only 1/3rd of equipment of conventional liquid refrigerant plants;
¾ Low capital cost and less maintenance with less equipment;
¾ Shorter project schedule enabling earlier production and improved cash flow;
¾ Process efficiency close to large scale plants maintaining low fuel consumption and
operating costs;
¾ Modular construction reducing site construction costs and shorter schedule than
conventional site constructed plants;
¾ Applicable to both offshore and onshore locations;
¾ Intrinsically safer than processes using large inventories of highly flammable liquid
refrigerants;
¾ Ease of start up and shutdown including the ability to operate on full recycle;
¾ Opportunity for new vendors to enter the market and provide more competition lowering
costs and shortening delivery times;
¾ Economic for LNG production rates from 30 t/d to 3,000 t/d (10,000 TPA - 1 MTPA).

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4 THE PROTEUS LNG TECHNOLOGY

4.1 UNIQUE AND PATENTED TECHNOLOGY

The patented Proteus LNG technology is unique in that the liquefaction of the feed gas (essentially
methane and ethane) takes place directly inside the turbo expander. In all other processes the
liquefaction takes place in a cryogenic heat exchanger using an indirect refrigerant or refrigerants.

The other simple small scale technologies typically provide refrigeration by using either an external
single nitrogen expander cycle or dual nitrogen and methane expander cycles.

The elimination of these external refrigerant(s) circuit(s) significantly reduces the complexity and
number of equipment items and thus reduces plot space, capital cost, maintenance and potential
hydrocarbon leakage points. The flow scheme for the liquefaction process is shown in Figure 4.1.

Figure 4.1 – Proteus LNG Simplified Flow Scheme

4.2 FLOW SCHEME

The feed gas requires pre-treatment in the same way as all other liquefaction process to remove
heavy hydrocarbons, water and carbon dioxide which would freeze at liquefaction temperatures
thus blocking the piping and equipment. A mercury guard bed would also be required to prevent
damage to the aluminium components as is normal practice. The feed gas is pre-cooled with
returning cold recycle gas and mixed with compressed recycled gas and further cooled before
entering the turbo expander where 30-40% of the feed gas is liquefied and sent to storage. The
gas not liquefied is compressed and recycled after cooling with air or cooling water. A part of the
recycled gas is used as fuel for the gas turbine driving the recycle gas compressor. To improve the
process efficiency an auxiliary refrigeration circuit can be used as shown using the recycled gas.

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The process flow diagram shown in Figure 4.2 describes the process in more detail. NGLs (natural
gas liquids) are removed from V1 following pre-cooling. It shows the arrangement of the heat
exchangers which would be located in the cold box and the multistage compression of the recycle
gas. The specific arrangement would be optimised for each project based on gas composition and
throughput.

Figure 4.2 - Process Flow Diagram

Figure 4.3 shows how the process is likely to fit into the overall plant. As mentioned earlier the pre-
treatment requirements are the same as to other liquefaction processes.

Figure 4.3 – Proteus LNG showing Pre-Treatment

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4.3 EQUIPMENT SELECTION

The equipment comprising the Proteus LNG unit is normal and well proven in the hydrocarbon
processing industry. It is only the arrangement that makes it unique and ideally suited for small
scale plants. Figure 4.4 shows the maturity of each of the main equipment items following
discussion with equipment suppliers.

The only item requiring some testing is the LNG separator located after the turbo-expander as the
LNG will exit the expander as a fine mist. The vendors contacted had every confidence that the
required separation could be achieved. With regard to the turbo-expander the world’s leading
manufacturer has many references for the same liquefaction duty on ethylene service and is
confident their units will perform with methane and ethane and will offer performance guarantees.
Turbo-expanders are well proven with propane where they are extensively used for natural gas
liquids recovery on gas processing plants.

Equipment Maturity

Compressors

Expanders

Heat Exchangers

Separators

Pumps

0 20 40 60 80 100

% Maturity

Figure 4.4 - Equipment Maturity

4.4 LAYOUT AND MODULARISATION

The simplicity and low equipment count of the process makes it ideal for modularisation and layout
studies have been undertaken for 400 t/d and 3,000 t/d units. Even the larger 3,000 t/d unit can
be arranged as a single module with a weight of 2,000 t and dimensions of 36 m long x 24 m wide
x 15 m high (excluding the turbine exhaust sacks). For the larger units 2x50% compression trains
would be used as shown. The cold boxes, also 2x50% would be separate from the main module
and each weighing approximately 250 t. The layout shown assumes cooling water is available, if
not air coolers would be needed with a plot area similar to the main module.

