Hi Tommy,
While raw sour gas is sometimes (very rarely and definitely not the norm) sold in the field, sweet natural gas is the usual saleable commodity. Quoted natural gas prices are for pipeline spec gas (sweet, with only minute water vapor and other impurities) at standard conditions (Eg. 14.65 psia and 60 degrees Fahrenheit).
Sour gas must be processed through a gas plant to remove H2S, CO2, water vapor, and heavier hydrocarbon constituents so that a saleable "sweet" residue gas remains. Removal of these constituents results in "shrinkage" of the raw gas produced volume. In addition, the processing of a sour gas stream is more costly than that of a sweet raw gas stream.
For "scoping" purposes you will not be too far off if you assume that the shrinkage of the 7-25 raw gas stream will be in the order of 40% and that the processing cost will be in the order of $0.65/mcf of raw gas inlet (i.e. ~$1.10/mcf of sales gas if shrinkage is 40%).
Thus, for a current one year gas contract at ~$2.65CAN/mcf delivered at AECO 'C'(the common Alberta reference Hub), you would need to deduct ~$0.15 for Nova transportation charge, ~$1.10 for a processing charge, ~$0.10 for gathering and operating and you'd get a cash flow of about $1.30/mcf (before deduction of any crown and other royalties). So, if the well produces 10 MMCF/d of raw gas and incurs 40% shrinkage, the sales gas revenue (before royalty deductions) would be about $7,800/day.
Hope this helps.
Later,
grayhairs |
