NOMENCLATURE
APG: Associated Petroleum Gas
b/d: barrel per day
BTU: British thermal unit
CAPEX: Capital Expenditure
CNG: Compressed natural Gas
EIA: environmental Impact Analysis
EPA: environmental Protection Agency
F-T: Fischer Tropsch
GGFR: Global gas Flaring Reduction Partnership
GHGs: Green House Gases
GTL: Gas-To-Liquids
GTW: Gas-To-Wire
IRR: Internal rate of return
LNG: Liquefied Natural Gas
MMBTU: million British thermal unit
MMscfd: million standard cubic feet per day
Mt: Metric Tonne
NCR: Net cash Recovery
NGLs: Natural Gas Liquids
OPEX: Operating expenditure
POT: Pay-out Time
Scf: standard cubic feet
SPDC: Shell Petroleum Development Company
STG+: Syngas to gasoline plus
Tcf: trillion cubic feet
GOR: Gas-Oil-Ratio
GTH: Gas to Hydrate
DME: Dimethyl Ether
IOC: International Oil Companies
BLPD: Barrel of Liquid per day
OFG: Offshore Gases
SMR: Steam Methane Reforming
ABSTRACT
This work evaluates the economic viability of using mini Gas-to-liquid technology for the monetization of associated stranded flared gas at Izombe location, in the Niger Delta, Nigeria. The Izombe field has been noted as the area of large production of associated gas. This gas has been stranded and thus flared because of lack of proximity to market. The average 40mmscfd of Izombe flared gas is to be put to monetization. The volume available for monetization after preliminary treatment and NGL recover corresponds to 32.07mmscfd. This volume yields a GTL product of 3207b/d of diesel. The Fisher Tropsch synthesis reaction method was used for the conversion of the synthesis gas to diesel using iron catalysts. The economic analysis identified several economic factors that characterizes the economic profitability of the project. An economic model was developed which was simulated in MATLAB script known as GTL.m for the simulation of results. The results of the sensitivity analyses show that the CAPEX has significant impact on the overall profitability of the project. The results also reveal that the OPEX has negligible effect on the NPV of the project. Economic factors such as diesel price, natural gas price and discount rates all have serious impact on the profitability of the project. From the results it is seen that the project will always yield positive NPV as long as the natural gas price is below $1.5/Mscf for all discount rates. And for a discount rate of 29.3% the project yields positive NPV for diesel price of $67/bbl and above.
LIST OF TABLES
Table 2.1: Top 20 Flaring Countries by Volumes (in Billion Cubic Feet), 2007-2011 25
Table 2.2: years gas flaring volumes for Nigeria (million cubic metres). 32
Table 3.1: Flare gas composition of Izombe Gas 65
Table 4.1: the initial cash flow analysis for base case 70
Table 4.2: Calculating the NPV for Base case 71
Table 4.3: NPV of Project at Various Product Price per Barrel 72
Table 4.4: table of critical product price at various discount rate for base case 73
Table 4.5: Overall results for sensitivity analyses of the project 75
Table 4.6: Table of Critical CAPEX at various OPEX 81
Table 4.7 NPV at various prices of natural gas for base case (CAPEX, $85328BPLD and OPEX, 6% of CAPEX) 84
Figure 1: FT GTL process flow diagram, showing the three main stages 19
Figure 2.1: Top Proven Non-Associated Gas Reserve Holder 27
Figure 2.2: Gas production, utilization and flared since 1990 -2006 29
Figure 2.3: effects of gas flaring on the environment (Alakpodia, 2000). 35
Figure 2.4: Forms of Qualitative conversion of natural gas. (Ekejiuba, 2017) 35
Figure 2.5: different route for stranded gas transportation (Ekejiuba, 2017) 39
Figure 2.6: The capacity distance diagram (Onwukwe and Duru, 2015) 42
Figure 2.7: Different ways to monetize stranded gases (Ekejiuba, 2017) 43
Figure 2.8: different route for indirect conversion means (Chabrelie and Rojey, 2010) 45
