SpeakingOilGas

Market place

Butane and propane are sold as separate commodities on world markets and each requires specialised handling. LPG carriers can take both in one cargo using a refrigeration system, but the on-board tanks require separate temperature control to keep each in its liquid phase. Any boil-off gas is recompressed into a liquid and reintroduced to the respective tanks.

The standard carrier size for an LPG carrier is 45,000 tonnes and the vessel is known as a VLGC (very large gas carrier). Loading and reception terminals are built to match this capacity. Any increase in trade is more likely to result in an increased number of vessels rather than construction of larger individual vessels.

World production of LPG is likely to rise in the short to medium term because of the increase in natural gas production (especially the huge 600 trillion cubic feet of reserves coming on stream in Qatar). There is also likely to be a substantial ongoing demand for LPG. China in particular is seen as an important emerging market. Although that country is increasing its intake of LNG, the terminals and distribution networks for natural gas are around the coastal areas. LPG will still be required in the inland regions.

LPG is closely associated with the production of oil and gas. If the LPG cannot be sold, the whole production system is halted. Hence it is important to find and maintain a steady outlet for LPG. Regular and predictable offtake is achieved by setting supply contracts for terms of one to two years with reliable and flexible buyers.

However, in recent years the growing Chinese demand is also leading to an increase in spot market sales.

Pricing mechanisms

The LPG price tracks other hydrocarbon prices and is seasonal, especially in the northern hemisphere where winter cold increases the demand for heating fuel.

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There are two main marketing divisions in the world for LPG — west of Suez and east of Suez.

West of Suez (USA and Europe) LPG is priced against the liquid market, i.e. the price of competitive crude oil and product prices.

East of Suez (Asia) the LPG price tends to be based on a Saudi ArabianJapanese producer-buyer price agreement. This latter arrangement, known as the Saudi Aramco contract price, is struck every month and has become a world marker. The price for propane and butane is set separately. Other buyers and sellers then take these prices as the lead.

LPG sold into Japan is usually on an FOB basis because Japan has a fleet of specialised LPG carriers. The trade with China is on CIF terms and the LPG is carried in ships owned by international LPG traders.

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Crude oil properties

Comparison of BHP Billiton crudes with world marker crudes

CRUDE OIL			Gippsland	Cossack	nGriffi	WestNorthShelf Condensate	Saharan	Calypso	LiverpoolBay	DogMad	Tapis	TexasWest Intermediate	Brent
ORIGIN			Strait,BassAustralia	NorthwestAustralia	NorthwestAustralia	NorthwestAustralia	NorthAlgeria,Africa	Trinidad	UKSea,Irish	Mexico,ofGulf USA	Malaysia	USA	Sea,NorthUK
Key Properties
API Gravity		degrees API	49.3	47.7	54.0	60.0	45.7	29.0	44.7	27.7	45.3	38.7	37.9
Sulphur		Wgt%	0.089	0.045	0.014	0.004	0.097	0.609	0.25	2.52	0.029	0.45	0.45
Pour point		degrees C	-24	-12	-30	-60	-42	-39	0	-28	12	-24	-3
Viscosity @		Centistokes1	1.7	1.9	1.3	0.8	2.4	7.7	4.9	32.9	3.5	5.5	5.6
20˚C
UOP K factor2			11.9	11.9	12.2	12	11.9	11.7	12.1	11.7	12.2	11.9	11.9
Carbon		Wgt%	0.30	0.35	0.10	<0.1	0.85	2.6	0.94	6.7	0.45	1.55	2.10
Residue
Nickel		ppm3	0.1	0.9	0.5	<0.1	0.3	15	<0.1	29	1.7	7	1.5
Vanadium		ppm	<0.1	<0.1	<0.1	<0.1	<0.1	78	<0.1	103	<0.1	6	7.7
Yields vol%
C4 minus4		<20˚C	2.1	1.4	3.9	5.2	5.1	0.1	3.4	1.7	3.1	2.9	4.2
Naphtha		20-165˚C	44.0	40.1	47.6	68.6	33.4	10.9	32.3	15.8	27.4	26.9	25.0
Jet/kerosene		165-230˚C	12.7	15.4	20.4	13.5	16.1	11.0	11.9	11.0	16.4	13.8	12.2
Diesel		230-360˚C	23.2	22.9	20.9	12.2	22.9	36.0	24.1	23.1	30.9	23.2	23.2
Long residue5		360˚C+	16.1	17.0	6.7	0.5	22.5	42.0	28.3	48.4	22.2	33.2	35.4
(LSWR)
Short residue		540˚C+	1.9	3.2	0.5	0	6.2	12.6	7.2	27.5	3.4	12.1	12.6

Comparison table of crude oil properties:

1)Centistoke is a unit of viscosity

2)UOPK or United Oil Products K Factor is a characterisation for various crudes. The values usually range between 11 and 13. The lower the K factor the more paraffinic the crude

