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Upstream Oil and Gas
www.UpstreamOilAndGas.com

Upstream Oil and Gas Information, Resources, Acquisitions/Divestments,  
and Business Development Strategies

What is "Upstream Oil and Gas"?

The oil and natural gas industry is divided into three major segments:

• Upstream

• Midstream 

• Downstream

The Upstream Oil and Gas segment is a term that refers to the searching, drilling and production of crude oil and natural gas. The Upstream Oil and Gas segment is also known as the "exploration and production" or "E&P" segment.

The Upstream Oil and Gas segment includes; exploring for potential underground (or underwater) oil and natural gas fields (or reservoirs), drilling of exploratory wells, and operating/producing the oil and natural gas wells that "pay" with crude oil and/or natural gas.


What is "Midtream Oil and Gas"?

The "midstream oil and gas" sector - also referred to as the "midstream natural gas sector - receives the oil and natural gas from the upstream oil and natural gas sector and provides initial Gas Processing, Terminalling and Storage, and transports the oil and natural gas and natural gas liquids (also called "LNG" which is primarily comprised of ethane, propane and butane) as well as any sulphur for further natural gas treating and desulfurization "downstream." The natural gas may be processed or treated in the midstream sector through gas processing or natural gas treating facilities for producing pipeline quality gas for direct sale to a interstate or intrastate natural gas pipeline, and may bypass the downstream oil and natural gas sector entirely.

Midstream Assets include those assets and services that link the supply side of the value chain within the industry, to the demand side for for these energy commodities.

The Midstream Assets and the Midstream sector in the bridge between the energy producers and the energy end-users and - therefore, can only be as strong as the weakest link or bridge within the midstream oil and gas sector. 

Typical Midstream Assets include; 

• natural gas gathering

• natural gas treating

• natural gas processing

• natural gas liquids 

• NGL fractionation 

• natural gas storage 

• natural gas transportation

• natural gas pipelines

• natural gas compression

• terminalling and storage

• oil transportation

• vapor recovery units

The "midstream oil and gas" sector receives the oil and natural gas from the upstream oil and natural gas sector and provides initial gas processing, terminalling and storage, and transports the oil and natural gas and natural gas liquids for further natural gas treating and desulfurization "downstream." The natural gas may be processed or treated in the midstream sector through gas processing or natural gas treating facilities for producing pipeline quality gas for direct sale to a interstate or intrastate natural gas pipeline, and may bypass the downstream oil and natural gas sector entirely.

The downstream sector usually refers to crude oil refineries and the selling and distribution of natural gas and products derived from crude oil.  These products include Liquefied Petroleum Gas or "LPG," gasoline, jet fuel, diesel fuel, and other fuel oils, as well as asphalt and petroleum coke.

What is "Downstream Oil and Gas"?

The downstream oil and gas usually refers to crude oil refineries, refining and marketing, storage and transfer, and the selling and distribution of natural gas and products derived from crude oil.  These products include Liquefied Petroleum Gas or "LPG," gasoline, jet fuel, diesel fuel, and other fuel oils, as well as asphalt and petroleum coke.

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Natural Gas Ventures
www.NaturalGasVentures.com

Natural Gas Ventures is a new company presently being formed for the purpose of acquiring natural gas assets for use as a fuel in our related company's cogeneration and trigeneration energy systems for their commercial and industrial clients. 

Expressions of interest have been received from companies wanting to sign 10-20 year Power Purchase Agreements (PPA) for purchasing the power and thermal energy from our cogeneration or trigeneration energy systems - installed at their facilities.  One of these is with a major hospital chain. 

As natural gas is now in abundant supply with prices expected to remain relatively flat over the next 10 - 20 years, our business model is designed to maximize and exploit this new paradigm.  We will accomplish this by "upgrading" our natural gas into power (electricity) plus thermal energy - which can be any or all of the following;  hot water, steam and/or chilled water for air-conditioning - through our related company's cogeneration or trigeneration energy systems.  

We are uniquely positioned for long term success via multiple core competencies and our "durable competitive advantage."  One of these includes the fact that there will be an ever-greater demand for onsite cogeneration or trigeneration energy systems as a result of the EPA's requirements to reduce greenhouse gas emissions and increase energy efficiency.  

