1
ECONOMIC VIABILITY OF UNDERGROUND NATURAL GAS STORAGE
CASE STUDY: NIGER DELTA
BY
NWACHUKWU KELECHI .C. (20061516763)
IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF BACHELORS OF ENGINEERING (B.ENG)
IN PETROLEUM ENGINEERING.
SUBMITTED TO
THE DEPARTMENT OF PETROLEUM ENGINEERING
SCHOOL OF ENGINEERING AND ENGINEERING
TECHNOLOGY
FEDERAL UNIVERSITY OF TECHNOLOGY, OWERRI.
OCTOBER, 2011.
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CERTIFICATION
This is to certify that this work titled “Economic Viability of Underground
Natural Gas Storage; Case Study: Niger Delta” was done by Nwachukwu
Kelechi .C. (20061516763) a final year student of the department of Petroleum
Engineering, School of Engineering and Engineering Technology, Federal
University of Technology Owerri and was duly approved by the following;
……………………….. ……………….
Engr. B. Nzeribe Date
(Project Supervisor)
………………………. ………………..
Engr. Dr M.S Nwakaudu Date
(Head of Department)
……………………… ………………..
External Supervisor Date
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DEDICATION
This work is dedicated to God all mighty for his love, guidance, protection
and divine enablement throughout this work. This work is also dedicated to my
dearest family for their immense support in making sure this work was done well.
This work is also dedicated to Engr. B. Nzeribe, sir your immense support
and trust during the period of this work, may God repay you in full.
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ACKNOWLEDGMENT
It seems impossible to accomplish an academic task of this nature without
experience in some intellectual depths, in recognition of this fact therefore, I
acknowledge all those group or persons whose moral support had assisted me to a
maximum extent in the realization of this work. I specially give thanks to my dear
parents Mr. & Mrs. G.O Nwachukwu and sisters for their moral and financial
support in the production of this work.
I also acknowledge the good effort of my lecturers and course mates for
their kind support and love, may the good God bless you all.
My thanks goes to all my friends Inyang, Chinasa, Funmi, Ekele, Ebube,
Ike, Marvelous, Obumse, Tony, Solomon and all Gymites you people are the best,
I wouldn’t have achieved half of this work without your support and love. Thanks
a million
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TABLE OF CONTENT
TITLE PAGE
CERTIFICATION…………………………………………………………i
DEDICATION…………………………………………….……………....ii
ACKNOWLEDGEMENT……………………………………….…….….iii
TABLE OF CONTENT…………………………………………………...iv
ABSTRACT…………………………………………….…………...…….vii
LIST OF ABBREVIATIONS……………………………………….……..viii
LIST OF FIGURES……………………………………………….….…….xi
LIST OF TABLES…………………………………………………...……..xiii
CHAPTER ONE: INTRODUCTION…………………….………………..1
1.1 OVERVIEW OF UNDERGROUND STORAGE………………………1
1.2 FACTORS FAVOURING UNDERGROUND GAS STORAGE IN
NIGERIA………………………………………………………….…………..4
1.3 FACTORS AFFECTING/LIMITING UNDERGROUND STORAGE IN
NIGERIA………………………………………………………………………4
1.4 STATEMENT OF PROBLEM………………………………………....6
6
1.5 SIGNIFICANCE OF STUDY…………………………………….……6
1.6 PROJECT OBJECTIVES………………………………………………7
1.7 SCOPE OF STUDY…………………………………………………....7
CHAPTER TWO:LITERATURE REVIEW………………………….....8
2.1 DESCRIPTION OF NATURAL GAS STORAGE PROCESS
………………………………………………………………..………………8
2.2 FACTORS TO BE CONSIDERED IN UNDERGROUND NATURAL
GAS STORAGE........................................................................................10
2.3 TRADITIONAL USE OF UNDERGROUND NATURAL GAS
STORAGE ................................................................................................10
2.4 TYPES OF UNDERGROUND NATURAL GAS STORAGE…...….14
2.4.1 Depleted Reservoirs……………………………………………15
2.4.2 Aquifers ..................................................................................19
2.4.3 Salt Caverns………….……………………….………………..22
2.5 ECONOMICS OF GAS STORAGE………………….………………..26
2.6 NIGERIA AND NATURAL GAS…………..…..…………………..31
CHAPTER THREE: METHODOLOGY…………..……………………36
3.1 CASE STUDY……………………………………………………........36
3.2 FIELD HISTORY……………………………………………………...36
3.3 GEOLOGICAL DATA………………………………………..……….37
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3.4 COMPOSITION OF NATURAL GAS TO BE STORED….………38
3.5 DESIGN, OPERATION, AND MONITORING OF UNDERGROUND
STORAGE RESERVOIRSINVOLVE RECOGNITION OF
THREE BASIC REQUIREMENTS………………………………………...43
3.6 COST OF OPERATION AND DEVELOPMENT…………………..45
3.7 GAS UTILIZATION PROJECTS …………………………………....48
3.8 GAS PRODUCTION AND UTILIZATION IN THE REGION……..48
CHAPTER FOUR: RESULT AND DISCUSION…………………………49
4.1 STORAGE CAPACITY……………………………………………..…..49
4.2 MINIMUM REQUIREMENT FOR CONSIDERING AN UNDERGROUND
PROSPECT………………………………..………….…51
4.3 GAS UTILIZATION PROJECTS AND PRODUCTION……..……….54
4.4 DISCUSSION…………………………………………………………...
CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS……64
5.1 CONCLUSION…………………………………………………………64
5.2 RECOMMNEDATION………………………………………………...67
REFERENCES………………………………………………………….….68
APPENDIX…………………………………………………………………71
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ABSTRACT
For proper gas utilization, proper storage facilities are required to sustain
supply, and proper analysis must be carried out, in other to choose the best
candidate for storage. This work focused on the viability of underground gas
storage in the Niger Delta in order to sustain supply using deliverability,
containment, cost of operation and development, inventory, gas utilizing facilities
in the region; anticipated, ongoing and fully functional and the present rate of gas
production with the anticipated demand. To achieve this, data were gotten for
proper analysis of gas volume capacity for depleted reservoir indicated the cushion
gas requirement, working gas capacity and total volume of gas that can be stored.
The analysis of the work showed that total cushion gas requirement for the
well=8.99 BScf-10.79 BScf. Total working gas requirement = 7.19 BScf – 8.99
BScf and best option for storage in Niger-delta as depleted wells due to its
availability, size, cushion gas requirement, containment etc. The work further
recommends investment, full development and encouragement of underground
storage facilities in the region as soon as possible and certain incentives should be
put in place by the Government.
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LIST OF ABBREVIATION
A: areal extent of the reservoir
AENR: Agip Energy and Natural Resources
API0: oil gravity
ALSCON: Aluminium Smelting Company Of Nigeria.
AGA: America Gas Association
BBL: barrel (unit of oil or liquid measurement)
Bscf: Billion Standard Cubic Feet
Bscf/d: Billion Standard Cubic Feet per day
CNG: Compressed Natural Gas
G: Volume of gas to be stored
GDP: Gross Domestic Product
GFEG: Gas Fired Electric Generation
GTL: Gas To Liquid
H: Reservoir average thickness
JVC: Joint Venture Company
LNG: Liquefied Natural Gas
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LPG: Liquefied Petroleum Gas
M3: Cubic Meters
Mbbls: Million Barrels
Mmscf: Million Standard Cubic Feet
Mscf: Thousand Standard Cubic feet
NAFCON: National Fertilizer Company of Nigeria
NAOC: Nigeria Agip Oil Company
N.D: Niger Delta
NEPA: National Electric Power Authority
NGC: Nigerian Gas Company
NGL: Natural Gas Liquids
NGMP: Nigerian Gas Master Plan
NNPC: Nigerian National Petroleum Corporation
NOG: Nigeria Oil & Gas
NPDC: Nigerian Petroleum Development Company
NPV: Net Present Value
O&G: Oil and Gas
OML: Oil Mining Lease
Pc: Critical pressure
Ppc: Pseudo-critical pressure
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Ppr: Pseudo-reduced pressure
PHCN: Power Holding Company of Nigeria
PSI: Pounds per Square Inch
SCF: Standard cubic foot.
STB: Stock tank barrel
Swc: Connate or irreducible water saturation in a reservoir.
UGS: Underground Storage
Vb: Bulk volume
Vp: Pore volume
WAPG: West Africa Gas Pipeline
Z: Gas deviation factor
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LIST OF FIGURES
Fig 2.1: Gas Processing…………………………………………………….9
Fig 2.2 Working Gas Capacity by Type of Storage……………………..23
Fig 2.3 Daily Deliverability by Type of Storage…………………………23
Fig 2.4 Nigeria’s Historical Gas Utilization and Forecast Potential
Demand……….……………………………………………………………35
Fig 2.5: Gas infrastructural blueprint (NGMP)…………………………..35
Fig 3.1:Cost estimation for UGS storage development…………………..47
Fig 4.1: Estimated cushion gas requirement……………………………...55
Fig 4.2: Estimated rate of deliverability…………………………………..55
Fig 4.3: Estimated Containment…………………………………………...55
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LIST OF TABLES
Table 3.1:Average Compostion Mole Percent of Natural Gas in Nigeria……38
Table 3.2:Computation of Average Molecular weight, etc………………….39
Table 4.1:Results of computation……………………………………………48
Table 4.2 - Example Storage Contract for Depleted Reservoir Storage……..52
Table 4.3- Storage Facility Characteristics ………………………………….53
Table 4.4:Gas production and utilization (Mscf),2002–2010 ……………..53
Table 4.5:Gas production and utilization by Company(Mscf), 2010 ……….54
Table 4.7: Mean Impacts of main items of investment cost…………………54
Table 4.6:Gas utilization projects……………………………………………56
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CHAPTER ONE
1.0 INTRODUCTION
Natural gas is stored underground when it can be injected into natural rock
or sand reservoirs that have suitable connected pore spaces, and it is retained there
for future use. Underground natural gas storage can therefore be defined as the
storage of gas at various depths beneath the earth surface when the gas is not
needed for immediate consumption in order to support the natural gas demand in
domestic, commercial, industrial and export purpose when it is needed. The
underground storage of gas has played and continues to play a vital role in
supporting the development and stabilization of the gas market worldwide.