3)ppm signifies parts per million

4)C4 minus signifies the hydrocarbon gases methane, ethane, propane and butane. Propane and butane are more commonly known as LPG

5)LSWR is low sulphur waxy residue i.e. what is left after distillation up to 360 degrees Celsius

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Chapter 8. HEALTH, SAFETY,

ENVIRONMENT & COMMUNITY

The petroleum industry has been acutely aware of environmental issues for many decades. Geologists, geophysicists and design/production engineers are keen observers. Their training has taught them to respect and conserve the natural phenomena which surround them every time they venture into the field to initiate and build a project. As a consequence, through their work the petroleum industry has been taking steps to minimise its disturbance to flora and fauna, both on and offshore, for a number of years prior to the recent wave of public concern.

It was realised as early as the 1950s, for instance, that using dynamite as a wave-generating source for seismic surveys had the potential to cause problems, such as the cratering of surface limestones. While dynamite is still used in some regions of the world, the industry has developed alternative and generally safer, more sophisticated techniques for supplying the seismic source in many areas.

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During the 1960s in Australia, the oil search on Barrow Island off the Western Australian coast led to the early industry environmental protection initiative of contracting a professional naturalist as a consultant to the exploration program and the field development that followed. Today, as preparations are being made on the island to build new facilities to liquefy gas fed in from the offshore Gorgon and Jansz fields, Barrow has become a classic example of the industry’s ability to explore for and produce petroleum without serious or lasting disturbance to the delicate ecosystem of the region.

Another recent example is the development of oil and gas fields in Liverpool Bay in the United Kingdom. The near-shore facilities are close to densely populated sections of both the Welsh and English coasts and have been the focus of very tight environmental controls. These include measures to immediately combat any oil spill, no matter how small, and dealing with the odour caused by natural mercaptans (strong-smelling compounds of carbon, hydrogen and sulphur) in the natural gas.Awell-managed and professionallystaffed community and education centre was established to inform and maintain contact with the local population.

More than ever, the modern petroleum industry is aware of the need to pay close attention to environmental matters and safety in its operations and to work with the local and broader communities in which it operates. Public concern and government legislation dictates that an increasing amount of detailed research and data collation is carried out to produce environmental impact assessments prior to any oil or gas program or project going ahead, onshore or offshore. There is also a continual monitoring of systems and procedures during the exploration, appraisal and construction phases as well as during a project’s working life. In addition, as part of a project’s design and implementation phase there must be detailed consideration given to the removal of exploration and/or production equipment, and to the restoration of sites once a program has been completed or fields have been depleted. Decommissioning plans are now a standard part of any project design.

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Today the concept of environmental care has broadened to include all aspects of sustainable development. A petroleum company’s operations are continuously measured against self-imposed Health, Safety, Environment and Community (HSEC) standards established as an integral part of the overall business plan. Many companies conduct regular audits of these standards on all of their sites, publicising the results so that they are fully transparent and accountable. Zero harm is the ultimate aim in any operation.

Health

Employee health and associated occupational illness, such as noise-induced hearing loss, respiratory problems and long-term chronic exposure to lowlevel chemical substances, is a key focus of health management. The aim is to remove or avoid hazards through engineering or design solutions wherever possible. As a final line of defence, this approach includes continued improvement of personal protective equipment. It also involves establishing monitoring and reporting procedures which point to areas of potential harm so that measures can be taken to mitigate exposure.

In some instances the industry (and individual company) standards and medical surveillance are more stringent than those set by regulatory authorities.

Many companies also work with public authorities to implement community health programs where diseases like malaria, tuberculosis and HIV/AIDS may impact the workforce.

Safety

The public expects that risks from industrial activities like petroleum exploration, production, refining and distribution will be regulated and controlled. People should be able to work in an environment that assures their safety and wellbeing. Many countries have safety regulating

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authorities to provide an independent assurance to society, governments and the industry itself that companies have identified risks to health and safety and have implemented proper measures to control the risks.

The ‘control’ can be exercised in a number of ways. At one end of the spectrum it can be that licences to operate are not issued until certain prescribed safety procedures and guarantees are carried out by the companies concerned. At the other end of the scale is the so called safety case regime where the regulator sets the broad safety goals to be attained and the companies concerned develop the most appropriate methods for achieving those goals. The basic tenet here is that the ongoing management of safety is the responsibility of the operator and not the regulator.

Safety case

The safety case regime stems from the 1988 ‘Piper Alpha’ disaster in the North Sea when a series of massive explosions and fire destroyed the production platform on the Piper oil and gas field. The incident resulted in 167 deaths and substantial financial losses to the UK industry and the British Government. The world petroleum industry and most governments studied the lessons from the disaster and rapidly put in place a safety regime to ensure that it could not occur again. The result is an internationally recognised regime of risk assessment where companies establish self-regulated controls to avert mishaps.