From our customer's vantage point, we are not only reducing their greenhouse gas emissions and increasing their energy efficiency, we are reducing their energy costs as well as we will sell the power and energy under a 10-20 year Power Purchase Agreement.  

Cogeneration and trigeneration energy systems are anywhere from 200% to nearly 300% more efficient over the utility company's central power plants.  As a result, we expect to pass on these savings to our customers and expect to reduce our customers energy costs by a minimum of 10%.  

From our customer's utility company's vantage point, our cogeneration or trigeneration are viewed as a "demand side management" solution which will generate even more savings (and possible rebates as well) as we will eliminate or greatly reduce our customer's monthly demand charges for their power.  Demand charges can be very expensive.  Our company has seen many company's electric rates wherein their demand charge was 50% or more of their monthly electric bills.

What is Cogeneration?

Cogeneration, also called "combined heat and power," is the simultaneous production of electricity (power) and thermal energy. Thermal energy may be in the form of one or more of the following; hot water, chilled water (for air-conditioning) and/or steam. Cogeneration energy systems essentially provide 2 useful forms of energy - typically hot water and electricity - for the price of one.

Cogeneration power plants are anywhere from 2 times to 3 times more efficient than typical "central power plants" and produce more energy with less fuel.  Central power plants operate at around 28% to 40% total system efficiency, wasting vast amounts of "waste heat."  Cogeneration power plants integrate "waste heat recovery" technologies that recover this waste heat and convert this waste heat into useful heat energy. Cogeneration power plants operate at anywhere from 80% to 90% efficiency.

The benefits of cogeneration energy systems include:

• Significant reductions in the cost of power and thermal energy (hot water, chilled water and/or steam)

• Lower carbon emissions/greenhouse gas emissions

• Increased power reliability - fewer to no blackouts compared with the electric grid.

What is Trigeneration?

Trigeneration takes cogeneration one additional step by providing 3 energies for the price of one, with the addition of absorption chillers or adsorption chillers. 

Our company's CEO has expertise in developing cogeneration and trigeneration energy systems (while employed at 2 Fortune 100 utility companies) for hospitals, universities, office buildings and other commercial clients. Trigeneration energy systems operate at efficiencies over 80% to as high as 92%.

Trigeneration has been hailed as the "hat trick" for the energy industry due to its superior efficiencies and cost savings for its owners/operators.

The benefits of trigeneration energy systems include all of those above for cogeneration as well as:

• Significant reductions in the cost of power and thermal energy (hot water, chilled water and/or steam)

• Lower carbon emissions/greenhouse gas emissions

• Increased power reliability - fewer to no blackouts compared with the electric grid.

More about Trigeneration:

As previously described, trigeneration is the simultaneous production of three forms of energy - typically, Cooling, Heating and Power - from only one fuel input. Put another way, our trigeneration power plants produce three different types of energy for the price of one.

Our company's trigeneration energy systems reach overall system efficiencies of 86% to 93%. Typical "central" power plants, that do not need the heat generated from the combustion and power generation process, are only about 33% efficient.

Trigeneration Diagram & Description
Trigeneration Power Plants' Have the Highest System Efficiencies and are
About 300 % More Efficient than Typical Central Power Plants

Trigeneration plants are installed at locations that can benefit from all three forms of energy. These types of installations that install trigeneration energy systems are called "onsite power generation" also referred to as "decentralized energy."

One of our company's principal's first experience with the design and development of a trigeneration power plant was the trigeneration power plant installation at Rice University in 1987 where the trigeneration development team started out by conducting a "cogeneration" feasibility study.

The EPC (Engineering Procurement Construction) contractor installed a 4.0 MW Ruston gas turbine for the power plant. Rice University selected an EPC company that installed the trigeneration power plant, along with waste heat recovery boilers and absorption chillers. A "waste heat recovery boiler" captures the heat from the exhaust of the gas turbine. From there, the recovered energy was converted to chilled water - originally from (3) Hitachi Absorption Chillers - 2 were rated at 1,000 tons each, and the third Hitachi Absorption Chiller was rated at 1,500 tons. The Hitachi absorption chillers were replaced shortly after their installation by the EPC company.

The first trigeneration plant at Rice University was so successful, they added a second 5.0 MW trigeneration plant so today, Rice University is now generating about 9.0 MW of electricity, and also producing the cooling and heating the university needs from the trigeneration plant and circulating the trigeneration energy around its campus.