The purpose is to meet the growing demand for gas in the future and to stop
the wasteful flaring of gas at the same time. Natural gas is a mixture of
hydrocarbon gases and impurities. The hydrocarbon gases normally found in
natural gas are methane, ethane, propane, butanes, pentanes, and small amounts of
hexanes, heptanes, octanes, and the heavier gases. The impurities found in natural
gas include carbon dioxide, hydrogen sulphide, nitrogen, water vapour, and heavier
hydrocarbons.
1.1 Overview Of Underground Storage
The underground storage of natural gas began in Canada in 1915, and in the
United States the following year. These two countries were the first to realize the
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economic importance and technical possibility of storing natural gas in natural
reservoirs. The use of gas storage spread considerably with the development and
production of gas reservoirs at large distances from the areas where the gas was
used, and especially with the development of importation from one country to
another
UGS is the process which effectively balance a viable demand market with a
nearly constant supply of energy provided by the pipeline system. Natural gas is
stored underground in geological structures whose properties allow gas to be stored
and withdrawn when required. Gas storage is described as conventional when it is
carried out using depleted or partially depleted gas production reservoirs, semi
conventional depleted oil reservoirs or aquifers (in other words geological
structures containing water) are employed, and special when caverns excavated in
underground salt formations or abandoned coal mines are used.
The tendency to store gas in order to modulate supply began by using tanks
located at the surface near towns and as production fields became depleted, by
converting these into storage reservoirs. These have extremely high storage
capacity and are thus more suited to the growing need of the gas market for
storage. Today there are more than 580 storage fields in the world, of which 70%
are in the United States; the remainder are concentrated almost exclusively in
Europe and Russia.
Essentially, any underground storage facility is reconditioned before
injection, to create a sort of storage vessel underground. Natural gas is injected into
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the formation, building up pressure as more natural gas is added. In this sense, the
underground formation becomes a sort of pressurized natural gas container. As
with newly drilled wells, the higher the pressure in the storage facility, the more
readily gas may be extracted. Once the pressure drops to below that of the
wellhead, there is no pressure differential left to push the natural gas out of the
storage facility. This means that, in any underground storage facility, there is a
certain amount of gas that may never be extracted. This is known as physically
unrecoverable gas; it is permanently embedded in the formation.
In addition to this physically unrecoverable gas, underground storage
facilities contain what is known as 'base gas' or 'cushion gas'. This is the volume of
gas that must remain in the storage facility to provide the required pressurization to
extract the remaining gas. In the normal operation of the storage facility, this
cushion gas remains underground; however a portion of it may be extracted using
specialized compression equipment at the wellhead. 'Working gas' is the volume of
natural gas in the storage reservoir that can be extracted during the normal
operation of the storage facility. This is the natural gas that is being stored and
withdrawn; the capacity of storage facilities normally refers to their working gas
capacity. At the beginning of a withdrawal cycle, the pressure inside the storage
facility is at its highest; meaning working gas can be withdrawn at a high rate. As
the volume of gas inside the storage facility drops, pressure (and thus
deliverability) in the storage facility also decreases.
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1.2 FACTORS FAVOURING UNDERGROUND GAS STORAGE
IN NIGERIA
The principal drivers for the development of natural gas are usually
ü Urgent need to reduce flaring in the country
ü Desire for economic growth a
ü Desire for broad gas based industrial development
ü Governments desire to Transform the domestic market into a vibrant and
fully commercial gas market where the gas price stimulates investment in
supply and the sustainability of the market compliments the other regional
and export LNG markets enabling a balance portfolio.
ü The Nigerian Gas Master plan.
1.3 FACTORS AFFECTING/LIMITING UNDERGROUND GAS
STORAGE IN NIGERIA
Today’s commercial demand of gas in Nigeria is gradually increasing and is
expected to shot up in the next 5 – 15 years. Even if over the years the utilization
of gas in Nigeria has increased, yet a considerable amount is still been flared,
Instead of flaring this large volume of associated gas we should consider storing
them as done in other countries for future use when the prices of gas is high or
demand goes up.
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Factors hindering underground gas storage
Ø Lack of gas markets: Kirkland (ibid), chevron managing director(October
1997) noted gas commends such a low price in Nigeria, that it is difficult to
economically justify gas project and he advised that there is need to find and
develop markets that support higher gas price.
Ø Lack of adequate gas infrastructure to the available local markets from the
area of production
Ø Low technology and industrial base for energy consumption in the country
Ø Inadequate fiscal and gas pricing policies to encourage investment
Ø Cost of storage facilities
Ø Physical factor: physical isolation of Nigeria from international gas markets
due to vast distance rules out the possibility of gas export pipeline.
Ø The private sector are not playing to full capacity in the utilization of gas
and putting in place relevant gas infrastructures.
Ø Legislative factors: amount charge per thousand ft3 of gas to be flared is
something the company comfortable pay. Obviously operators in the
industry prefer to pay the penalty than put in place a gas utilization scheme.
Ø Inappropriate domestic pricing policy—government policy may also heavily
influence gas pricing, for example, through social or sector policies
Ø Economic factor: investigation shows that the main disincentive to
investment in the gas sub-sector is the non guarantee of good returns on
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investments. flaring is seen more economical when compared to cost of
processing and storage (this include cost of conversion into gas storage well
in the case of aquifer and salt cavern, cost of maintenance and monitoring
gas leakage, cost of injection and withdrawal).
1.4 STATEMENT OF PROBLEM
Sustainable supply of gas to support projects utilising gas within and outside
the country is a challenge with the anticipated increase in gas utilization in the
coming years, and the present production rate of about 6.55Bscf/d and the flaring
of 24.30% of the total production is not encouraging considering the future of the
gas market in Nigeria.
1.5 SIGNIFICANCE OF STUDY
This project will be significant in the following ways;
i. It will encourage O&G companies to stop the unnecessary wasteful flaring
of gas and protect the environment.
ii. Create a sustainable gas supply system for the various gas projects.
iii. Sustain governments zeal for gas to have a multiplier effect on the economy
iv. The future demand of gas will be taken care of at almost no cost i.e. cost of
base gas.
v. Help determine the viability of UGS in Nigeria
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1.6 PROJECT OBJECTIVES
• The main aim is to determine the viability of UGS in the Niger Delta.
• To determine the storage capacity of a depleted reservoir D in the region.
• To encourage the storage of gas instead of flaring, and to determine the
feasibility of gas storage in the region
• Cost specification of storage type(cavern, aquifer, depleted reservoir).
• Estimate the need of UGS in Nigeria
• Estimate the future expansion of natural gas transmission and distribution
• Gas utilization projects and plans .
• Promote the development of Nigeria underground natural gas storage.
1.7 SCOPE OF STUDY
This study will be restricted to the Niger Delta region of the country since
this is the source of the oil and gas in the country. The determination of the
viability of UGS facility in the region will be based its availability, capacity,
containment, cost of operation and development, gas utilization projects in the
country and the production rate of gas in the region. This is as a result of
insufficient data since it is not being practiced in the country at this time.
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CHAPTER TWO
LITERATURE REVIEW
2.1 DESCRIPTION OF NATURAL GAS STORAGE PROCESS
Gas stored in the reservoir must of course flow through the formation to the
well bore, this process being called the inflow performance of the gas well. It must
then flow upward through the well tubing to the surface. During this phase of the
production, two factors are important: the friction loss experience in the well
tubing and the resultant pressure drop and the amount of suspended water present.
Even for a well producing hardly any water at all, an accumulation of water in the
well tubing will build up in time, depending on the production rate. This will lead
to an overall increase in density of the flowing gas with a consequent high
hydrostatic pressure drop. This phenomenon of liquid held up is particularly
important at flow rates.
Finally after leaving the wellhead, the gas will have to be dehydrated and
treated to pipeline quality, making sure that the gas is sweetened (removing the
sulphur content), gas is then compressed by increasing its pressure; this is then
injected into the storage reservoir with the pressure being monitored to know we
reached full storage capacity of the reservoir in use. The main surface
facilities of storage fields are the compressor station, the gathering system, the
treating and gas metering plants. The treatment of the gas withdrawn consists in
the separation of water and hydrocarbon liquids in order to meet the quality
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standards required for pipelines and consumers. As a consequence, on the whole,
the treatment processes are not different from the ones of the gas producing fields.
The only difference is that during the withdrawal period there is a wide range of
pressures and rates which require a higher flexibility to take into account sudden
closures and openings or sharp variations in flow rates. The most widespread and
convenient dehydration process uses triethylene glycol (V. Bolelli,1991)
Fig 2.1: Gas Processing
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2.2 FACTORS TO BE CONSIDERED IN UNDERGROUND
NATURAL GAS STORAGE
Geology is a key issue for determining the location of new traditional
underground storage projects and the expansion of existing projects. There are
areas that have the geological characteristics to construct storage fields; other areas
do not. Selection of any new underground gas storage location depends on
geological and engineering properties of the storage reservoir, its size and its
cushion, or base, gas requirements. It also depends on the site’s access to
transportation pipeline infrastructure, gas production sources, and to markets
(FERC,2004).
2.3 TRADITIONAL USE OF UNDERGROUND NATURAL GAS
STORAGE
Storage facilities were developed to allow the production capacity of natural
gas to be moved from one point in time to another. Natural gas that reaches its
destination is not always needed right away, so it is injected into underground
storage facilities where it can be stored for an indefinite period of time. Primarily,
underground storage provides an economical way to supply large volumes of gas
when it is needed. Storage improves the transmission line load factor by providing
a choice of delivering gas either to the users or to the underground storage
reservoir. Another use is the transfer of gas from a highly competitive field to a
field wholly controlled by one company. Under this arrangement the gas can be
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withdrawn as needed and used to best economic advantage. Also, the storage field
can be used advantageously to store gas from low pressure wells, usually the
smaller wells, during the off-peak season. In the case of long transmission lines,
underground storage near the consuming centres also acts as a safeguard or
reservoir in case of pipeline failures. Since the world production and distribution
capacity is only slightly above demand and periodic increases in demand or
decrease in production are quickly felt by consumers, governments and private
consuming companies. The large reserves required to provide effective protection
from supply interruptions have led many of these reserves to be primarily based
underground. A final major advantage of underground storage is safety. The
placing of hydrocarbons underground in a protected, oxygen-free Underground
Storage of Natural Gas environment greatly reduces the risk of fire or explosions
(Ikoku C.U, 1989). In general The traditional services offered by storage reservoirs
are production services, seasonal control services and strategic reserves
services(Eni, 2005).
