Optimization Of Strategies For Natural Gas Utilization

Introduction

1.1 Background of the study

Natural Gas as energy source is applicable for use in Residential, Commercial, Industrial and Power Generation. Gas has become very important in the global energy market & must be profitably harnessed. Total world natural gas reserve as at the end of 2014 is 6606.4 trillion cubic feet (187.1 trillion m3) with Reserve-to-Production (R/P) ratio of 54.1 years. Nigeria is endowed with abundant Natural Gas; Nigeria’s reserve is placed at 180.1 trillion cubic feet ranking Nigeria 9th in world natural gas reserve table as shown in figure 1. Global ranking of 9th and 25th in reserves and production respectively. Nigeria is considered to be “a gas province with some oil” according to USGS.

Falobi (2009) posited that natural gas in Nigeria has not attained its potential as a major source of fiscal revenue in the domestic economy because of inadequate funding for infrastructure development, inept pricing of natural gas for domestic gas policy and regulatory framework. Due to unsustainable exploitation practices coupled with the lack of gas utilization infrastructure, Nigeria flares a substantial proportion of the gas it produces when compared with oil production in advanced countries, Nigeria lags far behind in terms of associated gas conservation and utilization. Natural gas reserves in marginal oil field can contribute to the sustainable development of Nigeria economy if properly harnessed. As with most oilfields in Nigeria, the designated marginal fields projects are produced with associated gas. But over the year’s natural gas produced in associated field in Nigeria has been flared. Flaring imposes costs upon Nigeria, and potentially upon other countries as well. These costs include both opportunity costs – the cost of the best alternative foregone – and external costs. External costs are the costs imposed on Nigerians and others as a result of the activities of private oil companies (IOC and MFO), which are not currently factored into the cost of doing business.

Nigeria flares more natural gas associated with oil extraction than any other country in the world. Estimate suggests that out of the 3.5 billion cubic feet (Bscf) of associated gas (AG) produced annually, 2.5 billion cubic feet (Bscf), or about 70% is wasted via flaring. This statistical data shows that gas flaring is notoriously unreliable, and Nigeria may waste US $ 2.0 billion per year by flaring associated gas. Flaring is done as it is costly to separate commercially viable associated gas from the oil (Adewale, 2018). Companies operating in Nigeria also harvest natural gas for commercial purposes, but prefer to extract it from deposits where it is found in isolation as non-associated gas. Thus associated gas is burned off to decrease costs(Wikipedia,2018).

The World Bank estimates Nigeria alone accounts for 12.5% of the world‟s annual gas flared though the Nigerian government has enacted a policy of “Zero-Gas Flare” by 2008 which has still not been met by the operators. This translates to about 800 Bscf of natural gas flared annually. Hence, energy companies have to develop strategies to utilize the “stranded” gas produced. The Natural gas traded today is strongly driven by long-term and high risk contractual agreements (Adegoke et al, 2005). Major problems in utilizing natural gas worldwide have been predominantly the high transportation costs compared to crude oil. Transportation costs could be as much as four times that of crude. However, the OPEC World Energy Models forecast that world oil demand will rise from 76 MM bbl per day in 2000 to 103 MM bbl/day in 2020 seems to create opportunity for utilization of associated gas (World Energy, 2004). The additional benefits of natural gas utilization such as the reduced green house gas emissions (GHG) would further substantiate the claim for utilization of gas in Nigeria.

Natural gas utilization entails devising a strategy for converting natural gas from the production field to several options for economic benefits in terms of money and the environment. The options for the natural gas utilisation includes : enhanced oil recovery (EOR); conversion of natural gas to gasoline, methanol, CNG, and liquefied natural gas (LNG); transportation of natural gas or its by-products by pipeline, rail and sea; and other in-state utilization options such as use in utility or industry.Most commonly used means of transporting or utilizing natural gas consist primarily of pipelines and LNG. Pipelines account for 75%, with LNG accounting for the rest (EIA, 2004). The properties of LNG (one volume unit of LNG yields 600 units of standard gas volume) allow for its long distance transport by ships across oceans to markets and for its local distribution by truck onshore. Occasionally, liquefaction of natural gas also provides the opportunity to store the fuel for use during high consumption periods close to demand centers, as well as in areas where geologic conditions are not suitable for developing underground storage facilities (Wang and Economides, 2009).

Optimization approaches have been adopted over the years in making optimal decisions in terms of selection and cost effectiveness. This concept is applied in this study for optimization of gas utilization. Optimization is the act of obtaining the best result under given circumstances and has featured in the design, construction, and maintenance of any engineering system, where engineers have to take many technological and managerial decisions at several stages. The ultimate goal of all such decisions is either to minimize the effort required or to maximize the desired benefit (Rao, 2009). This involve formulating an objective function and several constraints for constrained optimization (Mathematica tutorials on constrained optimization, 2004).

1.2 Statement of problem

Despite policy initiatives in promoting marginal oil field development, the utilization of natural gas from marginal oil field has not been fully successful. The main problem against the optimum utilization of natural gas from marginal oil field operations in the country is the inadequate infrastructure and lack of appropriate pricing structure to support the economics of natural gas utilization.

As a long term strategy for the utilization of natural gas in Nigeria, the Federal government of Nigeria has put in place the gas master plan policy frame work. Also the marginal field development programme was initiated in 2001 to boost oil and gas production and utilization.

1.3 Objectives of the study

The main of the study is to examine the optimization of strategies for Natural Gas Utilization.

Specifically, the study sought to:

Identify sources and volumes of Natural Gas to be produced.

Develop a mathematical optimization model for natural gas utilization in the Niger Delta fields (case study) subject to constraints such as economics, environmental factors, etc.

Solve the optimization problem to identify the natural gas reserve required to meet market demand

Identify the optimum decision or utilization path that would generate the maximum profits in terms of gas utilization and consumption.

1.4 Scope of the study

Utilization options restricted to existing and planned natural gas utilization project in the Niger Delta region of Nigeria

1.5 Significance of the study

Huge natural gas reserves in the Niger Delta.

A need to reduce flaring of natural gas and consequently reducing carbon emissions and environmental pollution.
Economic benefits of natural gas utilization.

Reduction in Green House Gas (GHG) emissions.