COMPARATIVE H2S ECONOMICS FOR SHALE GAS

By Al Compton, Ignacio Bincaz, Curt Bermel

Abstract

This paper provides a backdrop on the Haynesville shale play considerations for H2S removal, presents an example of the operating expense (OPEX) considerations between the two prevalent H2S removal processes, and discusses the fundamentals of the LO CAT® operation.

Background

When the USA Shale Gas boom first began, sulfur removal was not a major concern. Operators used low CAPEX liquid scavenger systems to treat small amounts of hydrogen sulfide (H2S) so the produced shale gas met pipeline specifications or environmental regulations. After the scavengers capture the H2S, they must be removed at a rate of ten pounds or more of scavenger consumed per pound of H2S removed. Common carrier natural gas pipeline specifications typically limit the H2S content to 4 ppmv and carbon dioxide (CO2) to 2 vol%.

A common process used by operators to remove CO2 is an amine treating plant within the larger central gas processing facilities. If present, H2S will also be removed, producing a separate acid gas stream comprised mainly of CO2. Today, the system configuration and technology selection for meeting H2S specifications is less obvious. Some gathering systems are designed to treat H2S with scavengers at the wellhead so the gathering system can be permitted for sweet service (limited to less than 100 ppmv H2S in many locations). Others build sour service gathering systems to deal with H2S in a central facility. Options exist to remove the H2S at high pressure from the raw gas before the amine system, or treat the amine acid gas from the amine still or regenerator at near atmospheric pressure. These decisions vary depending on a number of variables, including the business relationship between the producer and midstream operator, H2S concentration, total sulfur load (in pounds or tons per day), and even awareness of technology alternatives.

Since the H2S content in the first major shale gas plays was low, operators used low-capital investment liquid H2S scavengers systems with triazines that can be designed as direct-injection configurations or sparged towers. Accompanying the low capital investment of these scavenging systems are high operating costs from the chemical consumption. Operating costs of these scavenger chemicals alone can range from $8 to $10 per pound of H2S removed. If the H2S content is low, operating costs are not prohibitive. As the H2S content rises, solid H2S scavengers offer operating costs slightly less than that of liquid scavengers, but the capital costs are somewhat higher. At low sulfur levels (e.g. 50 pounds per day), lower operating cost alternatives cannot justify higher capital cost related to custom engineering and equipment. When the sulfur load reaches 100 lb/day or greater, Merichem’s LO CAT technology offers a valuable alternative.

LO CAT technology’s operating cost typically ranges from $0.20 to $0.30 per pound of sulfur recovered including all chemicals and power. Compared to scavengers, operating costs are lower by more than 90% per pound of sulfur than the cost of scavenger-based treating after disposal costs are taken into account. Compared to other processes, LO CAT produces elemental sulfur easier and with less disposal costs. In some markets, the sulfur product is marketable for direct application on some crops. The LO CAT sulfur cake has a weight of only 1.6 lb per pound of non-hazardous solid sulfur cake that is easily disposed in a non-hazardous landfill, compared to over 10 lb of liquid with a scavenger (or of solids with a solid scavenger). A typical LO CAT unit does not have any liquid waste, drain or bleed.

LO CAT has been particularly successful in areas such as the Haynesville Shale gas play, where it is common to have large acid gas volumes with very dilute hydrogen sulfide concentrations both in the raw gas and acid gas. These characteristics make
other technologies such as Claus uneconomical due to the low overall sulfur load and the need for multiple stages of acid gas enrichment.

The Haynesville Shale

The Haynesville shale has been the first major play showing higher amounts of H2S. Although 100 ppmv to 200 ppmv H2S may seem low, pipeline specifications forced companies to evaluate alternative sulfur treating technologies for the large gathering systems in the planning stages. Chesapeake began planning an initial phase for its new Converse Central Facility in Mansfield, LA in 2009. The raw gas estimates were in the order of 190 ppmv H2S in 300 MMSCFD or about about 4,800 lb per day of sulfur (2.15 LTPD). At those rates the cost for the scavenger chemical alone was estimated to be more than $14 million annually. This amount did not include disposal of spent scavenger (which adds about 10% to Chesapeake) or operational issues like amine unit upsets from scavenger carryover. Chesapeake hired a process engineering consultant to assist them with the process of selecting the right technology with optimal economics and reliability for the Converse Central Facility.

After evaluating various options, Chesapeake selected the LO CAT technology for its low operating cost, reliability and proven track record in the industry. With only 0.5 vol% H2S in the acid gas, the team discarded the Claus technology since it would have required multiple stages of acid gas enrichment with additional amine stages. The low sulfur load of a few tons per day makes Claus uneconomical. Other redox and biological processes were evaluated, but rejected after careful evaluation.