Production Services
For technical and financial reasons, production reservoirs are developed in
such a way as to consider optimal a daily production profile which is essentially
flat. This is due to the fact that the determination of the size of the treatment plants
and the number and type of wells to allow production fields to follow market
fluctuations would entail additional costs and financial problems. Production
services thus involve the storage of a sufficient volume of gas in order to obtain
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optimal performance from the production system, both from the point of view of
production and of surface facilities.
Seasonal Control Services
Seasonal control is the traditional service provided by storage systems. Gas
is injected during the spring and summer and then withdrawn during the autumn
and winter to meet the demands of the market. Each natural gas sales company
estimates the need for stored gas on an annual basis at the beginning of winter.
More specifically, each company defines, on the basis of availability from national
production and/or imports, the contribution required from storage reservoirs to
meet its total predicted sales (both in terms of seasonal volumes and daily peak
rate), on the basis of individual sales sectors, i.e. the residential, industrial and
thermoelectric sectors.
Strategic Reserves Services
Another fundamental role played by storage systems is to provide the
strategic reserves to be used to guarantee supply: the volume of gas which must be
kept in storage reservoirs for this purpose is generally established by the relevant
government authorities of each country. The gas held in storage reservoirs may be
owned by storage operators or by gas sales companies. Strategic gas reserve is only
withdrawn under unusual circumstances such as particularly hard winters, or
significant and prolonged reductions in gas imports or national gas production.
Once produced, other gas is re-injected into the reservoirs during the summer in
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order to maintain the volume considered necessary to ensure gas supply at a
national level. The issue of strategic reserves is particularly important in countries
where the availability of gas depends heavily on imports and is thus subject to
potentially prolonged reductions due to political problems, or the partial or total
unavailability of transport systems due to breaks in pipelines or the failure of
boosting stations.
Special Services
Among the new services on offer, the most common are listed below.
ü Parking/Peaking Services - This involves injecting and withdrawing gas
over short periods of time, ranging from a week to a month, thus allowing
the customers of the storage to meet temporary imbalances in the volumes
supplied and sold, avoiding the application of penalties by the transport
company.
ü Interruptible storage - This is a service in which both working gas and peak
rate are offered at particularly low prices, since the storage operator may
interrupt supply at very short notice. These services which are offered on the
basis of the capacity margins inherent in a storage system may become
unavailable in the event of unplanned maintenance work, plant failures, the
closure of wells, etc.
ü Speculative Market Services where high deliverability storage quickly
responds to changing gas prices capitalizing on price movements at market
centres, and Emergency strategic storage (i.e. able to make up for a possible
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temporary suspension of supplies) is becoming more and more crucial to
safeguard the continuity in imports but also to better negotiate supplies.
ü Meet the regulatory obligation to ensure supply reliability at the lowest cost
to the ratepayer by maintaining specific levels of storage inventory
ü Support other electric generation loads
2.4 TYPES OF UNDERGROUND NATURAL GAS STORAGE
There are three main types of underground storage: depleted gas and oil
reservoirs, aquifers, and salt caverns. Today most gas storage is carried out in
depleted gas fields (around 70%), followed by those performed in aquifers and
those in salt caverns. However, all have similar operational characteristics. All
underground storage has a capacity measured in Bcf (billion cubic feet), which can
be divided amongst the amount of working gas and base gas within a facility.
Often when a capacity of a storage facility is quoted, it is referring to the working
gas capacity seeing as it is the amount which can be withdrawn and injected into a
facility. Every storage facility comes attached with a maximum and minimum
withdrawal and injection rates which are typically expressed in Bcf/day. The
injection and withdrawal rates for natural gas fluctuate based on the amount of
pressure (PSI) within the storage facility. Withdrawal rates share a direct
relationship with pressure while injection rates maintain an indirect relationship.
Pressure for a facility is also bounded by a maximum and minimum quantity which
28
is determined by the volume, depth, and structure of a facility. These operational
characteristics determine the operational flexibility of a facility.
2.4.1 Depleted Reservoirs
An underground gas storage field or reservoir is a permeable underground
rock formation (average of 1,000 to 5,000 feet thick) that is confined by
impermeable rock and/or water barriers and is identified by a single natural
formation pressure (FERC, 2004), it is the most prominent type of underground
storage due to their wide scale availability. These storage facilities are gas or oil
reservoir formations that have already been tapped of all their recoverable resource
through earlier production, leaving an underground formation geologically capable
of holding natural gas. As a result, storage facilities of this nature are abundant in
producing regions. Of the three types of underground storage, depleted reservoirs
are the cheapest and easiest to develop, operate, and maintain. Using an already
developed reservoir for storage presents the opportunity to reuse the extraction and
distribution equipment left over from when the field was productive, reducing the
cost of conversion to gas storage (Natural gas .org,2004).
The expertise developed in countries where depleted gas reservoirs are used
allow guidelines to be drawn up for the selection of fields which are to be
converted into gas storage. This selection is based on a careful analysis
of geological data and the physical parameters of the pre-selected structures. The
most important factors are: the shape and dimensions of the geological structure,
29
the aquifer size, the gas-water contact (in the case of depleted or partially depleted
reservoirs), the properties of the reservoir rock and cap rock.
The most important physical parameters of the reservoir rock, which require
careful evaluation, are:
• The porosity, which should be extremely high, thus providing greater storage
capacity.
• The permeability, which expresses the ease or otherwise with which the rock
allows a fluid, liquid or gas, to flow through it; the higher the permeability of the
reservoir rock, the better suited it is to storage.
• The water saturation, which should be as low as possible since, if it is high, it
reduces available volume.
Another factor to be considered is the ‘drive mechanism’, which expresses
the ability of the aquifer to move within the reservoir rock as the reservoir is filled
and emptied. In the depletion drive reservoirs the gas-water contact remains
substantially stable during the productions and injection phases allowing high
performances and minor problems during the production. On the contrary, in the
water drive reservoirs the gas-contact moves upwards during the production phase
and the water which has risen must be pushed back during the gas injection phase.
In these reservoirs the performance is reduced due to water production and the
need for more pressure to displace the water.
Storage in partially or wholly depleted oil reservoirs has similar
characteristics to that in gas reservoirs converted into storage; consequently some
30
of the operational and development methods applied to the latter remain valid. In
some cases, the injection of gas into an oil reservoir may form part of the
secondary recovery project for the oil itself; in this case as well as the typical
benefits of storage there are also those of the additional recovery of oil. It should
be added that the treatment facilities needed to give the gas the requisite quality
specifications before it is channelled into the transport network often differ from
those needed for gas reservoirs, since the fraction of liquid hydrocarbons
suspended in the gas must be removed (Eni, 2005).
In order to sustain pressure in depleted reservoirs, the facility maintains
equal parts base and working gas. However, depleted reservoirs, having already
been filled with natural gas, do not require the injection of what will become
physically unrecoverable gas seeing as it already exists in the formation. Depleted
reservoirs with high permeability and porosity are ideal for natural gas storage,
porosity lending itself to the amount of natural gas it can hold and permeability
determining the rate of flow of natural gas through the formation. This in turn
determines the injection and withdrawal rate of working gas. Foh et al., (1979) in
his work discussed the delivery rates and how it could be enhanced by an active
water drive, using water to displace gas by filling previously gas-filled pores. A
suitable aquifer for storage will have geology similar to depleted gas reservoirs.
The potential reservoir must have ample porosity and permeability with an existing
formation pressure and large reservoir capacity. Gas stored within aquifers are
31
typically drawn down once during the winter season. However, aquifers may be
used to meet peak load rates.
Disadvantages of using depleted reservoirs are the uncertainty of capacity.
The configuration of the geological formation is never fully used since it runs the
risk that injected gas may diffuse into the outer veins of the formation and becomes
inaccessible. Other disadvantages include a reservoir’s limited cycling capabilities,
where working gas volumes are usually cycled only once per season. In addition,
reservoirs are characterized with having low deliverability and thus would not be
well suited for peaking services. It is most typically employed for seasonal cycling
(NaturalGas.org 2004).
George G Bernard et al(1970) evaluated the effectiveness of foam in
preventing the escape of gas from a leaky gas storage reservoir. They simulated the
behaviour of a leaky gas reservoir with a sandstone model and found that foam was
99% effective in reducing leakage of gas through the model. Foam, because of its
unique structure, reduces gas flow in porous media. The blocking action of foam
was uniquely suitable for sealing leaks in underground gas storage reservoirs. It
was discovered that the amount of foaming agent required to seal a leak depends
on the adsorption-desorption properties of the agent. The best result was obtained
after testing some foaming agents with a modified anionic esters of relatively low
molecular weight. He suggested that foam generation is an effective and
economical method for reducing or stopping gas leakage from an underground gas
storage reservoir.
32
2.4.2 Aquifers
Only if a depleted gas or oil reservoir is unavailable or unsuitable would
Storage of Natural Gas consideration be given to using a water-bearing structure or
aquifer as a storage medium, tests would have to be conducted to determine the
suitability of such a structure to hold gas without leakage to overlying or
underlying formations(Ikoku, 1989). Aquifers are underground permeable rock
formations that act as natural water reservoirs (Dietert and Pursell, 2000). When
reconditioned, these formations may be used as natural gas storage facilities where
gas is injected on top of the water formation displacing the water further down
within the structure.
Advantages of aquifer storage include their close proximity to markets
where other geological reservoirs are not readily available. Deliverability rates may
also be enhanced due to the presence of an active water drive which increases the
storage facilities overall pressure. The high deliverability allows the working gas
volumes to cycle through the facility more than once per season.
