Optimization of Strategies for Natural Gas Utilization: Case Study of the Niger Delta

Abstract

Nigeria is endowed with huge proven gas reserves estimated to be 184 trillion cubic feet (Tcf). It ranks as the 7th holder of natural gas reserves in the world, and the largest in Africa. Nigeria also flares more natural gas than any other country; it accounts for 12.5% of the world‟s annual gas flared and it wastes $2.0 billion annually by flaring gas associated with crude oil extraction. There is crucial need to monetize the gas reserves, reduce gas flaring and its environmental impacts, and to derive he maximum economic benefits from gas production.

The purpose of this research is to identify options for natural gas utilization, evaluate the various strategies and thereupon develop a model for optimizing the natural gas utilization strategies using the Niger Delta as a case study. A Linear Programming model is formulated based on the Transshipment model formulation concept. An objective function is established based on profit derived from the various utilization strategies (represented as nodes on the model) subject to certain constraints. The optimal decision for the model is determined from the solution of the optimization model. Results obtained from this study indicate that the optimal utilization decision involved the continuation of projects (including both current and planned) such as the Liquefied Natural gas project at Bonny (including the sales of both LNG and NGL), supply of gas for domestic use and power generation, transport to West African countries, transport of natural gas to Algeria through the TransSaharan Gas Pipeline (TSGP), and sales of EOR products to market. Upcoming project such as the Olokola LNG was only viable as the gas price increased. Optimal decision is affected by fixed or variable costs and more significantly by changes in market price. Sensitivity analysis is carried out to evaluate impact of changes in the input parameters on the objective function. This research also discusses the impact of gas pricing on the implementation of the Nigerian gas master plan (NGMP). The model can be used to make optimum decisions in terms of selecting which set of projects would provide maximum benefits from several competing natural gas projects.