Figure 2.9: Classification of GTL routes (Ekejiuba, 2017) 46
Figure 2.10: Simplified flow diagram of gas processing stage 48
Figure 2.11: FT GTL process flow diagram, showing the three main stages (Lean, 2008) 51
Figure 2.12: Viability Envelope for GTL Projects (NETL, 2013) 54
Figure 2.13: An FT micro-channel reactor diagram (left), and the reactor in a full-pressure
shell (right) (White, 2010). 54
Figure 3.1: sweetening process 57
Figure 3.2: schematics of Amine sweetening 59
Figure 3.3: Schematic drawing of turbo-expander equipment. 62
Figure 3.4: FT GTL process flow diagram, showing the three main stages 64
Figure 4.1: The NPV of the project per barrel at various sale price of product (Diesel) 77
Figure 4.2: Relationship between the critical product price and discount rates 78
Figure 4.3: Effect of OPEX on NPV at various discount rates for annual OPEX of 5% of
CAPEX 81
Figure 4.4: Effect of OPEX on NPV at various discount rates for annual OPEX of 6% of
CAPEX 81
Figure 4.5: Effect of OPEX on NPV at various discount rates for annual OPEX of 7% of
CAPEX 82
Figure 4.6: NPV at various CAPEX for OPEX of 5% 83
Figure 4.7: NPV at various CAPEX for OPEX of 6% 84
Figure 4.8: NPV at various CAPEX for OPEX of 10% 85
Figure 4.9: Effect of critical CAPEX on the NPV for various OPEX. 86
Figure 4.10: Effect of critical CAPEX on the NPV for OPEX of 5% 87
Figure 4.11: Effect of critical CAPEX on the NPV for OPEX of 6% 87
Figure 4.12: Effect of critical CAPEX on the NPV for OPEX of 7% 88
Figure 4.13: Project annual NPV per barrel for various gas price for base case. 90
TABLE OF CONTENTS
1.2 STATEMENT OF THE PROBLEM… 16
1.6 SIGNIFICANCE OF STUDY.. 21
2.3.1 Modes of Occurrence of Stranded Gases. 25
2.4 STATE OF ASSOCIATED GAS IN NIGEIRA.. 26
2.5 THE NIGERIA NATURAL GAS INDUSTRY.. 27
2.7 GLOBAL IMPACT OF GAS FLARING.. 31
2.7.1 Environmental Implications of Gas Flaring. 31
2.7.2 Health Implications for Humans. 34
2.8 FORMS OF STRANDED GAS CONVERSIONS. 38
2.8.2 Conversion to Liquids. 38
2.8.3 Conversion to Solids. 39
2.9 GAS MONETISATION TECHNOLOGIES. 39
2.9.2 NATURAL GAS LIQUIDS (NGL) EXTRACTION.. 40
2.9.3 LIQUIFIED NATURAL GAS (LNG). 40
2.9.4 COMPRESSED NATURAL GAS (CNG). 40
2.9.5 NATURAL GAS TO HYDRATE (NGH). 41
2.9.6 GAS-TO-LIQUIDS (GTL). 42
2.10 FACTORS AFFECTING GAS MONETISATION OPTIONS. 43
2.11 GAS TO LIQUIDS TECHNOLOGY.. 44
2.12 THE FISCHER TROPSCH METHOD.. 45
2.13 SCALING IN GTL TECHNOLOGY.. 50
2.13.2 SMALL SCALE GTL (MINI GTL). 52
2.13.3 ECONOMIC BENEFITS OF MINI GTL.. 54
3.1 THE NATURAL GAS TREATMENT AND PROCESSING.. 55
3.1.1 PRETREATMENT OF THE FEEDGAS. 55
3.1.1.1 Sweetening Process. 56
3.1.1.2 Cost considerations. 56
3.1.1.3 Typical process equipment for sweetening sour gas with a regenerative solvent. 57
3.1.2.2 Cryogenic Expansion Process. 60
3.1.2.3 The turbo-expander process. 61
3.3 ECONOMICS OF GTL PLANT.. 64
3.3.2 OPERATING EXPENDITURE.. 66
3.3.2.1 The non-feedstock OPEX.. 66
3.3.2.2 Natural gas price (Feedstock cost). 67
3.3.4 INVESTMENT DECISION PARAMETRES. 67
3.5 BASE CASE DESCRIPTION.. 71
CONCLUSION AND RECOMMENDATION.. 90
APPENDIX 2: MATLAB SCRIPT.. 98
APPENDIX 3: RESULT VIEW OF THE MATLAB SCRIPT WHEN RUNNED.. 99
CHAPTER ONE
A good percentage of natural gas reserve is stranded in deep offshore locations, in difficult and remote areas or produced as associated gas. Bringing these stranded gases to the market is usually challenging especially when distance makes pipelining economically prohibitive.
The availability of the resources for the end users is therefore hampered by production and transportation costs which can exceed the price at which the gas can be sold. In such situations, innovative technical means are needed for reducing the costs and providing new outlets for natural gas.