Typical plan and elevation drawings for the larger unit are shown in Figure 4.5 and Figure 4.6. The
weights and dimensions are ideal for installing on a tanker or barge for a floating LNG (F-LNG)

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production vessel. Offshore layout studies have been performed for several oil & gas companies
and have proved the viability of process for offshore applications.

Figure 4.5 – Module Plan View

Figure 4.6 – Module Elevation View

4.5 SAFETY

The process is intrinsically safer than conventional processes as there are no flammable external
liquid refrigerants. The system operates totally in the gas phase with the exception of the LNG
separator thereby reducing hydrocarbon inventory. Further it only uses 1/3rd of the equipment of
conventional liquid refrigerant systems which minimises piping and valves and potential
hydrocarbon leakage points.

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4.6 OPERATIONS, CONTROL AND MAINTENANCE

The simple process and reduced equipment count enables easy start up and shut down. The unit
can be started in total recycle mode and maintained in that condition if there is an interruption in
the gas feed supply unlike the complex control systems used on multi-refrigerant systems. This
simple control scheme assists ease of plant operations.

The low equipment count also ensures maintenance is relatively simple reducing maintenance costs
and lost production time. A plant availability is expected in excess of 340 days per year (>93%).

4.7 HIGH EFFICIENCY

Proteus LNG offers much higher energy efficiency than other simple small scale expander processes
e.g. nitrogen and methane circuits. The efficiency is closer to that expected from complex multi-
refrigerant circuits thus reducing fuel consumption and operating costs. The efficiencies are
compared in Figure 4.7 expressed as kW per t/d LNG produced.

LIQUEFACTION PROCESS SPECIFIC POWER

kW/ton per day

Peak Shaving Units 25-35

Existing Expander Cycles 20-25

Proteus LNG 13-18

Cascade Cycle 13-14

Base Load Mixed Refrigerant 12-13

Figure 4.7 – Liquefaction Efficiency

For a 1 MTPA (3,000 t/d) plant the expected power consumption for a Proteus LNG unit is 39-54
MW - just half of the 60-100 MW typically required for a conventional nitrogen expander circuit but
only slightly more than the 36-42 MW required for the mixed refrigerant or Cascade process.
Assuming a feed gas (wellhead) cost of US$2/MMBTU and gas turbine efficiency of 35% the use of
Proteus LNG would reduce the fuel cost by approximately US$9 million per year for a 1 MTPA plant
when compared to the single nitrogen expander process. Expressed another way this fuel (feed
gas) saving could produce an additional 10% of LNG (100,000 TPA) with an increased revenue of
$27 million per year.

In addition to reducing the operating cost this higher efficiency also reduces the CO2 emission by
50% which offers many benefits not only to the environment but also savings from any imposed
carbon taxes.

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4.8 CAPITAL COST AND PROJECT SCHEDULE

Based on the conceptual design the FOB cost for a 1 MTPA modular plant is estimated to be
US$220-250 million. This excludes the gas pre-treatment, LNG storage, utilities and civil and
construction costs. This cost is significantly less than liquefaction plants using other technologies
due mainly to smaller number of equipment items and associated bulk materials.

The project schedule has been estimated as 30 months from award of the EPC contract. The critical
path is though the cryogenic equipment and main gas turbine compressors deliveries. It is hoped
that these delivery periods could be reduced by bringing new manufacturers into the supply chain
and offsetting the extended deliveries caused by the current high demand from limited vendors. An
indicative project schedule is shown on Figure 4.8.

Months Months Months

Title
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
Feed
EPC Award
Detailed Design
Procurement
Module Fabrication
Pre-Commisioning
Transportation
Installation
Tie ins
Commisioning
Commence Operation

Figure 4.8 –Indicative Schedule

5 THE OPPORTUNITIES

5.1 PRODUCING ENERGY FROM CURRENTLY UNECONOMIC GAS RESERVES

As Proteus LNG offers lower capital and operating costs than other small scale processes it is an
enabling technology for small scale LNG liquefaction plants in the range 30 t/d to 3000 t/d.

