Evaluation of utilization alternatives for stranded natural gas

Abstract

Options for exporting natural gas from stranded oil and gas fields to markets include pipelines, LNG (liquefied natural gas), CNG (compressed natural gas), GTL (gas to liquids), GTS (gas to solids), and GTW (gas to wire). Thus, the key question is which option is the most robust in ensuring the security of investment over a project life cycle against market fluctuations, trade embargos, political changes, technical advances, etc. Excluding pipelines, LNG, CNG, and GTL have attracted increasing investor attention during the last two decades. Although studies abound on economic comparisons of these processes, a systematic method to address this important problem in the presence of uncertainty seems missing in the literature. This work presents such a method based on decision analysis cycle and considers oil and gas prices as uncertain. Using NPV (net present value) as the decision criterion, it presents the computation of "expected NPV" of each gas utilization alternative to identify the best option. It includes the entire well-to-market supply chain, from extraction, conversion, and transportation, to re-conversion at the target market. Finally, it identifies the sweet spots for LNG, CNG, and GTL alternatives for different reservoir capacities and market distances. © 2012 Elsevier Ltd.