Most of the following requirements must be satisfied for a properly designed
aquifer storage. There should be a large enough layer of water bearing rock to
accommodate a worthwhile volume of gas. The rock should have a porosity that
enables water to be forced out by gas at a reasonable pressure and the rate at which
gas can be withdrawn should be suitable. The structure of the layer should
preferably be dome shaped, and the aquifer should be closed on all sides. There
33
should be a suitable layer of completely impermeable rock above the aquifer layer.
And the aquifer should be situated in a continuous, unfaulted layer of rock.
The most important requirement for storage facilities in aquifers is the seal
of the cap rock, which must be suitably thick and have low permeability values,
close to zero, as in shale formations. This second requirement is necessary as
during the injection of gas the hydrostatic pressure is always exceeded. When the
original pressure is exceeded in order to increase the volume of working gas in
storage of this type (and that in depleted gas reservoirs), care must be taken not to
exceed the threshold pressure, in other words the pressure above which the gas
begins to pass through the cap rock. The threshold pressure is determined in the
laboratory by means of tests on cores collected during the drilling phase, and
subsequently with long injection tests performed in the wells (early injection).
When storage is initiated in an aquifer, the gas displaces the water, advancing more
rapidly where permeability is higher, and thus leads to the formation of a gas
bubble. After a few years, as injection continues, the water in the upper part of the
reservoir is entirely displaced by the gas; at this point the storage can become
operational (Eni, 2005). It was observed that in an underground gas aquifer
containing water concentration of dissolved solids, knowledge of the hydrostatic
head at two points does not necessarily enable one to determine the direction of
flow, if any, between the two points. Secondly, a trough filled with dense water
can serve as a barrier to flow and also, that a downward potential gradient across a
cap rock can decrease the chance for leakage of stored gas. If the water above and
34
below the cap have different densities, this must be taken into considerations in
determining the total effect of the observed gradient (D.C. Bond & K. Cartwright,
1969). Slagle et al presented the problems associated with using slotted liners and
sand screen in protecting the aquifer storage from sand production, the liners either
plugged or had holes eroded in them by the sand, The slotted liners allowed too
much sand to be produced and had to be removed when the wells needed
stimulating and cleaning out. Therefore, the method of plastic sand consolidation
was investigated by them. They came to a conclusion that for the ultra-low-
temperature, high-stress requirements imposed on an aquifer storage reservoir the
plastic consolidation system appears to be the best (slagle et al, 1969). Advances in
aquifer storage concern the reduction of investment costs of cushion gas by
partially substituting it with inert gases such as CO2 or N2 . The risk is the
possibility of mixing these inert gases with working gas, thus not respecting the
pipeline quality standards (V. Bolelli,1991).
Dehydration is necessary in storage projects involving aquifers or water
drive fields, The produced gas is saturated with water and, in cold weather,
hydrates form and plug surface fittings. This is often prevented by wellhead heaters
or by methanol injection at the Wellhead. The gas then Loses its water to
diethylcne glycol or a dry desiccant before it travels on to the market (Keith H.
Coats, 1966)
Aquifer storage is the least desirable form of storage due to its physical and
economic disadvantages. A significant amount of time and money is spent testing
35
the suitability of an aquifer for natural gas storage and subsequently developing the
infrastructure needed for an effective natural gas storage facility. In addition, in
aquifer formations, base gas requirements are as high as 80 percent of the total gas
volume. Unlike base gas from depleted reservoirs, this base gas is unrecoverable in
aquifer storage due to the risk of facility damage. This high base gas requirement
increases the initial cost of capital for aquifer storage projects, thus limiting their
number. Most aquifer storage facilities were developed when the price of natural
gas was low, meaning this base gas was not very expensive to give up (Natural
gas.org,2004).
2.4.3 Salt Caverns
For storage in salt formations, caverns obtained by dissolving the salt mass
in fresh water pumped through one or more wells are used. The salt is then
extracted from the water; when this is not considered economically viable, it is re-
injected into another suitable geological formation. An understanding of the shape
of the cavern and the properties of the rocks surrounding it are important elements
for determining the minimum and maximum pressure at which the storage can be
operated (Eni, 2005). Salt cavern capacity typically is 20 percent to 30 percent
cushion gas and the remaining capacity is working gas. Working gas can generally
be recycled 10-12 times a year in this type of storage facility. These facilities are
characterized by high deliverability and injection capabilities and are mainly used
for short peak-day deliverability purposes (i.e., for fuelling electric power plants)
(FERC 2004, pp4).
36
Fig 2.2 Working Gas Capacity by Type of Storage
Fig 2.3 Daily Deliverability by Type of Storage
Three factors should be considered in selecting a storage cavern to be
created by solution mining: a sufficient salt thickness at adequate depth, an
adequate supply of fresh water for salt leaching (solutioning), and a means of brine
disposal. The process of constructing caverns by solution mining salt formations is
conceptually simple, involving the injection of unsaturated "raw water" into a salt
deposit and removing nearly saturated brine, thereby creating a cavity. This general
procedure has been used for hundreds of years for the production of salt, but
generally little or no concern was given to the shape, stability, or pressure tightness
of the produced caverns (Ikoku C.U, 1989). lain Knott and K.G. Cross described
how new site selection criteria were established in a feasibility study, summarises
37
the engineering and geological requirements for cavity development through
leaching, concentrating on the evaluation and interpretation of existing geological
information in the area to establish the most favourable site and then concluded
that that the geological study was the most important criteria in assessing a new
Greenfield site location and The chosen new site location cannot be proved
feasible until a well is drilled to prove suitable salt thickness and purity to support
cavity development. However, the geology study increased confidence in finding a
suitable site before committing to major expenditure (lain Knott and K.G.
Cross,1992).
Han et al., (2006) in his work indicated that developed caverns will possibly
intercept various lithologies within bedded salt formations and each layer will
contain its own set of properties that affect creep rates, deformation, and slip
between bedding planes . Underground salt formations are well suited to natural
gas storage allowing for little injected natural gas to escape from the formation
unless specifically extracted. The walls of a salt cavern have the structural strength
of steel making it resilient against degradation over the life of the facility. Base gas
requirements are the lowest of all three storage types, requiring on average only 33
percent of total gas capacity to the natural gas storage vessel which maintains very
high deliverability rates, exceedingly higher than that of depleted reservoirs and
aquifers. This allows for natural gas to be more readily withdrawn, sometimes on
as little as an hour’s notice, which is well suited for satisfying unexpected surges in
demand. Yuan Guangjie et al (2008) introduced various corrosion phenomena that
38
are encountered during the operation of leaching salt caverns and during natural-
gas injection and withdrawal. He discussed the main factor that causes corrosion
such as brine, air, microbes, components of natural gas, gas injection velocity,
operating status as well as some measures of preventing corrosion. He concluded
that the flow velocity of injection water, the mass of dissolved oxygen and partial
pressure of carbon dioxide are the main corrosive factors of wellhead and strings.
He presented the measures of preventing corrosion such as; Oxygen scavenger and
disinfectant (i.e. addition of either ferrous chloride or stannous chloride or
hydrazonium regularly into the injection water), coating protection, and annulus
protection liquid and cathodic protection.
The caverns also offer operational flexibility having the ability to cycle
working gas four to five times a year, reducing the per-unit cost of each thousand
cubic feet of gas injected and withdrawn. This multiple cycling capability coupled
with its high deliverability is why salt caverns are well suited for peaking services
as well as responding to volatility in natural gas market prices for commodities
traders. . Salt domes are thick homogeneous bodies located largely along the Gulf
Coast. Due to the salt’s homogeneous nature and thus isotropic properties caverns
created within domes are structurally stable above a depth of 6000 ft Below 6000 ft
salt deformation is great and cavern stability is difficult to maintain (Bruno et al.
2002)
Drawbacks of this form of storage are volume limitations where each cavern
size typically ranges from 5-10 Bcf of working gas, considerably smaller than
39
capacity capabilities of depleted reservoirs and aquifers. In addition, start-up costs
generated during cavern development are substantial, and the disposal of saturated
salt water produced during the solution mining can be detrimental to the
environment (NaturalGas.org 2004).
2.5 ECONOMICS OF GAS STORAGE
The variations in the physical characteristics of each of the storage facilities
affect the amount of pressure that can be maintained in the different facilities. The
amount of pressure a facility can hold is important because it determines the speed
with which gas can be injected into and withdrawn from storage. Higher pressures
allow the gas to be injected into and withdrawn from the storage facility more
quickly, providing what is referred to as a higher deliverability rate. Facilities with
higher injection and withdrawal rates can be filled and emptied more times over
the course of a year, in other words facilities with higher deliverability rates are
able to have more injection/withdrawal cycles per year.
When a storage facility is full, the pressure is higher than when it is only
partially full. Thus, injection and withdrawal occurs at faster speeds when a facility
is fuller. The more empty a cavern is, the more difficult it becomes to extract the
gas. Some gas may not be able to be extracted at all. This non-extractable gas is
called the “base gas” or “cushion gas.” The extractable gas is called the “working
gas.” The three types of underground storage vary in the percentage of capacity
that ends up as base gas.
40
The investment cost for the development of a new storage field depends on
the type of storage and, in the case of identical types of storage, on its capacity,
which may or may not permit economies of scale. Investment costs for a storage
project can be subdivided into:
a) exploration costs (unnecessary where partially depleted or depleted gas/oil
reservoirs are used)
b) drilling costs which are related to the number and depth of the storage wells.
c) costs of the cushion gas volume
d) costs of surface facilities, related to the size of the treatment and compression
plants.
The overall cost of a single storage facility depends on:
a) the size of the surface facilities necessary for treatment and compression of the
gas.
b) the number and depth of the wells
c) the number of caverns/wells in the case of salt cavities.
d ) the volume of cushion gas.
Jerzy Stopa et al stated that UGS require high capital costs and definitely lower
level of operation cost in the future (Jerzy Stopa et al,2009)
Operating costs
The cost of managing gas storage can be divided into fixed and variable costs.
Fixed costs are those related to the workforce, insurance, maintenance work, etc.
41
Variable costs are the costs of the fuel and/or electrical energy required to power
the compressors, consumer goods, etc.