When lack of facilities for transmission and distribution is available, there is only a limited number of outlets for the associated gas. This includes a re-injection (for pressure maintenance or for future recovery) and gas flaring. Gas flaring is the controlled burning of the associated gas in the atmosphere and it is a global environmental issue.
In order to address the issues of gas flaring, it is important to understand the reasons why naturalgas is being flared. Since oil and natural gas are mixed in every oil deposit, natural gas called “associated gas” must be removed from oil before refining (Ashton et al, 1999). Gas flaring is simply the burning of this associated gas. Issues of gas flaring is currently illegal in most countries of the world, and may occur in certain circumstances such as emergency shutdowns, non-planned maintenance, or disruption to the processing system (Hyne, 1991). Recently, 56.6 million m3 of associated gas is flared every day in Nigeria (Gerth and Labaton, 2004). In 2002, Nigeria has the world’s highest level of gas flaring, and it flares 16 percent of the world’s total associated gas (GGFR 2002). Due to lack of infrastructure, approximately 76 percent of associated gas is flared in Nigeria, compared to 8 percent in Alberta, Canada (Africa News Service 2003, Watts 2001).
Nigeria had regulations on the books banning gas flaring for more than a quarter of a century, however they are yet to effectively implement their policies. In 1969, the Nigerian government legislated a requirement that charged oil companies to set up infrastructures to utilize the associated gas within five years of commencement of oil production (Manby, 1999). The government also enacted the Associated Gas Reinjection Act in 1979, which charged oil companies to stop gas flaring within five years (Manby 1999). However, the companies preferred to pay the fine imposed by the government as a penalty for gas flaring rather than stopping the flaring. Although the fine for gas flaring has skyrocketed from Naira 0, 5 to Naira 10 (U.S. 11 ¢) for every 1,000 ft3 of gas in 1998 (Manby 1999, Project Underground 2003), but this fine is still very low to have an impact on these companies’ policy toward gas flaring. Moreover, approximately $3 million per month of fines that the government receives is just a fraction of what it could impose.
The reason for high rate of gas flaring in Nigeria is primarily due to;
- Lack of Infrastructure due to high cost involved in the gathering and processing of gas
- Distance from gas producing wells to product market
- Gas price distortion due to local subsidies and legislation
- Lack of capital to invest in gas projects
- Small gas volumes and volume changes which make investment in conventional gas processing facilities uneconomical.
The attendant impact of gas flaring in Nigeria cannot be over-estimated. Aside the billions of dollars lost annually to gas flaring when quantified financially, a lot of other impacts of gas flaring is noticeable in Nigeria. The severe environmental degradation of the ecosystem resulting to loss of ecological lives, emergence of sicknesses, air, water and land pollutions, release of poisonous gases that hampers human habitation, release of greenhouse gases resulting to global warming to mention but a few. With all these, the Niger Delta region of Nigeria can be said to be the area most impacted by oil activities in the world.
In most favourable situations, where a transport network and market are available, the gas is processed and heavy fractions are extracted as Natural Gas Liquids (NGLs). When the injection does not enhance oil recovery, its cost is not compensated by a specific benefit. Therefore, new capital intensive projects are now more and more considered as LNG production and GTL schemes. It can be considered that about 30% of the associated gas reserves are stranded.
Gas to liquids technology is the chemical conversion of the natural gas into liquid fuels by use of many available technologies. The method provides premium liquid fuels that burns cleaner and sells higher than the conventional crude oil fractions.
The choice of GTL is this study because LNG has been existing and is capital intensive. The use of mini-GTL technologies to capture and process stranded gases that otherwise were candidate for flaring forms the basis of this research work.
1.2 STATEMENT OF THE PROBLEM
There is vast volume of stranded natural gas in the Niger Delta. These gases have been flared by operating companies because of their inability to harness the gas to useful means. As a result, Russia and Nigeria is topping the nations in annual gas flared. The recent laws on greenhouse gas reduction have forced many countries to find measures to curtail its gas flaring activities. For this to be achieved gas projects must be developed. This is aimed at capturing and monetizing the gas for use by consumers. This problem is what monetization alternative quest for. Although many monetization options exist for the flared natural gas. These options must address the market demand and supply and the availability and locations of the gas must also be considered in the analyses. Gas-to-liquids technology is the conversion of the natural gas into premium liquid fuels which can be used in the liquid forms. By these the gases can be harnessed and monetized.