Applications have been identified as follows:-

¾ Small onshore gas fields;
¾ Small offshore gas fields;
¾ Flared gas from oil production;
¾ Coal bed methane or coal seam gas;
¾ Waste site methane and biomass;
¾ End of pipeline (pipeline ‘extension’);
¾ Sustainability.

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5.2 SMALL ONSHORE GAS FIELDS

Many small gas fields exist around the world and have been estimated to contain as much as
85,000 BCM (3000 TCF) and could be regarded as ‘stranded gas’ i.e. currently not economic to
develop. This estimate is based on fields that have been identified with reserves greater than 30
BCM (1 TCF). However it is expected that there many gas fields with even smaller reserves that
could be developed economically with Proteus LNG technology and supply much needed energy
resources. These fields could be regarded as below the current ‘radar’ of the industry reserve
estimates. With Proteus LNG technology economic at 30 t/d fields as small as 0.3 BCM could be
developed on a profitable basis.

The shape of these developments is likely to comprise a single modular unit with small buffer
storage and road tanker export. Production of 30 t/d equates to 60 m3/d of LNG and using typical
40m3 road tankers would result in loading 3 tankers every 2 days. Buffer storage could be just one
road tanker.

5.3 SMALL OFFSHORE GAS FIELDS

In general the development cost for offshore facilities is several times higher than the equivalent
onshore facilities thus raising the threshold at which small fields would become economic. This is
compounded by the additional costs associated with marine transportation as cargoes would have
to sufficiently large to be economic. Current studies indicate that 3000 t/d (1 MTPA) is likely to be
the economic break point requiring a field with a reserve of about 30 BCM. This could be reduced
by moving the facility from field to field but this does require considerable relocation costs.

5.4 FLARED GAS FROM OIL PRODUCTION

This scenario is essentially the same as small onshore fields and would be economic down to 10 t/d
providing the market for the LNG was reasonably close and could be delivered by road tanker. This
opportunity not only provides monetising the flared gas but also reducing the CO2 emissions. This
reduction could enable small oil fields to be developed where they are restricted by flaring
limitations. It could also prevent the shut down of existing operations due to pending flaring
limitations.

5.5 COAL BED METHANE (CBM) OR COAL SEAM GAS (CSG)

The industry is becoming aware of this valuable source of methane and it is estimated that
extensive reserves exist around the world. The gas is likely to be rich in methane and contain low
levels of CO2 and other contaminants minimising the size and cost of the gas treatment facilities
and improving the profitability when compared to many gas fields which can contain high levels of
CO2.

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Major reserves have been identified in China, Russia, USA, Canada and Australia. Reserves in China
have been reported as 36 TCM and it has been stated that 10 BCM/y will be produced in 2010
compared to 0.1 BCM/y in 2006. A recent collaboration has been agreed with Caterpillar for 15
CBM power generation projects.

CBM has traditionally been vented to the atmosphere and methane has been identified more far
more damaging to the ozone layer than CO2. Hence not only is the development of CBM as an
energy source potentially economic it will also have a positive effect reducing environmental
damage.

5.6 WASTE SITE METHANE AND BIOMASS

Waste sites offer a valuable source of methane gas for LNG production but the gas is likely to be
highly contaminated with heavy and complex hydrocarbons. These will need to be removed as they
will freeze in the liquefaction plant and cause a blockage. Further evaluation is needed to explore
this potential source.

5.7 SUSTAINABILITY

Bringing in the new sources of gas mentioned above will assist in sustaining the supply of LNG to
meet the clean energy needs of the future. Additional LNG production will be able to replace
expensive diesel often used in small power stations. This will not only reduce cost but also
environmental pollution.

5.8 END OF PIPELINE (PIPELINE ‘EXTENSION’)

Small scale LNG is ideally suited for ‘extending’ a natural gas pipeline beyond its economic limit for
small consumers. A small scale plant can be located at the end of the pipeline and small consumers
supplied by LNG road tankers with a small regasification unit and local gas network installed at the
consumer end if needed. Units as small as 10 t/d could be installed. This concept could replace
expensive diesel as a fuel supply for power generation plants in remote locations.