Trigeneration Chart
Trigeneration's "Super-Efficiency" compared
with other competing technologies
As you can see, there is No Competition for a Trigeneration Energy System!

Our trigeneration power plants are the ideal onsite power and energy solution for customers that include: Data Centers, Hospitals, Universities, Airports, Central Plants, Colleges & Universities, Dairies, Server Farms, District Heating & Cooling Plants, Food Processing Plants, Golf/Country Clubs, Government Buildings, Grocery Stores, Hotels, Manufacturing Plants, Nursing Homes, Office Buildings / Campuses, Radio Stations, Refrigerated Warehouses, Resorts, Restaurants, Schools, Server Farms, Shopping Centers, Supermarkets, Television Stations, Theatres and Military Bases.

We partner and collaborate with other forward thinking companies and communities that are interested in changing the outdated power and energy model of the past - inefficient and highly-polluting central power plants that average 33% efficiency - to a new paradigm and model for the future - community-based cogeneration and trigeneration energy systems at more than 90% efficiency - and therefore provides power and energy at lower prices while significantly reducing and even eliminating typical power plant emissions and greenhouse gas emissions.

Call/email us for more information about community-based cogeneration and trigeneration energy systems or about making your community, hospital, university or other commercial facility a model for the future.

At about 86% to 93% net system efficiency, our trigeneration power plants are about 300% more efficient at providing energy than your current electric utility. That's because the typical electric utility's power plants are only about 33% efficient - they waste 2/3 of the fuel in generating electricity in the enormous amount of waste heat energy that they exhaust through their smokestacks.

Trigeneration is defined as the simultaneous production of three energies: cooling, heating and power. Our trigeneration energy systems use the same amount of fuel in producing three energies that would normally only produce just one type of energy. This means our customers that have our trigeneration power plants have significantly lower energy expenses, and a lower carbon footprint.

What is Tax Equity Financing?

Tax equity financing has been a reliable source of funding renewable energy projects for the past decade. Tax equity financing is renewable energy financing structure that permits investors to efficiently and economically utilize federal tax benefits generated by the investment available in renewable energy projects. We are planning to set up a new Tax Equity Fund for providing tax equity financing for renewable energy projects in the U.S.  More information on our Tax Equity Fund, as well as Tax Equity Financing can be found on our following sites:

www.TaxEquityFund.com

and

www.TaxEquityFinancing.com

Renewable Energy Project Financing Post 2007

Up until 2007, there were 27 investment banks and companies that were investors in Tax equity financing.  Since then, most have left this market and only 5 companies now provide these investments for financing renewable energy projects. This has made it difficult for developers to secure financing for their renewable energy project. 

The American Recovery and Reinvestment Act of 2009 (ARRA) has expanded the use of tax incentives for the renewable energy sector and removed a cap that once restricted the market for new renewable energy investments. The ARRA now allows companies with no "tax appetite" to collect cash grants in lieu of the investment tax credit (ITC).

The investment tax credit, under I.R.S. Section 48, allows both businesses and individuals to take a one-time, upfront tax credit equal to 30% of their investment in renewable energy projects such as solar and wind, as long as they are "qualified facilities" and placed in service after December 31, 2008, and before Dec. 31, 2013.

What are Master Limited Partnerships?

Master Limited Partnership (MLPs) are limited partnerships that are publicly traded on a securities exchange.

MLPs combine the tax benefits of Limited Partnerships with the liquidity and protection/oversight of a publicly traded security.

Master Limited Partnerships are limited by regulation to apply to specific businesses - most notably - natural resources, including; oil and natural gas extraction and transportation.

To qualify for MLP status, a partnership must generate at least 90 percent of its income from "qualifying" sources/resources. For many Master Limited Partnerships, this includes activities related to the production, processing or transportation of oil, natural gas and coal.

Master Limited Partnerships pay their investors through Quarterly Required Distributions or QRDs. The amount of the QRDs is stated in the contract between the Limited Partners (the investors) and the General Partner (the managers). Failure of the General Partner to pay the quarterly required distributions constitutes a default of the MLP Agreement.

Due to the stringent provisions on Master Limited Partnerships and the QRD, the majority of all Master Limited Partnerships are pipeline businesses, and natural gas companies engaged in the "midstream" oil and natural gas sector, which generated a reliable and steady income from the oil and natural gas sector.

