The global energy industry has experienced dramatic declines in hydrocarbon pricing along with significant increases in price vol- atility over the past two years. This volatility poses special challenges for the midstream energy sector, with the potential for lower production volumes and reduced product price spreads.

To cope with an uncertain market- place and margin pressures, midstream owner-operators require faster and more flexible process solutions inte- grated across an increasingly complex network of hydrocarbon and petro- chemical equipment.

Continuing problem

Even after a year of declines, the biggest weekly oil price drop in 2015 only came in December, following the International Energy Agency’s fore- cast of weak demand and persistent oversupply in 2016. This weakness has been the case this year as crude oil, natural gas and both NGL and LNG have been affected.

The volatility in prices is discussed less—but is no less striking—with both short- and long-term causes. As one market analyst put it, “Just about the only thing we know about where oil prices are headed over the next few years is that most of the forecasts will be wrong.”

Again, that’s been a particular feature of oil, but it applies to natural gas, too.

These twin trends of price declines and increased volatility present dis- tinct but related challenges to the oil and gas industry. On one hand, lower prices have put significant pressure on margins. On the other, continuing volatility makes it hard to anticipate production and process requirements. Operators in the oil and gas industry must plan for the future with less predictable forecasts of the short, medium and long term.

This, in turn, puts pressure on busi- nesses to improve both efficiency and flexibility so they can remain competi- tive at low prices and respond quickly to changing market conditions. However, both trends also put investments in technology to achieve these goals under intense scrutiny. Short-term paybacks are favored, if not essential.

Increased complexity

To these challenges we should add another: the increasing complexity of operations due to vertical integra- tion and greater variation in supply and demand The increase in complexity is apparent in many natural gas value chains. Unconventional sources have increased or entered the chain, prices have decreased, and changing patterns of supply and demand are causing significant upheaval. Some pipelines have reversed their flow. Increased extraction means the hydrocarbon mix even within a single field can vary more widely. There are increasing options for sourcing from the upstream supply chain—with a consequential increase in the feedstock variability—and there is a wider range of market options for the end product as export markets develop.

Development of more distributed unconventional and conventional gas reserves—particularly in North America—has resulted in a more com- plex web of infrastructure to manage the transportation, processing and export of hydrocarbons. Moreover, price movements and volatility have impli- cations at the product and processing level, with falling ethane prices and increased storage costs increasing ethane rejection, for example.

Adding to this complexity, the natural gas value chain is tightly coupled. There is relatively little storage of gas in comparison to oil. Even allowing for recent highs in stor- age levels, the U.S. Energy Information Administration’s gas inventories in mid September were 3.5 trillion cubic feet—approximately one month’s con- sumption in the U.S. during the winter season. Thus, any significant disruption or bottleneck in the gas value chain can impact operations.

As a consequence, the midstream has a pressing need for efficiency, flexibility and reliability to deliver agile, profitable operations. Solutions are needed to quickly ramp up and reduce processing when required, add capacity quickly,alter the product mix in response to changing market conditions, run effi- ciently and drive down costs.

One step at a time

Two technologies that can help deliver these benefits are modularity and automation.

Pre-engineered, modular gas plants have a proven operating history in North America. Industry estimates place the number of such plants installed and successfully operating in the region at greater than 150. Some have been in operation for decades so they are not new to the oil and gas industry. However, since 2010, and in response to to the shale gas revolu- tion in the U.S., modular plants have achieved critical mass and established themselves as the preferred means of project execution for gas plants.

Modular plants are highly reliable compared to field-erected facilities. Estimates place the onstream factor for modular plants at greater than 97%, based on five years of recent operating history. They are also equal or supe- rior to field-erected plants in terms of servicing, reliability and ease of main- tenance. Because modular plants use proven, pre-engineered equipment, there is lower potential for errors within the manufactured components. Additionally, the spare parts inventory can be streamlined by using the same equipment across multiple facilities.

The layout of a modular plant, such as a gas processing plant, is designed with human factors in mind. In par- ticular, modules are adequately spaced, and the configuration of equipment on each module is typically designed to allow easy access to critical maintenance points. Additionally, gas processors operating a number of modular plants of the same design benefit from econ- omies of scale that drive down mainte- nance costs. Technicians become highly experienced trouble-shooting the same equipment and can be cross-trained to support multiple gas processing facili- ties. Maintenance schedules also become more routine.

With a facility’s components man- ufactured, pre-assembled and tested offsite prior to installation, the mod- ular approach delivers high cost cer- tainty and a reduced schedule against stick-built plants. The approach pro- vides midstream clients with value in a variety of ways:

• On-skid piping;
• Interconnecting piping between skids and adjacent off-skid equipment;
• Instrumentation that is completely wired and piped within the skid;
• Structural steel skids with ladder and platform access to instrumen- tation for routine maintenance per OSHA standards;
• Insulation of on-skid piping and equipment; and
• Trial fit of stacked skids and interconnect piping and on-skid motors, complete with control stations.

Skid-mounted, pre-engineered modules can be used for both the process and compression parts of the facility, requiring far less time and manpower to install.

Meeting needs

Modularity meets the midstream sec- tor’s requirements for repeatability, speed and the ability to expand incre- mentally as feed volumes increase over time—using parallel process trains, for example. Operators can quickly and easily upgrade facilities with additional process capabilities. A modular design and execution also allows for simpler facility revamps to adapt to changing feed conditions or product slates.