Economic considerations on the development of storage in depleted
reservoirs
For this type of storage exploration costs are generally unnecessary, since
the reservoir is already well-known from the point of view of both the geology and
productive behaviour. On rare occasions additional wells may be necessary in
order to locate the boundaries of the reservoir more accurately; more frequently,
new wells of a different type from existing wells may have to be drilled (horizontal
wells, wells with gravel pack, i.e. wells with calibrated sand filters or wells with
large diameter tubing) to allow high daily flow rates and reduce the time required
to inject/withdraw gas. Most existing surface facilities (gas dehydration plants,
compressors, pipelines, instrumentation, control room, etc.) and wells can also be
used for storage facilities, even though with some modifications. The volume of
gas to be immobilized as cushion gas depends on the size of the reservoir and the
drive mechanism (the volume of gas is smaller for reservoirs which produce by
simple expansion than for those which produce by water-drive). The impact of
cushion gas on total investments depends on how much of this is still present in the
reservoir when it is converted into a storage site, and on how much must be
purchased at market prices and injected into the reservoir (Eni, 2005). Apart from
natural gas, which during UGS construction is injected, increasing the buffer
42
capacity, there still remains native natural gas. In the case of future exploitation of
the field, this gas would be exploited and sold, generating income to the owner.
This fact should be accounted for when assessing the economic efficiency of an
UGS in a partly depleted field (J. Stopa et al, 2009). However, they generally have
low injection and withdrawal rates due to their low porosity, which keeps pressure
low in the wells. Consequently, most depleted gas fields are only capable of having
one injection/withdrawal cycle per year. In order to keep pressure up, about 50% of
the capacity of depleted reservoirs must be kept as base gas (Recon, 2009).
Depleted fields are the least expensive type of gas storage facility to develop at $5-
6 million per Bcf of working gas capacity (FERC 2004,).
Economic Considerations On The Development Of Gas Storage In
Aquifers
The search for these geological structures requires considerable exploration
expenditure to identify those suitable for storage. Once the structure has been
identified, it is necessary to drill all of the development wells and build the
treatment and compression plant, without the possibility of using existing facilities.
The volume of gas to be immobilized as cushion gas is large, since the front of the
aquifer must be kept at a distance from the productive zone; the impact on total
investments is significant, since all of the gas used for this purpose must be bought
on the open market and injected into the reservoir (Eni, 2005). Aquifers are
underground porous, permeable rock formations that act as natural water
43
reservoirs. Some aquifers can be converted into gas storage reservoirs, though at a
higher development cost than the other two types of underground gas storage. Gas
extracted from a water-bearing aquifer typically requires further dehydration prior
to shipping. Aquifers typically require more base gas than depleted fields, up to
80% of capacity. Because of the high cost, aquifers are typically only used if there
are no depleted gas fields or salt caverns nearby (Recon, 2009).
Economic considerations on the development of gas storage in salt
caverns
These types of storage use underground caverns which are sometimes
created by the exploitation of salt formations to extract rock salt; in other cases
they are created specifically for storage. It is clear that in the former case
investment costs are limited to those for wells and the treatment and compression
plant, whereas in the latter case exploration costs and the cost of artificially
creating the cavity must also be taken into consideration. The volume of gas used
as cushion gas is relatively modest, and is conditioned only by the minimum
pressure which we wish to maintain at the end of the flowing cycle (Eni, 2005).
Salt caverns are storage facilities created in naturally occurring salt domes or salt
beds. Salt domes are large salt formations that usually go far down into the earth.
Salt beds are shallower than salt domes. To form a cavern for storage, salt domes
are drilled and then leached with water to dissolve the salt. The resulting brine is
pumped out, a process which requires a large amount of water. Natural gas is
44
pumped into the resulting cavern to create pressure. Sometimes abandoned salt
mines are used as caverns, saving the expense of drilling and leaching a new
cavern. Smaller, shallower salt caverns can also be drilled in salt beds. Salt caverns
are generally smaller than depleted gas fields, averaging around 5 to 10 Bcf of
working capacity per cavern. However, salt caverns require only about 33% of
total capacity to be base gas. The higher pressure pushes gas in and out of the
storage facility more quickly. This provides for higher injection and withdrawal
rates, allowing for multiple injection/withdrawal cycles over the course of a year.
Although the higher pressure in salt caverns gives them more rapid deliverability,
it also makes them more prone to blowouts if there is a weakness in part of the
cavern (Recon, 2009).
2.6 NIGERIA AND NATURAL GAS
Nigeria is endowed with abundant natural gas resources with estimated
proven reserves of about 184 TCF. This represents about 4% of the world’s proven
gas reserves, making Nigeria the seventh largest gas reserve holder in the world
and the largest in Africa with 95TCF AG and 89TCF NAG, the gas is rich in
quality with 0% sulphur and rich in NGL (Abubakar L.Y,2007). The United States
Geological Society (USGS) has indicated that Nigeria’s gas reserve could reach
about 600 trillion cubic feet with dedicated gas exploration (Dr E.O. Egbogah,
2011). But, more than 60% of the reserves are associated, meaning that the
reserves exist with crude oil as free gas. Over the years, lack of adequate domestic
gas utilisation infrastructure, domestic gas market and inefficiency of existing gas
45
utilisation infrastructure, has resulted to the flaring of over 50% of the reserves or
in some cases reinjection of gas for enhanced oil recovery, presently Nigeria
produces about 6.55 Bcf/d and flares 24.30% of the produced gas(NNPC,2011).
However, there has been no significant gas exploration to date and growth in
the gas reserves are largely linked to oil exploration. Earth scientists believe that
there are more gas reserves not found which when discovered may double the
current figures. These resources are evenly distributed between associated and non-
associated gas and are greatly characterised as some of the best quality in the
world. However, due to low utilization in domestic and industrial usage of natural
gas and the limited gas distribution infrastructure, Oil industries producing natural
gas in association with their crude oil production have been compelled to flare
these gases due to some of the reasons listed below (Ukpohor & Excel T.O, 2009):
1. Limited numbers of appropriate reservoirs conducive for gas re-injection
and storage and the economics of the process.
2. Financial commitment of developing major and interconnecting network of
gas pipelines.
3. Low technology and industrial base for energy consumption in the country
4. Limited regional market
5. Inadequate fiscal and gas pricing policies to encourage investment.
However, growing pressure from environmentalists, government’s concerns
over revenue loss from flared gas and increasing local and international demand
46
for natural gas have renewed the interest of Nigerian government to seek
alternative strategies for utilising the abundant gas reserves in the country.
The current and expected increase in natural gas demand in the Nigerian
region, coupled with the greater complexity of natural gas market operations,
requires all natural gas market players to optimize flows of natural gas in order to
ensure uninterrupted supply of the fuel, its delivery at affordable prices and
flexibility in meeting demand peaks as well as various other consumer needs.
While efficient operation of the natural gas industry is certainly a prerequisite for
the vast majority of companies for maintaining desirable profitability and meeting
prescribed technical standards and safety requirements, it is also considered to be a
condition for improving security of supply.
There is an expected rise in demand for natural gas in Nigeria over the next
5 to 15 years as a result of the various projects utilizing gas and the Governments
zeal to make gas have a multiplier effect on the economy, stimulate a gas based
industrialization and facilitate the use of gas in power generation by introducing
the Nigerian Gas Master plan(the Domestic Gas Supply Obligation, the Gas
Pricing Framework and the Gas Infrastructure Blueprint), has further accentuated
the pressure on the natural gas industry to guarantee reliable delivery from ever
increasing distances at a competitive cost (Nigerian Gas Master Plan). (Diezani
.A,2010) noted that the unprecedented growth in natural gas demand has however
created a short term challenge for the sector in terms of response. This prompted
the reform of the sector through the Gas Master-plan. Underground gas storage
47
within the whole industry chain might play an important role in securing a reliable
and efficient supply of natural gas to industrial, residential and other consumers in
the region and country at large.
Considering the increasing importance of natural gas in power generation,
liquefied natural gas(LNG), gas to liquid technology(GTL), methanol and fertilizer
production, cement, aluminium and steel industry, only the constant supply of gas
can effectively yield the expected result in this sectors and this supply can be
achieved by the storing of gas when the demand is low and supplying it to meet the
demand during peak periods. Presently over ₦500 billion is needed to complete all
the projects required in the power sector (Bart Nnaji,2011). Strategically gas
storage allows security of supply in case there are disruptions to production,
transport or supply.
48
Fig 2.4 Nigeria’s Historical Gas Utilization and Forecast Potential Demand
[source:www.ngmproadshow.com]
Fig 2.5: Gas infrastructural blueprint (NGMP)
49
CHAPTER THREE
3.0 METHODOLOGY
The main aim is to determine the viability of UGS in the Niger Delta, and
considering the various storage types the available one is storage in depleted
oil/gas reservoirs, we will be concentrating only on the storage capacity of
reservoir D whose prevalent drive mechanism is gas cap, with available geological
data an assessment of Obigbo north field is carried out with the quality of a typical
gas produced in the region that would be injected and also to determine benefits for
storage in Niger delta with reference to
Ø Deliverability.
Ø inventory.
Ø containment .
Ø cost of developing and operation.
Ø Available gas utilization projects.
Ø Gas produced and flared in the region.
3.1 CASE STUDY:
Field and geological data were acquired from Obigbo north field. This data
were used in estimating the reservoir storage capacity.
50
3.2 FIELD HISTORY
The Obigbo North field is located some 18km north-east of Port Harcourt
and straddles OML's 11 and 17. The field was discovered in October 1963 by
exploratory well Obigbo North-1 and covers approximately 50 km2. The
exploration well was drilled on the main accumulation of the Obigbo North field
and encountered hydrocarbons between 6,540 and 10,000 ftss. The field contains
66 reservoir blocks, of which 55 oil bearing and 11gas bearing. Except for the E6.0
and deeper reservoirs, which contain light oil the average reservoir contains
medium gravity (API=26°, Rsi 300 to 400 scf/stb) oil.
