Glossary

Since the performance in global projects is about communication to co-ordinate global and local initiatives, it appeared imperative to create this glossary.

You will find words related to technology as well as commercial and contractual terms.

For each word you will find a definition as short and simple as possible and comments to make the best use of it.

With new technologies and new practices, new words or new understandings to come up at any time, feel free to comment. We expect to handle this section as a permanent  interactive learning session.

Many thanks in advance for your contribution

Letter of Intent : Definition: Letter of Intent is a document which contains information about the agreement which is about to take place between 2 parties before it is being approved Comments: A LoI is a document by which two parties describe how they intend to work together. It can be just a technical base line of co-operation or a more extended agreement with commercial and financial terms. Depending on the countries, a LoI may be considered as a formal bidding contract or not. A LoI may also be called Memorandum Of Understanding (MoU) The difference between MoU and LoI is that a MoU may stay as such without further bidding document, while the LoI tells clearly the intention of the parties to convert it into a formal bidding contract. In the Oil&Gas sector, MoU is mostly used between partners chasing together the same opportunity, for example it will preliterate joined ventures, while the LoI will be mostly used between customers and suppliers, especially to preserve delivery times in the mean time that a formal order has been placed and acknowledged. To avoid future potential conflicts between the parties, a LoI should refer more to the intention to provide means than to detailed commitments on goals and results with key performance indicators (KPIs) and so on. In putting on paper the base line of a potential future contract, the LoI helps the partners to realize in more details what shall be the name of the game and what kind of commitment they can commit on on their side and rely on from the other party.
Liquefaction : Definition: Liquefaction refers to the physical transformation of gas into liquid. In the oil and gas industry this liquefaction of gas may be processed just by compression, just by refrigeration, or both in combination depending on the gas. Comments In most of the cases the gas liquefaction is performed for storage and transportation purpose. Previous to the industrial development of gas liquefaction the natural gas markets were very local and the transportation was solely carried out through gas pipelines. Net importers of natural gas were at the mercy of their next door neighbors who could change the price they charged for spot gas or short term contracts at any time. When the gas pipeline happens to cross third parties countries, between the exporter and the importing country we could also see the resulting tensions on the fees to pass by. Because of these uncertain practices in trading gas another form of transportation had to be developed to build a global gas market on the same model as oil. Natural gas liquefaction was then conceptualized in the 1960?s and the first liquefied natural gas (LNG) carrier was moved from Algeria to the UK. To be liquefied the natural gas must be cooled down at very low temperature - 161° Celsius by the process known as liquefaction. During that liquefaction the natural gas reduces its volume by 600 times which makes it much easier to store and transport as long as the temperature is maintained at that low level of -163° C, just below the boiling point. To guaranty this low temperature during transportation, special vessels have been designed with special tanks and dedicated cooling system to maintain the natural gas in its liquid phase. The same process is used in the storage tank farms in LNG terminals for import or export. To produce cold in the gas liquefier, a turboexpander is used. The gas liquefier is reliable in operation; it has a simple technological structure and a handy control system. The gas liquefier is a cryogenic unit which uses a pressure drop in the natural gas networks (about 6 bar) to power the natural gas liquefaction process. The gas liquefier includes a natural gas treatment and dehydration system, booster compressor, liquefaction unit, turboexpander unit, control system. In the liquefaction process, the natural gas is liquefied in a condenser where the heat of vaporization is released, and then evaporated in the evaporator, where the heat of vaporization is absorbed. Along the development of this liquefaction technologies, the natural gas markets has turned over the years less and less local to become regional but not yet global. The world natural gas market is actually divided in three regions, North America mostly dominated by spot market prices, such as Henry hub, Europe which is a mix between spot prices and long term contracts mostly signed with Norway, Russia or Algeria, and Asia where the natural gas market is driven by long term contracts indexed on the oil prices through JCC calculations.