Because MLPs are a partnership, there is no corporate income tax at either the state or federal level. The Limited Partners (investors) are able to record a pro-rated share of the investment in the Master Limited Partnership's depreciation on their personal income tax filings which further reduces their (that year's) tax liabilities. This is the primary benefit of Master Limited Partnerships and provides MLPs relatively inexpensive funding and capital costs. Simultaneously, this makes Master Limited Partnerships unattractive to "tax-deferred funds" that are unable to utilize this tax savings advantage. To encourage tax-deferred investors, MLPs set up new corporation holding companies for their Limited Partner's claims which can then issue equity.

In most new Master Limited Partnerships, the General Partner starts out with a small stake or position in the company - typically in the 2% to 5% range. However, the MLP receives "incentive distributions" from the net income after the Quarterly Required Distributions. As the incentive distributions are normally paid in the form of increased equity claims this allows the General Partner to attain an increasingly greater percentage of ownership in the company over time.

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Investment Tax Credits
www.InvestmentTaxCredits.net

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Upstream Oil and Gas
www.UpstreamOilAndGas.com

Upstream Oil and Gas Information, Resources and Petroleum Engineering Services 

info@UpstreamOilAndGas.com 

Gas Gathering
www.GasGathering.com

Advertising inquiries may be directed to:

info@GasGathering.com

Amine plants are used for "gas sweetening" in the midstream oil and gas sector known as "gas processing." Amine plants provide H2S removal as well as CO2 removal from natural gas and liquid hydrocarbons. The process involves both absorption and chemical reactions. 

We provide amine plant sales and natural gas processing and engineering services.

What are Gas Compressors?

Gas compressors are mechanical device that increase the pressure of a gas by reducing its volume. 

Gas compressors are responsible for moving the natural gas from the oil or natural gas production well to homes and businesses via natural gas pipelines and gas compression stations.

Gas compression also increases the temperature of the gas during compression.

What is Gas Gathering?

Gas Gathering systems are the physical facilities that accumulate and transport natural gas from a well to an acceptance point of a transportation pipeline are called a gas gathering system.

What is Gas Processing?

Natural Gas Processing plants separate the various hydrocarbons and natural gas liquids from the pure natural gas (methane or CH4) to produce what is known as 'pipeline quality'  natural gas. Natural gas pipeline companies have requirements on natural gas they buy from producers which is why the natural gas processing plants are located where they are, and why they separate the ethane, propane, butane, and pentanes from the methane.  Natural gas liquids or NGLs include ethane, propane, butane, iso-butane, and natural gasoline.

Sulfur exists in natural gas and is known as hydrogen sulfide (H2S).  Natural gas is usually considered "sour" if hydrogen sulfides content exceeds 5.7 milligrams of H2S per cubic meter of natural gas. The process hydrogen sulfide removal from sour gas is commonly referred to as "gas sweetening."

The primary process for natural gas sweetening - or the sweetening of "sour" natural gas - is very similar to the processes of glycol dehydration and NGL absorption. In this case, however, amine solutions are used to remove the hydrogen sulfide. This process is known simply as the 'amine process', or alternatively as the Girdler process, and is used in 95 percent of U.S. gas sweetening operations. The sour gas is run through a tower, which contains the amine solution. This solution has an affinity for sulfur, and absorbs it much like glycol absorbing water. There are two principle amine solutions used, monoethanolamine (MEA) and diethanolamine (DEA). Either of these compounds, in liquid form, will absorb sulfur compounds from natural gas as it passes through. The effluent gas is virtually free of sulfur compounds, and thus loses its sour gas status. Like the process for NGL extraction and glycol dehydration, the amine solution used can be regenerated (that is, the absorbed sulfur is removed), allowing it to be reused to treat more sour gas.

Although most sour gas sweetening involves the amine absorption process, it is also possible to use solid desiccants like iron sponges to remove the sulfide and carbon dioxide.

Sulfur can be sold and used if reduced to its elemental form. Elemental sulfur is a bright yellow powder like material, and can often be seen in large piles near gas treatment plants, as is shown. In order to recover elemental sulfur from the gas processing plant, the sulfur containing discharge from a gas sweetening process must be further treated. The process used to recover sulfur is known as the Claus process, and involves using thermal and catalytic reactions to extract the elemental sulfur from the hydrogen sulfide solution. 