3.3 GEOLOGICAL DATA GIVEN AS:
Swc=connate water saturation=0.20
A=areal extent of the thickness =100acres
H=reservoir average thickness (ft) =100
P=initial reservoir pressure=4900psi
T=reservoir temperature =710oR
H=well depth (ft) =10000
Ct=total compressibility (psi-1) =259×10-6
µ=gas viscosity=0.0235cp
51
K=permeability=250md
Vb= bulk volume of cone sample =8.03 ft3
W1=weight of dry cone sample=786.94lb
W2=weight of saturated core sample=2831.56lb
e= density of non volatile liquid=849.36lb/ft3
3.4 COMPOSITION OF NATURAL GAS TO BE STORED
This is the average composition of gas to be stored in the storage facility, it
is an average composition of gas produced in the Niger Delta.
Table 3.1:Average Compostion Mole Percent of Natural Gas in Nigeria
Symbol Name Formula Average Composition (mole %)
C1 Methane CH4 85.82
C2 Ethane C2H6 6.46
C3 Propane C3H8 2.71
iC4 Iso – Butane C4H10 1.25
nC4 Normal – Butane C4H10 0.92
iC5 Iso – Pentane C5H12 0.42
nC5 Normal – Pentane C5H12 0.28
C6 Hexane C6H14 0.16
C7+ Heptanes C7H16 0.26
N2 Nitrogen N2 0.41 (Impurity)
Co2 Carbon dioxide Co2 1.16 (Impurity)
H2S (ppm) Hydrogen Sulphide H2S <0.15 (Impurity)
Source: Compiled from SPDC
52
In this case, the compressibility factors which depends on the quality of gas
needs to be calculated together with the formation porosity before we can
determine the volume of the reservoir.
Table 3.2:Computation of Average Molecular weight, Gas gravity etc of Gas from Nigeria
Comp Yi Mi YiMi Pc (psia)
YiPi (Pci) (psi)
Tc (oR) YiTc(Tci) (oR)
C1 85.82 16.043 1376.81 667.8 57310.6 343 29436.3 C2 6.46 30.070 194.25 707.8 4572.4 549.8 3551.7 C3 2.71 44.097 119.50 616.3 1670.2 665.7 1804.1 iC4 1.25 58.124 72.65 529.1 661.4 734.7 918.4 nC4 0.92 58.124 53.47 550.7 506.6 765.3 704.1 iC5 0.42 72.151 30.30 490.4 206.0 828.8 348.1 nC5 0.28 72.151 20.20 488.6 136.8 845.4 236.7 C6 0.16 86.178 13.79 436.9 69.9 913.4 146.1 C7+ 0.26 100.205 26.05 396.8 103.2 972.5 252.9 N2 0.41 28.013 11.49 493.0 202.1 227.3 93.2 Co2 1.16 44.010 51.05 1071.0 1242.4 547.6 635.2 H2S (ppm)
0.15 34.076 5.11 1306.0 195.9 672.4 100.9
Ma = ∑ YiMi����
∑ Yi����
� ………………………………………………(1)
=1974.62100�
=19.75 Kg.Kgmol-1
53
g=� ��
= ��.����
........................................................................................(2)
= 0.68 (air =1)
using the Standard katz Z – factor chart for sweet gas since the amount of non
hydrocarbon component is less than 5% by volume.
Ppc = ∑ YiPc����
∑ Yi����
� ……………………………………………..(3)
= 66877.4100� =668.77psi
Tpc = ∑ YiTc����
∑ Yi����
� .......................................................................(4)
=38245.55100� =382.46oR
Ppr = P Ppc� …………………………………………………………(5)
= 4900668.77� =7.33
Tpr =TTpc� .........................................................................................(6)
= 710382.46� =1.86
54
Z=f(Ppr, Tpr) ……………………………………………………….(7)
=f(7.33,1.86)
Z =1.13
Gas formation volume factor
Bg = VrVs� = 0.283ZT
P� .....................................................................(8)
= 0.283 ∗ 1.13 ∗ 7104900�
Bg=0.0463
Depleted gas reservoirs are normally pressurized to back to their
original discovery pressure when they are converted to storage reservoirs.
However, if a good cap-rock is present, a top storage pressure higher than
discovery pressure can be considered. This practice has two advantages, the larger
storage capacity and higher flow capacity. However, compression requirements,
market needs, production problems, and economics must be considered when
selecting the storage top pressure. A storage top pressure above the discovery
pressure should not be selected when the caprock is thin or mechanical
conditions are questionable.
55
For higher deliverability, pressure higher than the initial reservoir pressure is
chosen: a pressure of about 6500psi (the higher the injection/reservoir pressure the
higher the storage capacity and deliverability).
Porosity � = VpVb� ........................................................................(9)
Vp =� ��� ��
=����.������.�����.��
=����.�����.��
Vp =2.41
Vb =8.03
ϕ = ����
=�.���.��
=0.3
Reservoir Capacity, G
G=�× �× ϕ× ����� ��× �× ����× �× �
.....................................................................(10)
G=�����× �× �× ϕ× ����� ��× �× ����× �× �
G=�����× ���× ��× �.�× ����.��× ����× �����.�× ���× �.��
G=17,976,822,760scf=17.98 Bscf
56
3.5 Design, operation, and monitoring of underground storage
reservoirs involve recognition of three basic requirements:
1). INVENTORY: which represents the volume of the gas that resides
in the storage horizon. In depleted reservoirs, in order to sustain pressure, the
facility maintains equal parts base and working gas. However, depleted reservoirs,
having already been filled with natural gas, do not require the injection of what
will become physically unrecoverable gas seeing as it already exists in the
formation unlike storage in aquifers where the base gas is unrecoverable due to
fear of facility damage.
2). DELIVERABILITY: Which represents the ability of the storage
field to deliver the gas stored to the market when needed. Deliverability depends
on the pressure which is a function of the volume of the gas in the storage;
therefore deliverability is related to inventory. Depleted wells has a limited cycling
capability, where working gas volumes are usually cycled only once per season.
Reservoirs are characterized with having low deliverability and thus would not be
well suited for peaking services or speculative market services. It is most typically
employed for seasonal services, strategic reserve services or production services.
When compared to storage in salt caverns it’s deliverability is low.
3). CONTAINMENT: Which represents the ability of the storage field
to prevent movement of gas away from the storage horizon. Migration of gas
away from the storage horizon results in attrition of the inventory and
57
consequently loss of the deliverability. The gas loss due to migration often
depends on the pressure in the storage field which is related both to inventory and
deliverability.
Geologically, the reservoirs of depleted wells have proven capable of
holding gas, since the reservoirs once trapped hydrocarbons that migrated up from
the underlying source rock. However, some reasons for caution should be noted. In
a few instances, reservoirs that once held gas actually continuously lost gas over
geologic time up to the time of production. In other cases loss of gas occurred until
the pressure dropped below the cap-rock threshold pressure i.e. the pressure
required for gas to displace capillary water. In this instance loss of stored natural
gas would occur once operating pressure was increased. To contain gas the
reservoir must have high permeability and porosity and successful traps to seal the
gas within the reservoir. The high permeability and porosity allows for large
volumes of gas to be stored and for the operation of high gas injection and
withdrawal rates. Traps that successfully contain gas are either structural, such as
an anticline, or stratigraphic, such as an impermeable layer. Depleted reservoirs
with high permeability and porosity are ideal for natural gas storage, porosity
lending itself to the amount of natural gas it can hold and permeability determining
the rate of flow of natural gas through the formation. This in turn determines the
injection and withdrawal rate of working gas.
58
3.6 COST OF OPERATION AND DEVELOPMENT.
Underground storage fields have different costs associated with their development
and operation. It has been estimated that investors require a rate or return between
12 percent to15 percent for regulated projects, and close to 20 percent for
unregulated projects. The higher expected return from unregulated projects is due
to the higher perceived market risk. In addition significant expenses are
accumulated during the planning and location of potential storage sites to
determine its suitability, which further increases the risk(Eni, 2005). Underground
storage is more economical than LNG or LPG even on a 1-day basis (Harold E. S,
1971)
The investment cost for the development of a new storage field depends on
the type of storage and, in the case of identical types of storage, on its capacity,
which may or may not permit economies of scale. Investment costs for a storage
project can be subdivided into:
a) exploration costs (unnecessary where partially depleted or depleted gas/oil
reservoirs are used)
b) drilling costs which are related to the number and depth of the storage wells. c)
costs of the cushion gas volume
d ) costs of surface facilities, related to the size of the treatment and compression
plants.
The overall cost of a single storage facility depends on:
59
a) Size of the surface facilities necessary for treatment and compression of the gas.
b) The number and depth of the wells
c) The number of caverns/wells in the case of salt cavities.
d ) The volume of cushion gas.
The capital expenditure to build the facility mostly depends on the physical
characteristics of the reservoir. First of all, the development cost of a storage
facility largely depends on the type of the storage field. .Cost is estimated by the
type of storage facility to be developed and its intended use. Expenses include
development of caverns and/or above ground infrastructure, the amount of cushion
gas required, and the cost of operation for a single cycle facility versus a multi-
cycle facility. Plant costs represent the cost to erect the facility, cushion gas cost is
based on actual examples and are not directly comparable, and operation costs
incorporate facility performance, maintenance, and cost of utilities. Aquifers are
generally the most expensive to develop, whereas salt caverns are the most
economic to operate.
Depleted Reservoirs: For this type of storage exploration costs are generally
unnecessary, since the reservoir is already well-known from the point of view of
both the geology and productive behaviour. They are generally cheaper (in $/Mcf)
to develop and operate than aquifers. In order to keep pressure up, about 50% of
the capacity of depleted reservoirs must be kept as base gas. Depleted fields are the
60
least expensive type of gas storage facility to develop at $5-6 million per Bcf of
working gas capacity. The reservoirs have an existing infrastructure in place and
Fig 3.1:Cost estimation for UGS storage development
are already proven to trap and contain gas. Most depleted gas reservoirs contain
residual natural gas that was never recovered from production. The abandoned gas
can be used to meet cushion gas needs, thus reducing the cost and amount of
cushion gas that must be injected.
Aquifer: They have the highest cushion gas requirements (about 80% capacity)
and longest development times. It typically takes five years to develop an aquifer
due to reservoir characterization and constructing the above ground infrastructure.
They are more expensive to develop and operate and are used only in the absence
of depleted reservoirs and salt cavern.
Salt Cavern: are the most economical option for underground natural gas
storage. However, the development ($/Mcf) of the caverns and related
infrastructure is a large capital expense. Although the higher pressure in salt
61
caverns gives them more rapid deliverability, it also makes them more prone to
blowouts if there is a weakness in part of the cavern.