The LO CAT unit at the Converse Central Facility in Mansfield was designed for 3.34 LTPD and successfully started up in mid 2011. The LO CAT technology is robust and flexible, as proven by this unit’s successful operation at 77% turndown without penalty or problem while still meeting or exceeding the performance guarantees. Compared to LO CAT, not all technologies offer this flexibility. Low or variable sulfur levels affect their ability to maintain process variables within stable ranges, keep the operating cost in control, or both.

The LO CAT operating cost (including chemicals and power) represents less than 0.6 cents per thousand standard cubic feet (MCF) to Chesapeake. Additionally, the manpower needs are quite low and LO CAT licensees report less than two to four hours of operator attention per day (1). At the Converse plant, Chesapeake found their manpower requirements stabilized at two to three hours per day after entering stable operation following start up. With the success of the Converse unit, a second LO CAT unit has been started up by another midstream operator in the Haynesville area, and a third LO CAT system is under construction to treat Haynesville gas.

A number of North American shale gas plays are found in H2S prone regions. Some shale oils are accompanied by sour associated gas. As the industry shifts to develop these new formations, additional LO CAT systems are being planned.

The LO CAT Technology

Merichem has licensed over 200 LO CAT units since 1980, with more than half of them in the oil, gas and refining sector. By a separate measure, more than half of all LO CAT units across several industries treat acid gas produced from amine units. This experience has made LO CAT the benchmark technology for sulfur recovery applications between a few hundred pounds per day of sulfur and 25 tons per day.

LO CAT technology involves a proprietary liquid catalyst that converts H2S to solid elemental sulfur. The catalyst consists of an aqueous solution of iron, whose performance is enhanced by a proprietary blend of chelating agents. The H2S is converted to elemental sulfur by redox chemistry according to the following overall reaction:

Direct Oxidation Reaction
H2S + 1/2 O2 ↔ H2O + S°

Each part of the redox reaction is carried out in a separate section of the unit as summarized below:

Absorber H2S + 2Fe+++ → S° + 2Fe++ + 2H+
Oxidizer ½ O2 + H2O + 2Fe++ → 2 OH– + 2Fe+++

The Absorber reaction represents the oxidation of H2S to elemental sulfur and the accompanying reduction of the ferric (active) iron to the ferrous (inactive) state. The Oxidizer reaction represents the oxidation of the ferrous iron back to the ferric state.

The LO CAT technology offers several advantages over other technologies. These include:

• Treating dilute H2S concentrations without additional enrichment;
• Operating at ambient temperatures with an aqueous solution;
• Processing both aerobic and anaerobic gas streams;
• Removing H2S with efficiencies in excess of 99.9%;
• Operating at essentially 100% turndown on H2S concentration and/or gas flow;
• Eliminating liquid waste and drag streams;
• Producing sulfur by-products that are safe for handling and disposal.

In applications like Chesapeake’s Converse Central Facility, the LO CAT technology produces a sulfur cake and a clean CO2 product that can be vented directly to the atmosphere (or captured if necessary for enhanced oil recovery or other reasons). LO CAT does not produce any other products or byproducts that require additional treating by the operator, including liquid streams.

The Operation

Chesapeake and Merichem started discussing the LO CAT process in September 2009, after Chesapeake learned about the three LO CAT units at Anadarko Petroleum’s Pinnacle Plant in Palestine, TX (2). Although Chesapeake had midstream experience, this was their first sulfur recovery unit of this type and this was Merichem’s first venture into the Haynesville shale play. Both companies worked together and developed an optimal solution for Chesapeake’s Converse Midstream facility. Chesapeake and Merichem then signed a license agreement in June 2010. Merichem supplied a full equipment package, including installation of critical pieces of equipment, and worked integrally with Chesapeake’s general contractor at the site through final commissioning and startup of the LO CAT unit.

The startup of the unit took place in June of 2011. This was one of the smoothest startups of a LO CAT unit in years. The unit consistently exceeds its guaranteed sulfur emission requirements of 10 ppmv by achieving generally no more than 5 ppmv H2S.

Operation of the LO CAT unit has been smooth except for the one issue with the system heater. The issue is being addressed with the heater manufacture but the problem is not deemed to be serious. Chemical usage is in line with initial estimates at about $0.25 per pound of sulfur recovered. Power requirements add another $0.25 per pound due to the electric heater duty for a total operating cost of $0.50 per pound of sulfur recovered. Merichem and Chesapeake are collaborating to make modifications that will reduce the overall operating cost of the unit by one third, while improving reliability. Converse also has scavenging systems installed which were in operation before the LO CAT system was started up. The scavenging system operating cost is about $6 per pound of sulfur removed.