Some of the above information from www.NaturalGas.org with our thanks.

Glycol dehydration - through glycol dehydrators - is used in the production and processing of natural gas by using a liquid desiccant that removes water from natural gas and natural gas liquids (NGL). 

Various types of glycols are used in this process including;

• triethylene glycol (TEG)

• diethylene glycol (DEG)

• ethylene glycol (MEG)

• tetraethylene glycol (TREG). 

TEG is the most commonly used glycol in the natural gas industry.

H2S, or Hydrogen Sulfide, is a hazardous and corrosive element found in oil and natural gas which needs to be removed from the hydrocarbon before the oil or natural gas can be sold.  The hydrogen sulfides are usually removed in a mid-stream gas processing facility by either iron sponges or amine plants.

What is a Heater Treater?

A "Heater Treater" is used in the oil and gas production process and is used to removes water and gas from the produced oil - and to improve its quality for sale into a crude oil pipeline or for other transport. A heater treater typically combines the following components inside the heater treater:  a heater, free-water knockout, and oil and gas separator.

There are periods of time in peak periods of natural gas use, that a natural gas company (pipeline or LDC) may not be able to keep up with these peak demand periods.  Natural gas storage is a way to help provide for the natural gas reserves or natural gas supplies that are needed during these peak demand periods.  Having strategically-located natural gas storage capabilities can assist natural gas pipelines or LDCs provide the natural gas supply when their customers demand. 

Recent governments studies conclude that demand for clean-burning natural gas has continued to rise.  In the last 20 years, natural gas consumption has risen nearly 25%.

The Energy Information Administration (EIA) estimates there are over 2,100 Trillion cubic feet (Tcf) of "technically recoverable natural gas" reserves in the United States, as reported in the EIA's 2010 Annual Energy Outlook.  In 2009, the United States used just over 22 Trillion cubic feet of natural gas, making the U.S. one of the global leaders in natural gas consumption. This means the U.S. has enough natural gas supply to last about 100 years. 

With greater demand comes greater need to be able to store natural gas.  In the past 20 years, natural gas storage has increased less than 5%.  This creates a serious constraint that can impact our nation by failing to keep up with natural gas supply and demand.  Existing natural gas storage facilities will not be able to keep up with the demand for natural gas during increasingly greater periods of increasing demand, which could cost all consumers of natural gas billions of dollars.

There is a critical need for new high-volume natural gas storage facilities to meet the escalating demand for natural gas which will provide predictability of natural gas supply and reduce or eliminate volatility of natural gas prices during peak periods.  Natural gas storage "balance" the load - or supply and demand requirements of all natural gas consumers and provides the "cushion" needed for large supplies of natural gas to serve all consumers during periods of peak demand.

Natural gas storage can take place in a number of underground natural gas facilities.  From the time the natural gas is produced, it may be stored temporarily in underground natural gas storage facilities that may be one or more of the following;  depleted oil or natural gas fields/reservoirs, salt dome caverns/salt dome storage or former aquifers. 

Most of the natural gas storage in the U.S. takes place in naturally-occurring natural gas or oil reservoirs that have been depleted through production.  An underground gas storage facility must contain enough “base gas” or “cushion gas” that provides adequate pressure to re-produce and extract the natural gas.

As natural gas is produced from either a natural gas well, or from an oilwell which contains "associated gas," the natural gas must be treated or processed before it can be used at a home or business as a fuel.

Natural gas treating or processing, takes place at gas processing plants to remove the impurities and other hydrocarbons other than the methane itself, or CH4. 

The by-products and impurities of natural gas that must be treated or processed include; ethane, propane, butane, isobutane, pentane, isopentane and higher molecular weight hydrocarbons, as well as H2S or elemental sulfur, carbon dioxide (CO2), water vapor and sometimes helium and nitrogen.

Terminalling and Storage is a term used in the oil and natural gas industry that refers to the midstream natural gas gathering and crude oil gathering, pipeline, transportation and storage facilities. Terminals are facilities where natural gas and crude oil is transferred to or from storage, transportation network (other pipelines or trucks) for distribution, refining (for crude oil) or gas processing (for natural gas). Terminals are an integral and key component in the natural gas and crude oil to end-users by providing natural gas storage and crude oil storage, as well as inventory management, distribution and gas processing and blending to achieve "pipeline quality gas" and specific crude oil grades.