The output of the safety case regime is a document produced by the companies operating every petroleum facility which identifies the hazards and risks and describes how the risks are controlled. It also describes the safety management system in place to ensure those controls are effectively and consistently applied.

Safety cases must be produced by the operator of a facility, the principle being that those who create the risk must manage it. The operator must assess the processes, procedures and systems to identify and evaluate risks, and establish the appropriate controls because it is the operator that has the greatest in-depth knowledge of the various installations.

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The safety case must identify both the technical and managerial aspects of safety. It is also vital that the operator establishes a performance standard required of a system, an item of equipment, a person or a procedure that is used as a basis for managing the risk of a major incident.

Equally, the company workforces must be involved in the process so they know what happens in practice and why, rather than rely on a rules-based culture.

Each safety case is assessed by an independent regulator to ensure the arrangements set out in the document demonstrate that the risks will be reduced to as low as is reasonably practicable. Following acceptance of a company’s safety case, the regulator will visit the facilities to monitor the practical application of the arrangements.

Monitoring and design

In petroleum facilities there needs to be a monitoring, inspection and maintenance program to ensure the integrity of all equipment and processes is preserved. Sophisticated alarm systems are included, so that operations can be shut down within seconds (by remote control from shore if necessary for an offshore installation) in the event of a malfunction of equipment.

Importantly, safety studies and risk assessments today begin during the facilities design stage, i.e. Safety Case, areas where hazardous operations take place (HAZOP) etc. Consideration is given to things like the spacing of people (particularly in accommodation/recreation rooms) away from hazardous areas and providing safe areas in case of an accident. A similar approach is made when retrofitting new equipment on older facilities.

Behaviour and awareness

Many companies are now looking at behaviour in the workplace to improve performance. This is an area where great gains can be made. Company leadership should drive the improvement and set the standard. Ensuring performance to these standards will then be reflected in workplace behaviour. This includes involving the whole workforce to define and report the ways employees are most likely to be injured. The workforce is also encouraged to discuss remedies to perceived safety risks.

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Environment

Environmental management covers the whole range of upstream and downstream petroleum operations — from exploration and appraisal right through to decommissioning and rehabilitating upstream facilities, then transportation, refining, distribution and retail of downstream products.

Many countries now have legislation in place that addresses the likely environmental impacts of any petroleum (and other industrial) programs. In countries with less sophisticated legislation and regulation, the World Bank imposes similar requirements for any project that it finances. The wording and names of the various legislations may vary, but internationally the moves and the intent are the same. Basically, any proposed project needs to test itself against its potential impacts on a number of key receptors: air, water, land, flora/fauna and natural resources, and people.

Environmental controls

In some cases the petroleum industry sets more stringent environmental controls on its own operations than are called for in government regulations or legislation. Toxicological tests are carried out before any substance or material is used. Some examples of petroleum industry moves to ensure no contamination and minimal disturbance to the environment are:

Drilling fluids — all drilling muds are ecologically tested to ensure there are no toxic effects on the surrounding environment. This involves extensive laboratory work as well as studies of natural reef, sea bed and shoreline conditions in areas where drilling is to take place.

Biocides and oil-based muds (made with biodegradable synthetic oils) are only used in special circumstances. Where downhole difficulties do require their use, stringent controls are employed to ensure minimum discharge and coating of cuttings.

Waste disposal — regulations governing the chemical and heavy metal content of waste material are strictly adhered to and often surpassed,

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particularly in offshore locations. Some platforms have chambers called skimmer piles built into one of the structure’s legs and connected to drains on deck. Collected run-off water can be retrieved using pumps and then either treated in hydrocyclone oil/water separators on board or sent directly to shore in containers for treatment and disposal. Spent drilling mud is sometimes sent to shore. At other times it may be disposed of in subsea formations.

Formation water produced with oil is sometimes treated on the platform offshore to reduce the oil content to very low levels (average international standard of 30 parts per million) before being discharged. If the production is close to a significant area like a coral reef, the water is re-injected into the reservoir. At other times, where all offshore production is piped ashore for treatment, the water separation is conducted at the onshore facilities.

Onshore sullage ponds, flare and mud pits are lined so that pollutants have limited chance of entering the natural ground water system. Hazardous wastes are stored in containers and sent to appropriate disposal units. All pits are filled in after use and the area remediated.

Treatment facilities, refineries and storage tanks are bunded to prevent the escape of any spillage or run-off of contaminated water into the surrounding area.

Land care — clearance of vegetation for tracks or drilling sites (sometimes called a footprint) is kept to a minimum to avoid erosion and to allow speedy regeneration. Instead of cutting through topsoil to make tracks, many seismic lines are rolled so that vegetation ‘springs back’ once the seismic vehicles have passed. Seismic lines are also diverted around large trees and thickets.

Blocking or diverting natural drainage patterns by building raised roads or pipeline easements is avoided and water courses are approached and departed from at an angle to prevent erosion and washout of stream banks.

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