Business

Tackling gas flaring with mini-LNG plants

 

Without prior warning to the their host communities, multi-national oil companies (MOCs) and even the Nigerian National Petroleum Corporation (NNPC) build pipe scaffolding with a burner on top burning gas which complicates breathing problems for residents.

Researchers from the UCLA Fielding School of Public Health and the University of Southern California have found that a high level of exposure to oil and gas flaring is associated with a 50per cent higher risk for preterm birth, compared with women who aren’t exposed to flaring. That’s how the oil industry gets rid of waste gas released by drilling for oil in the Niger Delta region.

Despite the government’s lip service to ending gas flaring, it has continued as the country flared 225.1 billion standard cubic feet of gas, (bscf) between January and July, this year.

The cash value of the burnt gas in the international market is estimated at $787.7 million (about N299.33 billion). This is, no doubt, a huge cash, especially now that coronavirus (COVD-19) has taken its toll on oil revenue, which has constrained budget funding.

The National Environmental Economic and Development Study (NEEDS) estimated the environmental cost of gas flaring in the country to be about $94 million (about N35.7 billion) yearly while the volume of gas flared was an equivalent of 12 million tons of carbon dioxide emission.

Even the Federal Government’s Gas Flare Tracker showed that 225.1 bscf of gas was flared by the oil and gas firms in the first seven months of this year. This could generate 22,500 gigawatts hour of electricity.

Gas flared should attract fines totaling $450.1 million (about N171.04 billion), but the report was silent on whether payments had been made for previous gas flares, which amounted to several billions of dollars.

According to the report, 136 bscf of gas was flared onshore, while 89.1 bscf of gas was flared offshore. It explained that in January, 40.03 bscf of gas was flared; 32.15 bscf in February; 37.61 bscf in March, while 38.84 bscf, 36.98 bscf, 37.21 bscf and 2.24 bscf of gas was flared in April, May, June and July, this year.

While NNPC upstream arm, Nigerian Petroleum Development Company (NPDC) flared 4.6 bscf of gas from OPL 091, Famfa Oil flared 7.6 bscf of gas from Oil Prospecting Licence (OPL) 216; Shell Petroleum Development Company (SPDC) flared 6.9 bscf, 6.7 bscf and 5.4 bscf of gas from OML 11, OML 29 and OML 18.

According to the World Bank, energy firms around the world flared 250 billion cubic metres of natural gas last year. That is the highest gas flaring rate since 2009, representing billions in lost profits from wasted gas.

But the World Bank, in its report entitled: Nigeria’s Flaring Reduction Target: 2020‘, noted: “With almost 8 billion cubic metres of gas flared annually, according to satellite data, Nigeria is the seventh-largest gas flaring nation in the world. At the same time approximately 75 million Nigerians lack access to electricity.”

Part of the solution to this problem has since been discovered -that is, turning the gas into LNG and sell it abroad. LNG is a hot commodity despite a glut that has driven prices to historic lows, making some large-scale LNG projects economically unviable.

Currently, Nigerian Liquified Natural Gas (NLNG) operates six LNG processing units, known as trains, on Bonny Island. The final investment decision on Train 7 processing unit was signed by Nigeria LNG partners state-run NNPC, Eni, Total and Royal Dutch Shell.

The new train is expected to boost output by 35per cent to 30 million tons per year and will arrest a decline in the country’s LNG output.

Yet, not all LNG facilities are large and cost billions to build. Nowadays, there are also mini-LNG plants that produce gallons instead of tons of the super-chilled liquid gas. And, according to some, they can solve the flaring problem, at least in the Permian.

According to an online oil and gas platform, OilPrice.com, the Houston Chronicle‘s Jim Magill wrote in a recent article on flaring and LNG production about cost-effective method of ending gas flaring. Small LNG plants churn out up to 100,000 gallons of LNG daily, which can then be transported to power plants and ports to fuel ships. It is already being done in some parts of the United States, but not the shale plays where the gas flaring actually occurs, it said.

Globally, gas flaring costs oil producers about $17 billion in loss, according to United Kingdom(U.K.)-based flaring solutions providers Capterio. It also costs a lot in emissions, which is the reason flaring has been drawing increasing attention from regulators.

According to OilPrice.com, flaring in the Permian fell sharply as oil production fell. New gas pipelines in the Permian have also helped the situation. But they have not solved the problem once and for all.

“Since the downturn, the rate of flaring has gone down with more than 99.5 per cent of the gas produced in the month of May sold and beneficially used to generate electricity, cook dinner, or make hundreds of consumer products,” said the chairman of the Texas Railroad Commission in comments on the new rules. “Now is the opportune time to implement meaningful recommendations to reduce flaring before oil and gas production climbs back to previous highs.”

Roduction is already coming back on stream, and the flares will follow. Setting a mini-LNG train on-site could be the perfect solution, at least for those who have money to spare. Small-scale LNG trains may not cost billions to build, but they are not cheap either.

One southern Texas small-scale LNG plant, operated by Stabilis Energy, cost between $40 and $45 million to build, according to its Chief Executive Officer (CEO) Jim Reddinger, who spoke to Chron‘s Magill. The plant has a capacity of 100,000 gallons of LNG daily. It distributes its liquefied gas to various businesses across North America. But can the market support a dozen more LNG suppliers of this size?

This is the million-dollar question. The global LNG market is oversupplied, and this is already hurting U.S. LNG producers. Things are beginning to improve, with fewer U.S. cargos being canceled for delivery in September and October, but the situation on the LNG market is pretty similar to that on the oil market. There is way more supply than there is demand. In this context, which also features depressed investment appetite among energy firms, the chances are that few would be willing to consider solving their flaring problem by building small-scale LNG plants.

According industry experts, mini-LNG trains could help drillers save money. The question is, why liquefy and regasify when you have the gas as it is at the field? Yet, liquefied gas can also be used as fuel for machinery, and it could be a cheaper and cleaner alternative to diesel.

Be that as it may, the challenges for mini-LNG plants seem to be identical to those that large-scale plants have: securing long-term customers. In a low-price environment, many buyers prefer to tap the spot market than to commit to long-term contracts that are the bread and butter of LNG producers. For all the benefits that small-scale LNG plants can deliver in the gas flaring area, finding enough consumers for the fuel remains the major challenge. This is because demand for LNG as fuel for oil production equipment depends on oil demand.

“Mini-LNG plants at the oil field only make sense if there are enough rigs and hydraulic pumps to be fuelled with gas. An alternative use is as fuel for ships-demand for LNG-powered smaller vessels is on the rise. But given the amounts of LNG that are used as fuel, small-scale producers would have to face the stiff competition of larger LNG companies.

“Replacing flaring with LNG production certainly sounds like a good idea. It could be a particularly good idea for bigger flarers than the U.S., such as Iraq,” OilPrice.com said.

Source: thenationonlineng.net