3.7 GAS UTILIZATION PROJECTS
There are various gas utilization projects, ongoing, completed and
anticipated and their required gas feeds in the next 5–10 years in the country. The
development of an underground storage facility is dependent on the availability of
a sustainable gas market that will offset its high capital expenditure with time. The
traditional use of UGS was for seasonal variation in order to store during the hot
months and withdraw during cold ones when the demand for gas to heat homes and
offices is high, but since the climate over here does not support seasonal variation,
we will be considering other gas utilizing facilities like LNG, GTL, NGL/LPG,
fertilizer, methanol, GFEG, aluminium and steel, etc where the demand for gas is
constant over the year and they have impact on the nations GDP.
3.8 GAS PRODUCTION AND UTILIZATION IN THE REGION
The gas produced and flared in the region has experienced an overturn over
the past couple of years as a result of more gas utilization projects like NLNG,
GTL, LPG/NGL, fertilizer, Power generation, etc in the country. The quantity of
gas flared has been on the decrease yet there is still significant loss in revenue and
the consequent environmental damage as a result of the quantity of gas still flared
in the region. With the anticipated boom in the domestic and international demand
for gas this wasteful flaring has its demerits in the nearest future where the
problem of the country won’t be demand any longer but supply.
62
CHAPTER FOUR
4.0 RESULTS AND DISCUSSION
4.1 Storage Capacity
Below are the results of the computation in chapter three;
Table 4.1:Results of computation
Term Type Gas Reservoir Depth 10000 ft Working Gas Capacity if base =60% 7.19 BScf
Working gas capacity if base is 50% 8.99 BScf
Base gas at 60% 10.79 BScf Base gas at 50% 8.99 BScf Volume capacity 17.98 BScf Porosity 0.3 Z factor at 0.65 1.13
In order to confirm that this depleted reservoir is of high quality for gas
storage in it, we will take a look at the various petro-physical properties of the
reservoir.
Porosity: the Porosity value obtained is high and so is very good.
Permeability: any porous formation is usually permeable, so we postulate that the
formation is permeable.
63
Cap rock: this reservoir has a sealing cap rock, which is easily deduced from the
fact formation formally housed crude oil deposits.
Depth: the depth is 10000ft, which is a good one, since it will allow for storage of
gas at a pressure of about 6500psi.
Pore volume: from the calculation above, it is evident that not only will this
reservoir supply the needed volume of gas; it will still have more left in the
reservoir as a cushion gas for pressure maintenance.
Volume capacity=17.98BScf
In a developed reservoir about 50% of the gas is considered cushion gas; 50-60%
of this is considered non-recoverable and should be depreciated. The recoverable
cushion gas is included in the investment but is not depreciated. The recoverable
cushion gas is included in the investment but is not depreciated. Fixed charges of
depreciation return on investment and taxes dominate the operating cost of gas
storage.
For 60% cushion gas
Cushion gas=60% of gas (17.98BScf) =10.79BScf
For 50% cushion gas
Cushion gas=50% of (17.98BScf) =8.99BScf
Volume available for market= 7.19 BScf for 60% cushion gas
64
Volume available for market=8.99 BScf for 50% cushion gas.
So on withdrawal of 40/50% of gas from this storage, about 50/60% will remain as
cushion gas for pressure maintenance.
Capillary pressure: gas is more volatile than water, as the production well is
opened for flow, the gas will be virtually displaced before water can start coming
out of the reservoir.
The gas produced here that will be injected into the storage facility is a
sweet gas (≤ 0.15% sulphur content) therefore having less acid removal plants and
better quality.
The storage facility is located in an area of great importance to gas
transmission to various gas utilization projects in the region. The storage facility is
located in Obigbo North of Port-hacourt which supplies gas to Ibom power plant,
Aba industries, Ala-Oji power plant, calabar,etc.
4.2 Minimum requirements for considering an underground
prospect for gas storage include:
(a)Storage Contract
In order to use any type of storage facility above, a storage contract must be
entered into. A natural gas storage contract will specify the term date for the
party’s use of the storage, the type of storage facility, as well as the physical
65
Fig 4.1: supply grid from Obigbo North(UGS facility)
constraints and operational costs of the facility. A specific catalogue of these
physical and operational components can be found in the example contract below.
b. A structure overlain by a cap rock. The water in the water filled cap rock seals
the tight rock from penetration by the gas phase and prevents the gas from rising
vertically, due to buoyant forces or from moving laterally and causes the gas to
accumulate in the storage zone below the cap rock.
66
Table 4.2 - Example Storage Contract for Depleted Reservoir Storage
Term 2/1/2012-1/31/2014 Type Oil Reservoir Depth 10000 ft Maximum Working Gas Capacity
8.99 BScf
Initial Working Gas Capacity
0 BScf
Maximum/Minimum Injection Rate
75 MMScf/day – 45 MMScf/day
Maximum/Minimum Withdrawal Rate
150 MMScf/day – 90 MMcf/day
Fuel Injection Loss Spread
1.0%- 2.5%
Maximum/Minimum Facility Pressure
6700 – 1500 psi
c. Sufficient depth to allow the storage to take place under pressures. The
pressure will allow satisfactory quantities of gas be stored into a given space and
permit gas to flow readily into and out of a storage horizon.
d. A high porosity and permeability storage zone beneath the cap rock that
permits gas to be stored in sufficient quantities and to permit the gas to
flow into and out of it readily.
e. Water below the storage zone to confine the stored gas.
All of these conditions are normally met in underground petroleum reservoir
where hydrocarbon have been found trapped below a cap rock and confined by
underlying water for millions of years. That is why many gas storage fields are
partially depleted gas (or oil) fields which have been converted to storage.
67
Table 4.3- Storage Facility Characteristics
Facility Description Injection
Withdrawal
Operating Costs
Major Use
Depleted Fields
Low deliverability, low cycling, high capacity
120-200 Days
60-120 Days
High with some fuel losses
Seasonal Cycling
Salt Caverns
High deliverability, high cycling, low capacity
20 Days 5-20 Days Low with minimal fuel losses
Peaking Services
Aquifers Low deliverability, low cycling, high capacity
120-200 Days
60-120 Days
High with some fuel losses
Seasonal Cycling
4.3 GAS UTILIZATION PROJECTS AND PRODUCTION
Table 4.4:Gas production and utilization (Mscf),2002–2010 YEAR GAS PRODUCED TOTAL GAS UTILIZED TOTAL GAS FLARED% FLARED
2002 1,651,591,488 897,789,582 753,801,906 45.642003 1,828,541,855 983,562,969 844,978,886 46.212004 2,082,283,189 1,195,742,993 886,540,196 432005 2,093,628,859 1,282,313,082 811,315,777 38.752006 2,182,432,084 1,378,770,261 803,661,823 36.822007 2,415,649,041 1,655,960,315 759,688,726 31.452008 2,287,547,344 1,668,148,489 619,398,854 27.082009 1,837,278,307 1,327,926,402 509,351,905 27.722010 2,392,838,898 1,811,270,545 581,568,354 24.3
source: compiled from NNPC
Over the past years the volume of gas flared has been on the decrease as a
result of various gas utilization projects being put on stream by the Government.
The gas market in Nigeria is undergoing an overturn with the present zeal of the
Government to make gas have a multiplier effect on the economy(NGMP) but their
68
Table 4.5:Gas production and utilization by Company(Mscf), 2010 COMPANY GAS PRODUCED TOTAL GAS UTILIZED TOTAL GAS FLARED % FLAREDJVSPDC 777,170,430.73 673,693,051.04 103,477,379.69 13.31MOBIL 479,251,265.66 356,505,522.00 122,745,743.66 25.61CHEVRON 194,327,349.00 76,018,339.31 118,309,009.69 60.88TOTAL E& P 277,253,720.31 246,778,233.10 30,475,487.21 10.99NAOC 441,864,139.00 338,975,625.00 102,888,514.00 23.28Chevron (PENNINGTON) 7,683,657.00 130,491.00 7,553,166.00 98.30PAN OCEAN 8,082,809.00 1,286,176.00 6,796,633.00 84.09SUB TOTAL 2,185,633,370.70 1,693,387,437.45 492,245,933.25 22.52
ADDAX 84,989,027.00 20,068,561.00 64,920,466.00 76.39ESSO 104,990,024.80 97,610,252.45 7,379,772.35 7.03SUB TOTAL 189,979,051.80 117,678,813.45 72,300,238.35 38.06
AENR 6,713,476.00 182,142.74 6,531,333.26 97.29SUB TOTAL 6,713,476.00 182,142.74 6,531,333.26 97.29
NPDC 10,513,000.00 22,151.01 10,490,848.99 99.79SUB TOTAL 10,513,000.00 22,151.01 10,490,848.99 99.79
GRAND TOTAL 2,392,838,898.50 1,811,270,544.65 581,568,353.85 24.3
PRODUCTION SHARING CONTRACT
SERVICE CONTRACT
SOLE RISK/INDEPENDENTS
source: compiled from NNPC
greatest challenge is supply. With a present production rate of about 6.55 Bscf/d,
the flaring of 24.30% of the total production and an anticipated demand of about
20Bscf over the next couple of years, the problem that the country would be faced
with is supply. The various gas utilization projects outlined in table 4.6 have a
multiplier effect on the economy, increasing the GDP, creating more jobs etc.