Manufactured offsite in a controlled environment to a standard design (avail- able in a range of nameplate capacities), modules can reduce construction times by 20% to 40%. Fabrication from award to start-up is usually little more than a year.

The modular approach brings much greater flexibility. Owner-operators add capacity more quickly, and they can more easily adjust to changes in feedstock and offtake by adding mod- ular processing capabilities upfront or downstream of the facility core. They have the ability to quickly add pre-en- gineered fractionation or stabilizer columns, for example, while turbines are easily re-wheeled to handle changes in feed composition.

Furthermore, the modular design lowers risk in commissioning and improves performance. Modules are pre-engineered and pre-tested before delivery, and a proven, standard design is improved over time.

UOP Russell, for instance, has built more than 200 modular process plants in North America alone. Those opting for a pre-engineered plant today there- fore benefit from the manufacturers’ improvements made in response to the experience of all other users of the same standard module. In addition,
UOP Russell has a continuing active development program to improve both the individual process modules and the entire pre-engineered plant.

Perhaps the most significant factor, however, is that these benefits carry no additional cost. Individual modular units are actually cheaper to install than traditional units. In short, it costs less to get a better outcome.

Enhancing modularity

Extending the modularity concept to include the automation can build on these benefits. The Honeywell Advantage program embeds proven, pre-tested automation into UOP process modules to accelerate the process still further and remove yet more risk. It takes automation off the critical path in the construction of the plant. Process knowledge is inte- grated into the automation design and control strategy.

With standard, proven designs installed and tested offsite, commis- sioning can be cut to a few days, and integrated control and safety costs can be cut by 30%.

Again, the Honeywell Advantage offers a faster, more efficient and repeat- able approach:

• Standard instrumentation is included with automatic device commissioning for highway addressable remote transducer (HART) devices;
• To reduce time and cost,
fiber-optic cables are run directly from remote cabinets to the con- troller cabinet.The process skid module is pre-wired with a remote universal IO standard cabinet in factory, eliminating the need for onsite engineering;
• Displays, alarms and procedures are preconfigured;
• Operators of greenfield sites can opt for a prefabricated modular control room with preconfigured displays, alarms and procedures; and
• Cyber security is integrated from the start.

As a result, the plant can rapidly move from commissioning and first production to full capacity and sus- tainable operations.

Training of operators also can be completed much sooner—before the plant is built—since the approach uses standard modules and high-fidelity models for use in simulators, and training already exists. This allows training to start sooner so that operators are far more experienced when opera- tions begin, and this also cuts the costs and effort required to create operator training simulations. For some smaller plants, training models may be difficult to justify otherwise.

Optimizing modularity

Once the case for the modular approach to encompass automation is accepted, one further expansion of the modularity concept should be consid- ered: real-time optimization.

Optimization is, in any case, a key technology in answering the challenges facing midstream operators. Even with the best training, plant operators cannot consistently maintain opti- mized plant performance as feed, plant conditions and requirements change. Transitions between ethane rejection and recovery modes in response to changing prices, for example, often take a day or possibly longer. Advanced pro- cess control (APC) can reduce switch- over times to three to four hours.

Even in steady-state conditions, optimization has been shown to deliver significant efficiency gains. Typically, it can improve yields by 2% to 4% and cut utility consump- tion by 10% through unit variability reductions and by running closer to throughput targets.

While modularity enables a plant to flexibly meet changing requirements in the market over the medium and long terms, optimization enables operators to respond efficiently to short-term variability. Declining prices (increasing the need for efficiency) and higher volatility (increasing the frequency of transitions) make the case for APC stronger than ever.

APC helps meet a number of key midstream challenges:

• Staying within limits to avoid unsafe operation or damaging equipment;
• Staying on specification but avoiding giveaway;
• Coping with varying feedstocks, rates and compositions;

Optimizing for changing economics to keep the process at the best operating point; and
• Improving knowledge capture from advanced control engineers to combat skills shortages.

Getting payback

Typical payback from APC is one to two months. However, in greenfield sites, or when adding to plants, any delays to the schedule for purposes of optimization could offset these benefits.

Again, modularity can be used to address this risk. Just as automation can be preconfigured in the process units offsite, so can optimization. Users can start up with advanced control strategies in place to maximize flexibil- ity and profitability while working with different grades, compositions and market conditions.

The benefits of APC can be real- ized from commissioning on. Remote connectivity for maintenance and performance management of the opti- mization with Honeywell Profit Expert, meanwhile, can ensure it is sustained. While the benefits of APC can be felt at any time, tying optimization into the modular approach locks these benefits in at the start, maximizing returns and minimizing the risks and costs.

A flexible future

Declines in pricing and persistent vola- tility, as well as the complexity of the gas value chain, mean the need for flexible process units and efficient, agile opera- tions is stronger than ever. The case for modular units and optimization—in existing and new plants—in all these respects is compelling.

However, the argument for mod- ularity of both the process units and automation is strong irrespective of market conditions or the changes in supply and demand in the gas indus- try. Prefabrication has been shown to reduce risks, improve quality and cut the costs of construction for gas plants. Optimization can bring consistent effi- ciency gains in even steady state oper- ation. Whether, or how long, volatility and low prices in the market endure, the place of both technologies in the indus- try looks assured.

Guy Lewis is vice president of strategic marketing and commercial execution for Honeywell UOP, and Jerry Belanger is a vice president with Honeywell Process Solutions.

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