“All GPM’s Are Not Created Equal”
The Importance of Gas Chromatography
Gulf Coast Gas Measurement Society
March 18, 2013
Anne B. Keller
© Midstream Energy Group 2013
Gas Analysis Goes Mainstream
Why Wall Street Knows What ‘GPM’ Means Now
A Billion Dollar Midstream Question
Accurate Measurement Adds Value – In
Unexpected Ways
Technical Update – New GPA Standard 2261
Successful Shale Drilling Leads to
“Dry” Gas Price Declines by 2012
$/Mmbtu
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Gas prices hit a decade low in
2012 due to gas oversupply

Spot Price Henry Hub at
$1.82 on April 23, 2012

Low for 18 month “strip” on
NYMEX forward price curve
for gas of $3.03 in April
2012

“Dry” gas drillers seeing
much lower cash flows
6 mos.
12 mos.
18 mos.
NYMEX Futures Gas Price - Henry Hub
“Breakeven” level for gas production
Source: NYMEX Henry Hub settlements
NGL Values Help Offset Lower Gas Prices
Wall Street Learns “GPM”
Producers shift
focus to “rich”
gas plays to
benefit from NGL
sales
Analysts begin
using “Gallons
per Mcf” in
discussing gas
quality and NGL
yields
Source: Magnum Hunter Q4 2012 Investor Presentation
The Billion Dollar Midstream Question
Forecasting NGL Recovery Volume – Is “GPM” Enough?
Source: ONEOK Investor Presentation
The Billion Dollar Midstream Question
Gas Quality Drives Investment in Downstream Assets
Several processing plant announcements show plans for
“5+ GPM” gas
Transmission lines have a 1050-1100 btu/scf limit
Ethane content is reportedly high – 55-65%
Therefore, a lot of ethane extraction & pipeline capacity
will be needed regardless of ethane prices, to meet
pipeline specs
But is this assumption always valid?
Is the Marcellus the area with the most “stranded” ethane?
The Need for Good Data
All 5 “GPM” Gas is Not Created Equal
This Marcellus stream has 5 “GPM” – But Ethane Can
be Sold as Gas if Ethane Prices are Low
Gas Composition Before
Processing:
GPM:
5.483
Mmbtu:
1237
After Processing - High Ethane Recovery:
After Processing - Low Ethane Recovery:
GPM:
5.022 Recovered as NGL GPM:
3.59 Recovered as NGL
Mmbtu:
974
Mmbtu:
1024
Mol %
CO2
Nitrogen
Methane
Ethane
Propane
0.0060
0.0366
0.7644
0.0873
0.0638
NGL Barrel Composition:
Gallons
Ethane
39%
1,862
Propane
34%
1,752
I-Butane
4%
206
N Butane
11%
579
NGL Barrel Composition:
Ethane
13%
Propane
48%
I-Butane
6%
N Butane
16%
I-Butane
0.0063
N Gasoline*
N Butane
0.0184
N Gasoline*
0.0172
Total
1.0000
Total NGL
*Sum of the C5 and higher carbon content molecules
Typically C5, C6, C7, trace other
Gallons
466
1,717
206
579
12%
623
N Gasoline*
17%
623
100%
5,022
Total NGL
100%
3,591
Source – composite sample Marcellus area gas, Midstream Energy Group NGL Yields calculator
The Need for Good Data
All 5 “GPM” Gas is Not Created Equal
This Bakken stream has 15 “GPM” – Ethane Must be
Flared to Produce Oil if No Ethane Pipeline Is Available
Gas Composition Before
Processing:
GPM:
14.73
Mmbtu:
After Processing - High Ethane Recovery:
GPM:
13.26 at 80% Ethane Recovery
1688
Mmbtu:
1047 Meets Pipeline Specifications
Mol %
NGL Barrel
CO2
0.0049
Composition:
Nitrogen
0.0180
Ethane
Methane
0.4586
Propane
Ethane
0.2672
I-Butane
Propane
0.1549
N Butane
I-Butane
0.0147
N Gasoline*
N Butane
0.0505
N Gasoline*
0.0313
Total
1.0000
Total NGL
*Sum of the C5 and higher carbon content molecules
Typically C5, C6, C7, trace other
43%
32%
4%
12%
10%
Gallons
5,700
4,212
478
1,589
1,285
100%
13,264
After Processing - Low Ethane Recovery:
GPM:
8.82 at 20% Ethane Recovery
Meets NGL Pipeline
Mmbtu:
1225 Specifications,
NOT Gas pipeline
NGL Barrel Composition:
Gallons
Ethane
16%
1,425
Propane
46%
4,042
I-Butane
5%
478
N Butane
18%
1,589
N Gasoline*
15%
1,285
Total NGL
100%
8,819
Source – composite sample Bakken area gas, Midstream Energy Group NGL Yields calculator
Data Driven Answer:
Look to Bakken for “Must Recover” Ethane
Bakken gas is mostly oil-driven – ethane is a true by-product
Will Canadian ethylene producers benefit from proximity to this
supply?
One ethane line to Canada is under construction, but will it be big
enough?
Gas Processing Plant Economics
Measurement Helps Optimizing NGL Product Revenues
A product that meets the definition of “purity” in the
commercial world may only need to contain 90%
of the actual molecule being sold
Ethane – can contain some methane (limit
based on pressure)
Propane – can contain some ethane
Iso-butane – can contain some propane
Natural Gasoline – can contain some butane
Similar to selling nitrogen as “natural gas” in the
gas industry
Gas Processing Plant Economics
Why Operators are Leaving More Ethane in Gas
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$-
Rockies
Louisiana River
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
$(4.00)
Mar-10
$(2.00)
Jan-10
$/Mmbtu
Estimated Ethane Field Value
Value Gain/Loss
Ethane Sale as NGL Vs Sale in Gas
Eagle Ford
Need to be able to accurately measure outgoing Btu to avoid issues
downstream especially when ethane prices are low
Benefits of Better Chromatography
Gas Plant Measurement
Be a better upstream ‘neighbor’ for both gas and NGL pipelines
More likely to be able to manage pipeline Btu and non-methane
content within tolerances when NGL (ethane) prices are low
Better optimization of NGL values while remaining on-spec in the
NGL pipeline system
Volatile prices provide more incentives to have inline
chromatography for real time control
Technical Update
Revised Gas Plant Chromatography Standards
GPA (Gas Processors Association) Standard 2261: Analysis of
Natural Gas and Similar Gaseous Mixtures by Gas Chromatography
(Revised 2013)
Scheduled for implementation in late 2013/early 2014 – currently in
the balloting process with Gas Processor’s Association general
membership
Initial standard was adopted in 1964; the new standard is revised to
reflect current industry practices
Redefines precision statements to reflect a recently obtained round
robin precision data set which tests a broader range of samples than
in the previous version
Sources and Contacts
GPA (Gas Processors Association) Standards – Technical Section B

Website at gpaglobal.org
Midstream Energy Group – http://www.midstreamenergygroup.com

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
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NGL Yields Calculator tool (online – sign up for trial)
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