Natural Gas & NGLs
As the world evolves towards cleaner, energy-efficient, and reliable fuels, demand for natural gas and natural gas liquids will continue to grow. Watson Millican & Co. has performed technical, operational, and commercial due diligence on acquisitions and financings of midstream assets including natural gas gathering systems, treating and processing plants, storage facilities, and gas and NGL pipelines.
We have provided expert testimony in numerous royalty disputes at the state and Federal levels, involving the market value or net proceeds of natural gas, NGL, and condensate production, as well as appropriate deductions or allowances for the costs of processing and transporting the gas.
Our firm has also provided expertise in the development, construction, and operation of processing facilities, and investigated the causes of process and equipment failures.
Construction Disputes
LCIA Gas Plant and Pipeline Construction Dispute
Provided expert opinions on behalf of a middle eastern governmental entity against the developer and EPC contractor regarding claims related to deficient design and construction of a new gas processing plant in Iraq. Claims involved delays associated with late engineering, late delivery of materials, scope changes, and rework. Prepared expert report and provided evidence to the tribunal during the hearing.
Gas Processing Plant Dispute
Prepared expert reports and testified in Australian arbitration on behalf of Engineering, Procurement and Construction (EPC) contractor involved in engineering and construction of offshore platform, sub-sea pipelines, and onshore natural gas processing plant. Issues involved impact of change to feedstock design basis as well as numerous engineering and construction related defect claims made by owner.
Natural Gas Processing Plant Construction Delay
On behalf of a state-owned oil company, reviewed Engineering and Construction contractor’s claims of delay and disruption associated with a major debottlenecking project for a 2.4 billion standard cubic feet per day natural gas treating facility located in the Middle East. Claims were associated with the design and construction of a high-pressure DGA unit, a 535,000 ton per day sulfur recovery unit, and new high-pressure flare systems.
Litigation Support
Propane Product Quality Dispute
Investigated the design and operation of a natural gas liquid fractionation, storage, and loading facility located on the Red Sea to determine potential causes of alleged hydrogen sulfide contamination of propane cargoes. Matter was filed in London High Court of Justice, Queen’s Bench Division Commercial Court.
Natural Gas Sales Contract Dispute
Performed an independent audit of dedicated natural gas delivered under three long-term purchase agreements. Assessed the applicability of dedicated quantity provisions and the reservation of processing rights by the seller. Determined the volume and heat content reductions experienced by the seller’s natural gas gathering, transportation, compression, treating, and processing facilities.
Due Diligence
Midstream Due Diligence
Assisted an energy distribution company with due diligence for a potential transaction involving gas gathering and processing assets in the Permian Basin including over 4,000 miles of gas and liquid pipelines, four gas processing plants, and multiple gas treating plants. Participated in data room reviews and management presentations with a focus on commercial, operational, and technical evaluations of midstream systems. Prepared a comprehensive economic model of the integrated gathering and processing assets that were used to determine valuations and evaluate key sensitivities.
Incident Investigations
Investigation of Gas Processing Plant Accident
Assisted a major oil company in the investigation of explosion and fire with resulting failure of natural gas supply from onshore crude oil, condensate, and natural gas processing facilities located near the Bass Strait of Australia. Reviewed facility design, operating, and maintenance standards and assisted in the preparation of testimony before a Royal Commission.
Production Facility Incident
Reviewed the design of a “full well stream” (natural gas, condensate, and water) production and separation facility in Louisiana. Determined the cause of failure for a vapor recovery tank during pipeline purging and production start up operations.
Project Development
Gas Plant Cost Estimate
Provided engineering and cost estimating assistance on behalf of Caspian based oil & gas producer engaged in construction of gas-condensate processing facilities. Prepared independent process design and cost estimate for a gas-condensate inlet separation and condensate stabilization system that was used by client to verify change order claims being made by EPC Contractor. Conducted a process design review of the proposed gas plant design to ensure optimum process performance and ability to meet contractual guarantees.
Market Studies
Natural Gas Liquids Supply / Demand Study
Prepared an analysis of the demand for NGL products as feedstocks to the petrochemical and refining industries, the availability of NGL supplies in the U.S. and Canada, and the level of current and future NGL fractionation capacity.
Royalty Determination
Transportation and Processing Unbundling
Unbundled the transportation and processing costs incurred by exploration and production companies for their natural gas production in the Permian Basin, Williston Basin, and Uinta Basin. Estimated capital costs and operating expenses for each function performed by the midstream services provider, including pipeline transportation, inlet separation, compression, treating, and NGL extraction. Evaluated the operating conditions of each function and assessed their effect on the marketable condition of the natural gas as it pertains to determining allowable deductions from royalty payments. Estimated system fuel usage and hydrocarbon losses from condensate.
Royalty Class Action Cases
Assisted in development of expert reports on behalf of gas producers in Oklahoma, New Mexico, and Arkansas in multiple royalty owner class action certification trials. Assessed differences and variability in production conditions, required midstream services (including gathering, compression, dehydration, treating, and processing), and product disposition to assist court in determining suitability for class certification