5.9 NEW LNG PRODUCERS AND OPERATORS

The production of LNG to date has been mainly limited to the major oil and gas companies as the
developments have been large, capital intensive and based on large gas reservoirs or associated
gas from large oilfield operations. However this use of small scale LNG production as offered by the
Proteus LNG technology will open up the production opportunities to much smaller companies as
the development costs will be much less and local markets identified which can be served by road
tankers. These new operators are likely to comprise local gas and power companies who are
probably keen to replace expensive diesel or unreliable pipeline gas with a more reliable local
source.

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Small scale operations have already commenced in many countries and will increase world wide
particularly as LNG becomes a source of fuel for vehicles and replaces expensive diesel. Many of
the major truck engine manufacturers are currently developing LNG fuelled engines.

5.10 NEW EQUIPMENT MANUFACTURERS

These new smaller plants will require new small LNG production equipment and will provide an
opportunity for new suppliers to enter the market. Whilst the existing manufacturers will no doubt
look at this smaller market it is likely that their focus will remain on the larger contracts with
higher returns. Further for large world scale plants with multi billion US$ investment operators will
only source from proven suppliers as the cost of equipment failure is very high. For the small scale
LNG production investment costs are much lower and this paradigm is shifted providing the way for
new entrants.

6 STATUS & NEXT STEPS

Proteus LNG technology is currently at the engineering stage and an engineering package has been
developed for a 3,000 t/d (1 MTPA) modular plant for either onshore (air cooling) or offshore
application (sea water cooling). Budget quotations and confirmation of equipment performance
have been obtained from the major vendors. A conceptual design will now be performed for a
smaller 150 t/d plant (50,000 TPA).

The next step is the construction and operation of a demonstration unit in 2009 to provide potential
purchasers with the necessary confidence. It is expected that this unit will produce 10t/d and
operate on a commercial basis taking gas from a national grid pipeline. Produced LNG will be
exported by road tanker for distribution to local users. The design of the demonstration has been
completed and the cost has been estimated at US$5 million. Investment partners are currently
being sourced.

7 CONCLUSIONS

For the last 30 years the focus of LNG liquefaction plant development has been on larger and larger
plants increasing from 1 million tons per annum (MTPA) to currently 8 MTPA. This has been based
on using gas from major oil and gas fields.

Proteus LNG technology with capital costs of the order of US$225-250 per TPA will enable the
economic production of LNG in the range 10,000 TPA – 1 MTPA (30 t/d – 3,000 t/d). This will
enable small gas reserves currently regarded as uneconomic to be developed and supply the
increasing world wide need for clean energy.

The process is innovative and simple and uses equipment already well proven in the gas processing
industry. Vendors contacted during the design of the 3,000 t/d unit all confirmed that their

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equipment was able to perform the duty requested and they were all prepared to offer full
performance guarantees.

Unlike many other current offerings of small scale LNG production to the industry, Proteus LNG
offers energy efficiency closer to the far more complex liquid refrigerant systems. The expected
efficiency is twice that of the simple nitrogen cycle saving US$9million per year in operating costs
for a 1 MTPA plant or increasing LNG production by 10% for the same feed gas supply delivering an
increased revenue of $US27 million per year.

Further the avoidance of liquid hydrocarbon refrigerants intrinsically increases the safety of the
plant and also avoids any need for expensive refrigerant make up systems particularly difficult for
remote areas and offshore. Most operators wish to avoid the handling and storage of liquid
hydrocarbon refrigerants offshore.

The liquefaction unit can be built as a single module up to 1 MTPA (3,000 t/d) making it ideal for
remote locations where site construction is expensive or difficult due to access or lack of local
labour and resources. This also makes it ideal for offshore locations where it can be simply installed
on a LNG tanker or barge to provide a floating LNG (F-LNG) production system.

A design has been completed for a 1 MTPA plant for use either onshore or offshore and several
application studies have been completed for oil and gas companies. Further studies are currently in
progress including smaller plants of 150 t/d. The demonstration unit designed for 10t/d is expected
to be operational in 2009.

The process can be applied to any source of methane including Coal Bed Methane and Waste Site
Methane. The gas pre-treatment will need to be adjusted accordingly.

Proteus LNG not only provides an opportunity to develop small gas sources currently regarded as
un-economic but also provides opportunities for new equipment manufacturers and suppliers and
new operators to produce and market small scale LNG into these emerging markets.

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