Liquefied Petroleum Gases : Definition: Liquefied Petroleum Gases are commonly called LPG. LPG are the light hydrocarbons fraction of the paraffin series, derived from refinery processes, crude oil stabilisation plants and natural gas processing plants comprising propane, butane and butylenes or a combination of them. LPG may be also called liquefied refinery gases. LPG have no natural odor Comments As light hydrocarbons of the paraffin series, LPG are derived solely from the distillation of crude oil. LPG can be liquefied under low pressure (5-10 atmospheres). In the liquid state and at a temperature of 38 °C, LPG have a relative vapor pressure less than or equal to 24.5 bars. LPG specific gravity ranges from 0.50 to 0.58. Unlike the liquefied natural gas (LNG), LPG do not require cooling to be liquefied. Large quantities of LPG are now available as a by-products from the gas and petroleum industries. LPG are obtained as light ends from the fractionation of the crude oil. LPG have good caloric value, to be used for transportation fuel as well as cooking fuel. Since LPG have no natural odor, a distinctive odorant is added so that it will be noticeable should a leak occur. Because of the low boiling point (?44 to 0°C) and high vapor pressure of these gases, their handling as liquids in pressure cylinders is necessary. Then LPG transportation is easy with steel pressurized bottles to be used in remote areas as domestic fuel. LPG are often employed as fuel for tractors, trucks, buses. LPG have a high octane rating, making it useful in engines having compression ratios above 10:1. Another factor of importance in internal combustion engines is that LPG leave little or no engine deposit in the cylinders when they bum. The exhausted gas from engine combustion are also pretty clean compared with gasoline and diesel so that LPG can be used in industrial applications for handling and forklift trucks. Owing to demand from industry for butane derivations, LPG sold as fuel are made up largely of propane.
LNG : Definition: LNG is the acronym of Liquefied Natural Gas. The Natural Gas is mainly Methane or Ethane and the operation of Liquefaction is made by the compression of the gas at moderate pressure and cooling at the cryogenic temperature of - 160°C. LNG is a clear, colourless, non-toxic liquid. The volume of the LNG is 1/600th of its volume as gas, so that this liquefaction process is used for the transportation on long distances, such as between continents, where pipelines solutions are not viable. Comments: One property which differentiates liquefied natural gas (LNG) from liquefied petroleum gas (LPG) is the low critical temperature, about -73°C. This means that natural gas cannot be liquefied at ordinary temperatures simply by increasing the pressure, as is the case with LPG; instead, natural gas must be cooled to cryogenic temperatures (-160°c) to be liquefied and must be well insulated to be held in the liquid state Since the numerous impurities that are naturally found in the raw gas freeze at low temperatures, and would thus block the cryogenic section of the plant, the gas has to be purified before it can be cooled down to cryogenic temperatures. Each LNG plant consists of one or more trains to compress natural gas into liquefied natural gas. A typical LNG train consists of a - Compression area - Propane condenser area - Methane, and ethane areas. Gas liquefaction is a special case of gas refrigeration. The gas is first compressed to an elevated pressure in an ambient-temperature compressor. This high-pressure gas is passed through a countercurrent heat exchanger to a throttling valve or expansion engine. Upon expanding to the lower pressure, cooling may take place, and some liquid may be formed. The cool, low-pressure gas returns to the compressor inlet to repeat the cycle. The purpose of the countercurrent heat exchanger is to warm the low-pressure gas prior to recompression, and simultaneously to cool the high-pressure gas to the lowest temperature possible prior to expansion. Both refrigerators and liquefiers operate on this same basic principle. The whole supply chain of LNG requires dedicated equipment: - LNG Trains for the production - LNG Tanks for storage - LNG Export Terminal to load the vessels - LNG Carriers for the transportation - LNG Import and Gazification Terminal to download the LNG at market place - LNG pipelines with LNG re-gazification stations to maintain and distribute the LNG locally Qatar has known the biggest concentration of LNG trains over the last 5 years, with companies like Qatar Petroleum, ExxonMobil, Shell and ConocoPhillips, mainly to supply Europe and North America. The development of the shale gas in North America has nearly stopped all upstream capital expenditure for LNG in Qatar. Today the biggest LNG projects are in Australia with Inpex, Total, ExxonMobil, Chevron, Woodside and Shell which has initiated the concept of floating LNG (fLNG) because of the long distance of the gas fields from the shore. Tomorrow the LNG projects may expand on the East Africa where promising resources are under exploration ashore from Mozambique and Kenya.
LoI : Definition: LoI is the acronym for Letter of Intent . Comments: A LoI is a document by which two parties describe how they intend to work together. It can be just a technical base line of co-operation or a more extended agreement with commercial and financial terms. Depending on the countries, a LoI may be considered as a formal bidding contract or not. A LoI may also be called Memorandum Of Understanding (MoU) The difference between MoU and LoI is that a MoU may stay as such without further bidding document, while the LoI tells clearly the intention of the parties to convert it into a formal bidding contract. In the Oil&Gas sector, MoU is mostly used between partners chasing together the same opportunity, for example it will preliterate joined ventures, while the LoI will be mostly used between customers and suppliers, especially to preserve delivery times in the mean time that a formal order has been placed and acknowledged. To avoid future potential conflicts between the parties, a LoI should refer more to the intention to provide means than to detailed commitments on goals and results with key performance indicators (KPIs) and so on. In putting on paper the base line of a potential future contract, the LoI helps the partners to realize in more details what shall be the name of the game and what kind of commitment they can commit on on their side and rely on from the other party.