69
Table 4.6:Gas utilization projects
S/N PROJECT TYPE LOCATIO
N
GAS FEED
(MMscf/d)
1 Bonny NLNG LNG N.D 3500
2 Brass River
LNG
LNG N.D
3 Olokola LNG LNG N.D 4500
4 Escravos GTL GTL N.D 300
5 Escravos Gas
Plant
NGL/LPG N.D 700
6 Oso NGL plant NGL/LPG N.D 600
7 West African
Gas Pipeline
Gas EXPORT 170 – 450
8 Power Projects Electricity NIGERIA 3000–4900
9 Cement sector Kiln NIGERIA 350
10 Trans Sahara
gas pipeline
Gas EXPORT 700–1000
11 Steel Sector Gas NIGERIA 120
12 Fertilizer
production
Gas NIGERIA 307
13 ALSCON Gas NIGERIA 104
14 Petrochemical
feedstock
Gas NIGERIA 100
70
Fig 4.2: Domestic and Inter Governmental Export Gas Requirement
Fig 4.3: Domestic Gas Demand and Supply profile
71
Gas demand in the domestic market is on the increase, fertilizer is
anticipated to utilize about 307MMscf/d by 2015 from less than 110MMscf/d
today. The base case gas demand for the cement industry could increase from
90MMscfpd currently to 350MMscfpd by 2015. This demand in the cement
industry would be met by a combination of plant expansions, new
grassroots capacity additions, and conversion of liquid fuelled kilns to the more
efficient, gas fired kilns. The major gas consumer for cement production in Nigeria
is the West African Portland Cement Company. Other cement producing
companies (Ashaka Cement, Benue Cement, Sokoto Cement and the others) are
yet to avail themselves the use of gas as a source of energy to power their
equipments and fire their kilns despite the relative cheapness of gas over other
sources of energy. This is due to the lack of a Natural Gas Grid, which should have
made gas more accessible, but with the NGMP (Gas Infrastructural Blueprint) on
stream gas will become accessible to these cement companies. The restarting of the
steel plants in Ajaokuta since connecting infrastructure already exist will increase
the demand from 70MMscf/d to 130MMscf/d and ALSCON and the Petrochemical
sector taking a joint feed of 204mmscf/d of gas. Gas export is also on the increase
with more LNG facilities coming on stream and the export line of WAGP and the
trans Saharan pipeline requiring about 800 – 1500 MMscf/d feed gas.
The power sector demand is the most aggressive of all the domestic sector
demand with anticipated demand of 3000 – 4900 MMscf/d, the power sector has
the greatest impact on the economy, presently more gas is being produced in
72
Fig 4.4: forecasted power sector gas demand
Fig 4.5: Industrial base gas demand
the east(N.D) than is required for power generation so as gas infrastructures are
being put in place to transport this gas to the west where there is insufficient
73
supply, instead of flaring it can be stored. GTL converts “non valuable gases” flare
Fig 4.6: Eastern Area Power Plants Gas Requirement Vs Gas Allocation Profile
Fig 4.7: Western Area power plant requirement Vs Gas Allocation Profile
gases into useful synthetic fuels like diesel, and CNG usage in the country is
limited as a result of lack of refuelling stations and automotives in the country are
not designed to make use of it.
74
4.4 COST OF OPERATION AND DEVELOPMENT
Looking at the overall cost (in $/Mcf) of each storage option, aquifers will
be the most expensive. Aquifers use a great deal more cushion gas than the other
options. For peak load needs salt caverns are the best value, as are depleted
reservoirs for base load operations. Since we are considering more of UGS in
depleted reservoir since the Niger Delta is an oil producing zone and sufficient
depleted reservoirs are present there. A more in depth economic analysis will be
presented below.
Table 4.7: Mean Impacts of main items of investment cost
CLASS OF INVESTMENT
DEPLETED RESERVOIRS (%)
AQUIFERS (%)
SALT CAVERNS (%)
Surface plants 30 25 40 Wells 25 15 35 Cushion gas 45 60 25
According to the FERC staff report, 2004 the cost of developing an UGS
facility for depleted reservoirs is $5–$6 million per Bcf of working gas. So in the
case of reservoir D under consideration the cost of setting it up will be about $54
million.
Considering the mean impacts of investment cost, $54 million is the cost for
the cushion gas, Surface plants and wells, but since we will postulate that the
stored gas will be the gas presently being flared then the value of the cushion gas
will not be considered i.e. cost of cushion gas is $0. Therefore the total cost of the
storage project is about $30 million.
75
Fig 4.8: Estimated cushion gas requirement
Fig 4.9: Estimated rate of deliverability
Fig 4.10: Estimated Containment
0
20
40
60
80
% D
ELIV
ERAB
ILIT
Y
TYPES OF UNDERGROUND STORAGE FACILITY
depleted storagereservoir
salt cavern
aquifer
0
10
20
30
40
50
60
70
underground storage types
% c
onta
inm
ent
depleted reservoirstorage
salt cavern storage
aquifer gas storage
0
20
40
60
80
100
% C
USH
ION
GAS
TYPES OF UNDERGROUND STORAGE
depleted well
salt carvern
aquifer well
76
Fig 4.11: The analysis of sensitivity of UGS NPV to the change of key financial
factor
The sensitivity analysis carried out shows that the variable and fixed cost has little
impact on the NPV but both the price of the gas and the capital cost in setting up
the facility has a huge impact on the investments made. The cost of managing gas
storage (operation cost) is divided into fixed and variable costs. Fixed costs are
those related to the workforce, insurance, maintenance work,
etc. Variable costs are the costs of the fuel and/or electrical energy required to
power the compressors, consumer goods, etc.
77
CHAPTER FIVE
5.0 CONCLUSION AND RECOMMENDATION
5.1 CONCLUSION
In many regions across the nation geologic formations can be used to store
natural gas underground. Natural gas is stored to meet seasonal demands and to
protect against accidents and natural disasters that could cause a disruption in
supply. Storage of natural gas is used for strategic purposes, meet seasonal
demands, base load and peak load requirements,. Storage options are dictated by
the regional geology and the operational need. It is therefore proper to highlight at
this stage the various areas in the natural gas industry where opportunities abound
for private investors especially at the time of structural changes in the economy of
the country. These investments opportunities will form the best strategies to
efficiently utilize natural gas. The areas open for gas utilization in Nigeria are in
the field of increased use of electric power generation, industrial fuel, GTL
technologies, LNG for export , increased city distribution for domestic and
commercial application, as feedstock for Nigeria-based fertilizers, methanol and
petrochemical industries and for re-injection into oil reservoirs, for pressure
maintenance or secondary/increase oil recovery purpose or for storage, Also, the
fertilizer plant as one in rivers state uses natural gas as feedstock.
Currently, depleted gas/oil reservoirs, aquifers, and salt caverns are the three
main types of underground natural gas storage in use today. Underground storage
78
must have adequate capacity and containment of gas. The storage formation must
have high permeability in order for gas to be injected and extracted at adequate
rates. Porous reservoirs such as depleted gas reservoirs and aquifers must possess
an impermeable cap rock along with a geologic structure to contain and trap gas.
Mined caverns such as salt caverns contain gas by the impermeability of the
surrounding host rock.
Aquifers and depleted reservoirs possess the largest capacity and require the
greatest volume of cushion gas. The reservoirs are typically cycled once annually
and are used to meet base load demand. Unlike depleted reservoirs aquifers must
be proven to trap and contain gas. Salt caverns are solution mined and hold a
fraction of the gas volume than that of depleted reservoirs and aquifers. Salt
caverns are typically used to meet peak load demands by possessing multi-cycle
capabilities and providing high delivery rates.
Economically, aquifers cost the most to develop and operate. The major
costs contributed to the large cushion gas requirements and the need to verify the
reservoirs capability to contain gas. Salt caverns are the most economical, due to
their multi-cycle capabilities and high annual throughput of gas. Salt caverns are
typically used to meet peak load demands, but has size disadvantage, rare in this
part of the country, cost of conversion and development which includes
compression horse power, surface equipments is high. From the analysis in chapter
79
3 and 4 the best storage facility for Niger delta is depleted reservoir, considering its
availability and cost effectiveness.
In the case of Obigbo north oil field, the depleted reservoir could store about
17.98 BScf with porosity of about 30% and high permeability which makes it
suitable for gas storage. The location of the depleted reservoir in Obigbo North
field is suitable for storage considering the geology and location. The reservoir can
store gases that can be transmitted to calabar for power generation and
manufacture of cement, to Aba industries and to Akwa Ibom in times of supply
shortage.
Recent development in the gas sector (NGMP) the demand for gas over the
next couple of years is expected to increase by about 100% with the various gas
utilization projects being put into place like LNG, GTL and other gas based
industries and the reviving of old industries.
Sustainable supply of natural gas in the region is required for the
government to achieve its aim of gas having a multiplier effect on the economy
and adding 10% of the GDP of the country, so in order for this supply to be
achieved, UGS is essential so as to take care of any inefficiency in supply. Storage
of natural gas in the Niger Delta region of Nigeria is economically viable, since the
gas to be injected dose not cost anything (flared gases).
80
5.2 RECOMMENDATION
This work has assisted in giving reasons for zero flaring of gas and proper
gas utilization. However, full development and encouragement of gas projects calls
for these incentives by the government:
Ø Free import of machinery and equipment
Ø Zero percent royalty
Ø Zero percent profit tax for gas used
Ø Free duty and VAT
Ø Tax deduction interest on loans for gas project investment
Ø Capital allowance
Ø Tax dividends for period of five years.
Ø Converting depleted reservoirs with desired storage characteristics to gas
storage facility.
Ø Encourage companies to go into gas storage.
Ø Commenced implementation of the NGMP.
Ø Development of new market, gas investment opportunity e.g. packaging and
distribution of gas(manufacture of cylinders or regulators)
Ø Strategic storage of gas should be embarked on.
81
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84
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http://www.eia.doe.gov/pub/oil_gas/analysis_publications/storagebasi
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85
APPENDIX A
Average Compostion Mole Percent of Natural Gas in Nigeria
Symbol Name Formula Average Composition
(mole %)
C1 Methane CH4 85.82
C2 Ethane C2H6 6.46
C3 Propane C3H8 2.71
iC4 Iso – Butane C4H10 1.25
nC4 Normal – Butane C4H10 0.92
iC5 Iso – Pentane C5H12 0.42
nC5 Normal – Pentane C5H12 0.28
C6 Hexane C6H14 0.16
C7+ Heptanes C7H16 0.26
N2 Nitrogen N2 0.41 (Impurity)
Co2 Carbon dioxide Co2 1.16 (Impurity)
H2S (ppm) Hydrogen Sulphide H2S <0.15 (Impurity)
86
APPENDIX B
Gas Deviation Factor for Natural Gas(after Standing and Katz)
87
APPENDIX C
Pseudo critical properties of miscellaneous gas (after Brown et al)