Opportunities for the Industry

Many gathering systems in the Haynesville and other areas operate sweet gathering systems where a large number of small producers treat their gas with H2S scavengers at the wellhead. Employing a regenerative H2S removal technology such as LO CAT may not be economically viable for independent producers who have only one or two wells. However, gathering several wells into a central processing facility creates a tremendous opportunity for operating cost savings. If the gathering system is re-permitted for sour service, assuming that the existing metallurgy is already compatible with NACE specs, the combination of producers and the central facility operator stand to save tens of millions of dollars annually by adding a LO CAT unit to the overall system.

To realize these savings, the Midstream Operator could offer a discount to the producers for untreated sour natural gas that offsets the producer’s scavenger costs. In these instances, contractual arrangements are developed where the treatment is paid by charging a variable fee based on the gas composition or the Midstream Operator keeps a percentage of the gas. These financial instruments enable all parties to develop a mutually beneficial arrangement to realize these savings.

This new arrangement creates a path to increased revenues to the Midstream Operator and the producer: the Midstream Operator keeps a sizeable share of the savings between the LO CAT technology operating cost and scavenger-based cost, while the producer reduces its operating cost. Reduced operating expenses resulting from eliminating scavengers offers opportunities to pay down the capital of a LO CAT system in almost any application where the gathered wells treat over 100 lb per day of sulfur. Although based on the specific local situation, the internal rate of return (IRR) and net present value (NPV) results can be quite compelling.

Merichem’s understanding of gathering system regulations indicates that in some areas such as Texas for instance, sour service is defined where the gas contains 100 ppmv H2S or more. Various Merichem licensees and industry contacts reported that their gathering systems would not require changes in the metallurgy for the switch from a sweet to sour gas service. In these cases, a re-permitting process would involve the submittal with an application along with a contingency plan to the Texas Railroad Commission or corresponding state regulator, and possibly the addition of signage to warn of the presence of poisonous gas that accompany any existing high pressure natural gas warnings.

A financial analysis of the capital investment for a LO CAT unit reveals a payback period of two years or less for applications treating a half ton of sulfur or more per day. A typical Producer-Operator in Hayneville may have a gathering system of 100 MMSCFD of gas with 5 vol% CO2 and 250 ppmv H2S (approximately 1 TPD of sulfur). This hypothetical case assumes that the sour gas is being treated at each wellhead with scavengers, regardless of whether this is several small independent well owners or a major with 10 to 30 wells of their own. A detailed tax-burdened financial analysis suggests that the total fixed investment of a LO CAT in a facility with an existing scavenger-based system would be paid off in less than two years of operation. The savings are immediate: significant operating expense savings in the range of 10 times less for LO CAT sulfur product per pound of sulfur removed. The payoff, IRR and NPV are even more favorable than this if a company designs their midstream operation with a LO CAT unit from the start, avoiding the capital expense for a temporary scavenger-based operation. The financial analysis estimates a payback in this theoretical case of less than six months, comparing LO CAT technology with a proprietary scavenger-based system for the same flow rate and sulfur removal capacity.

Another not-so-incidental consideration is the disposal of the resultant product. LO CAT produces a moist sulfur cake, at least 60% sulfur with the balance being mostly water, which is be marketable in some areas. For every pound of sulfur removed via LO CAT, 1.6 pounds of product are produced. In scavenger based sulfur removal, some ten or more pounds of waste product are produced for every pound of sulfur removed. Not only is the increase in resulting byproduct or waste to be handled seven fold for scavenger-based sulfur product, but for liquid scavengers the end product is a liquid waste, which requires further treatment. If there is no local market for LO CAT sulfur, it can be safely landfilled in a non-hazardous landfill at low cost.

Complex gathering system configurations between various producers have the potential to leave tens of millions of dollars a year of unrealized savings. The main factor slowing down these profitable projects is when the cost of scavengers stays with the producers (several of them sometimes) instead of looking at the entire system holistically between several different producers and the gathering system owner. In some cases, the gas treating facilities may be owned by yet another company. Merichem is supporting capital investment analysis for several different projects that identify key potential savings opportunities for all parties involved. In some cases it will be necessary to re-permit a pipeline, but the project will pay back the efforts in no time.

 

Conclusions

H2S treatment demands serious consideration for both short- and long-term for midstream processors. Operating considerations of the two prevalent regimes for removing H2S have been presented in this paper. In the case of Chesapeake, LO CAT H2S removal technology was the clear choice, from both a financial as well as operational perspective. At the end of the day, the goal of our midstream operators is to supply the demand load of the pipeline with sweet gas. With all the challenges of continuous operation of a midstream facility, Chesapeake is comfortable with the decision to employ LO CAT.

 

References

1. Presentations by LO CAT Licensees at GRI Desulfurization Conference. Chevron; Tejas Gas Corp; City of Los Angeles; CU Gas . Chicago : s.n., 1995 & 1997.

2. Anthony Barnette, Merichem Company and Conard Baker, Anardarko Pinnacle Gas Treating, Inc. A Unique Success Story - Anadarko LO CAT Case Study. Hydrocarbon Processing . January, 2010.