Long lead item : Definition: Long lead item refers to the equipment, product or system that is identified at the earliest stage of a project to have a delivery time long enough to affect directly the overall lead time of the project. Comments: The long lead items are common in the oil & gas and petrochemical industry because of the complexity of the supply chain used by the end users to design and execute their projects. In the oil & gas and petrochemical sector, the end user outsource the procurement of the equipment, product and system to the engineering, procurement and construction (EPC) contractors. These EPC contractors have been involved in the project at the last stage for execution, after the project conceptual study, feasibility study and the front end engineering and design (FEED). When the end user goes to execution it expects the awarded EPC contractors to execute the construction of the project as fast as possible. That is where the conflict comes with the long lead items. Some equipment, product or system have a normal delivery time which is too long to be outsourced through the EPC contractors. Typically large compressors, turbines, generators, control systems may have 12 to 24 months delivery times for a project to be executed in 36 months. Even if the delivery time of these equipment may be shorter than the whole project, it must be considered the additional time for the EPC to organize the tenders and selection of the vendors which may take 6 to 12 months, plus the time to install these equipment when delivered on site. In the best case if these equipment would be bought by the EPC contractors they should add at least 12 months to the overall project schedule. To avoid this delay, these equipment are treated as long lead items meaning that they will not follow the same supply chain as the other equipment. These long lead items shall be defined at the detailed design stage, or FEED, and the end user will conduct the bidding process in parallel of the EPC contracts tenders. The engineering company in charge of the FEED or the Project Management Consultant (PMC) is normally supporting the end user in this process. The goal is to synchronize the final decision to select the vendors of the long lead items previously the choice of the EPC contractors. To do so the end user places a letter of intent (LOI) to selected vendor of the long lead item and inform the leading EPC contractor that in case of being awarded it will have to endorse this LOI and convert it into a formal order. The benefit is for the end user and its long lead item vendor to work in parallel of the EPC contractors, so that the long lead item shall be delivered and installed in line with the EPC overall schedule.
LPG : Definition: LPG is the acronym of Liquefied Petroleum Gases. LPG are the light hydrocarbons fraction of the paraffin series, derived from refinery processes, crude oil stabilisation plants and natural gas processing plants comprising propane, butane and butylenes or a combination of them. LPG may be also called liquefied refinery gases. LPG have no natural odor Comments As light hydrocarbons of the paraffin series, LPG are derived solely from the distillation of crude oil. LPG can be liquefied under low pressure (5-10 atmospheres). In the liquid state and at a temperature of 38 °C, LPG have a relative vapor pressure less than or equal to 24.5 bars. LPG specific gravity ranges from 0.50 to 0.58. Unlike the liquefied natural gas (LNG), LPG do not require cooling to be liquefied. Large quantities of LPG are now available as a by-products from the gas and petroleum industries. LPG are obtained as light ends from the fractionation of the crude oil. LPG have good caloric value, to be used for transportation fuel as well as cooking fuel. Since LPG have no natural odor, a distinctive odorant is added so that it will be noticeable should a leak occur. Because of the low boiling point (?44 to 0°C) and high vapor pressure of these gases, their handling as liquids in pressure cylinders is necessary. Then LPG transportation is easy with steel pressurized bottles to be used in remote areas as domestic fuel. LPG are often employed as fuel for tractors, trucks, buses. LPG have a high octane rating, making it useful in engines having compression ratios above 10:1. Another factor of importance in internal combustion engines is that LPG leave little or no engine deposit in the cylinders when they bum. The exhausted gas from engine combustion are also pretty clean compared with gasoline and diesel so that LPG can be used in industrial applications for handling and forklift trucks. Owing to demand from industry for butane derivations, LPG sold as fuel are made up largely of propane.
Lube oil : Definition: Lube Oil is a lubricant, to be used in all mechanical system to reduce friction between moving parts. Produced out of crude oil, this Lube oil is also called Mineral oil. Comments: The word Lubricant is mostly used to speak about the products, while Lube oil is normally referring to the process such as Lube Oil Refinery or even Lube Refinery. The boiling point and freezing point of a lubricant must be selected for each application, so that they are classified in grades in respect with their viscosity index and thermal stability. As the sulfur contained in fuels used to help the lubrication of the engines, the development of the low sulfur diesel in fuels and the efficiency improvement of the engines have contributed to create needs for new lubricants with higher performances. These news needs are pushing the Oil & Gas industry to new investments.
Lump Sum Turn Key : Definition: A Lump Sum Turn Key (LSTK) Contract refers to bidding terms and conditions between the End User and an EPC which don’t allow any financial change for a given scope of work until the EPC is able the deliver the newly built plant in full operations to the End User. Comment: The benefit of the (LSTK) contract for the End User is to know how much will cost the construction of his plant and how long it will take as the project execution lead time is normally directly connected to the cost. The game for the EPC is to deliver the facility ahead of time to benefit from contractual bonus (the opposite of penalties in case of delay) and to restore his margin in managing smartly his procurement.
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