The use of mini GTL plants solves the problem of commercial volume. Mini portable GTL plants can be utilized and carried from one field location to the other or can be located to capture the gas other than having to lay pipelines to the central facility.
1.3 OBJECTIVES OF STUDY
The objectives of this research work are
- To address the problem of gas flaring in Nigeria.
- To monetized the flared stranded gases and provide revenue
- To evaluate the profitability of using GTL monetization options.
- To investigate the economic viability of GTL in Nigeria.
- To encourage individual or corporate participation in gas monetization in Nigeria.
1.4 METHODOLOGY
The methodology shall comprise these parts;
- The natural gas processing
- The natural gas conversion to liquids using GTL technology
- The technical and economic considerations of the GTL technology
The processing part talks about the treatment and recovery of the methane gas which shall serve as the feed stream gas to be fed into GTL plant.
The conversion of the gas to liquids employs many technologies of which the Fischer Tropsch method is the most popular and the one used in this work. There are basically three steps or processes in a typical Fischer Tropsch approach for GTL conversion. They are
- The syngas generation
- Synthesis gas conversion by FT process
- Product upgrading
- Syngas Generation
This is also called reforming. There are three processes to converts natural gas into synthesis gas:
a). Steam Reforming:
The reaction is as follows
CH4 + H2O ↔ CO + 3H2 ΔH 25oC = +49.3Kcal/mol
Catalyst: Ni/Al
High temperature (730 – 900oC) and it is an endothermic reaction.
Water gas shift formation as side reaction
CO + H2 ↔CO2 +H2 ΔH = -9.7Kcal/mol
This reaction is commercially applied in ammonia plants, fertilizer and methanol.
b). Partial oxidation
Reaction is as follows
CH4 + 1/2 O2 → CO + 2H2 ΔH 25oC = -8.5Kcal/mol
Catalysts: transition metal (Al)
Synthesis gas ratio: H2/CO = 2
c). CO2 Reforming
Reaction is as follows
CH4 + CO2 → 2CO + 2H2 ΔH = +59Kcal/mol
More endothermic than steam reforming
- Synthesis gas conversion (Fischer-Tropsch Synthesis)
The next step in converting the syngas into a mixture of liquid and wax in a reaction using FT reaction as follows
nCO + 2nH2 → (CH2)n + nH2O ΔH 25oC = -40Kczl/mol.
The reaction takes place at 200 – 500oC and 148 atm, the products may vary as olefins, paraffins, or alcohol depends on catalysts.
- Product Upgrading
This is also called product work-up and it is the last step in the gas to liquid conversion through the FT process. This is where the wax produced is converted into room temperature liquids that can travel in an oil pipeline or oil tanker.
Figure 1: FT GTL process flow diagram, showing the three main stages
The next aspect in the methodology is the evaluation of the technical and economic considerations of the GTL technology. In this the cost and revenue basis of the work is considered.
Overall consideration areas in the work include:
- The volume of gas flared in Izombe field.
- The capacity of theplant (mini GTL).
- Thecapital and operating cost of the technology.
- The operating cost of the plant per day and per year
- The product expected to be recovered from the plant ieGTL diesel, kerosene and gasoline.
- The market price of the product and the revenue.
- The economic indicators such as POT, ROR, NPV, etc of the project.
- The conditions for viability of the project.
- Efficiency of the plant
1.5 SCOPE OF STUDY
This work shall revolve around the conversion of the flared natural gas in the Niger delta to liquids using the Fischer Tropsch synthesis method. The gas here is strictly associated gas from oil wells that would have been candidate for flaring but harnessed and monetized. The work shall take a case of Izombe in Oguta. The case study is to evaluate the possibility of achieving zero flaring in Izombe by the use of mini GTL facilities located at the field locations to target the associated gas in that location. Since the problem of volume of gas to be harness is one crucial problem in GTL operations, the use of mini and portable GTL facility solve that problem.
It is to be noted that the work is not a complete feasibility study of GTL operations but a monetization alternative that would encourage investors to participate by highlighting the possibility and relative extent of revenue generation when venturing into gas monetization using GTL technologies in the Niger Delta.
1.6 SIGNIFICANCE OF STUDY
This research work shall be a major contribution to knowledge in the area of flared gas monetization. It will reveal the cost of initiating gas to liquid project in the Niger Delta and the profitability and economic viability of venturing into mini GTL project in Nigeria. It will encourage investor’s participation in the area of flared gas monetization. The use of mini GTL shall be a new innovative means of monetizing stranded flared gases in areas that are not closer to the existing gas gathering stations.
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