The case for a gas revolution

The case for a gas revolution

Fuel is a major component of every manufacturing or production process. However, the choice of fuel used is dependent on so many factors, such as price, availability of fuel, delivery channels, supply reliability etc.

The major fuels used in the commercial and industrial sectors include Natural Gas and its various forms such as Liquefied Natural Gas (LNG) and Compressed Natural Gas (CNG). Other energy sources are Petroleum derivatives such as Premium Motor Spirit (PMS), Automotive Gas Oil (AGO), Low Pour Fuel Oil (LPFO) and Liquefied Petroleum Gas (LPG) etc.

Natural gas is a hydrocarbon gas mixture mainly composed of methane, but commonly includes other elements such as ethane, propane, butane and condensates. Production of natural gas is typically either from gas associated with crude oil production (associated gas) or non-associated gas which occurs independently of exploration for crude oil.

Natural gas used in industrial endeavors is usually processed at gas processing plants in order to strip off heavier hydrocarbon components (propane & butane), condensates, and other natural gas liquids.

Petrolis a transparent, petroleum-derived liquid that is used primarily as a fuel in internal combustion engines, particularly motor vehicles. It is derived during fractional distillation process and has a translucent liquid form. Petrol is not used in its crude form. It is enhanced with a variety of additives and consists mostly of organic compounds obtained by the fractional distillation of petroleum.

LPFO is one of the products in the fractional distillation of crude oil. It is a dark viscous liquid and may have other varying colours such as dark brown and is popularly known as “black” or “crude” oil. LPFO is mostly used to run broilers in many industries especially textile and cement manufacturing industries.

Diesel fuel is widely used in most types of transportation. Unlike gasoline and liquefied petroleum gas engines, diesel engines do not use high-voltage spark ignition (spark plugs). Diesel fuel is produced from various sources, the most common being petroleum. Other sources include biomass, animal fat, biogas, natural gas, and coal liquefaction.

LPG, also referred to as simply propane or butane, is a flammable mixtures of hydrocarbon gases used as fuel in heating appliances, cooking equipment, and vehicles. LPG is prepared by refining petroleum or “wet” natural gas, and is almost entirely derived from fossil fuel sources, being manufactured during the refining of petroleum (crude oil), or extracted from petroleum or natural gas streams as they emerge from the ground.

Natural Gas is the cheapest available fuel source when compared with the aforementioned alternatives of PMS, AGO, LPFO and LPG. A comparison of the current prices of these fuel sources in terms of the Naira value of one million British Thermal Unit (1MMBTU) produced is shown below

Fig. 1

Also, industrial plants and machinery which use natural gas have lower service and maintenance costs, lower maintenance life time, and produced zero harmful emission (SO2)when compared with those using liquid fuels.The table below shows the relative maintenance cycle and emission associated with the various fuel sources.

Some industries and power plants have been able to take advantage of Natural Gas as amajor fuel source. This has been facilitated by the development of key pipeline infrastructure and upstream gas developments that enable gas delivery to their plants. For instance, development of the Escravos-Lagos Pipeline System (ELPS) which transmits gas from various field in the Western Niger Delta to Lagos has made it possible for various power plants along the pipeline route to offtake gas from the pipeline. Also, the development of ELPS has birthed the development of gas distribution franchise areas in the Lagos.  Many manufacturing industries have been able to take advantage of gas availability in these franchise areas and have realized over 50% in energy-saving when compared to the use of other liquid fuels.

Despite being the cheapest and cleanest source, the use of natural gas is not widespread in the country due to limited gas reserves development, inadequate pipeline infrastructure, supply insecurity caused by incessant vandalism of existing pipeline infrastructure and the absence of clear fiscal terms–particularly gas pricing mechanisms, and a legal and regulatory framework.

Currently, newer virtual pipeline technologies are being developed to address the issues of limited pipeline infrastructure and the risk of supply security. Compressed Natural Gas (CNG) and Small Scale Liquefied Natural Gas (LNG) are two virtual pipeline solutions currently in development across Nigeria.

CNG refers to natural gas compressed to about 250bar and transported in steel tanks via trucks to end customers. A pressure reduction and monitoring station (PRMS) is usually installed at the customer location to provide the appropriate pressure needed by the customer.

LNG refers to natural gas that has been liquefied by cooling to -162oC. The liquefied gas is then transported in cryogenic tanks via trucks and re-gasified at the customer location.

Currently, there are about over 12 CNG plants across Nigeria with a combined compression capacity of over 65MMscf/d. Domestic LNG distribution is relatively new in Nigeria with two plants with a combined installed capacity of about 60MMscf/d currently under development by indigenous firms. These plants are expected to come on stream in 2018.

CNG is often confused with LNG, and vice versa. The similarity is that both are stored forms of natural gas. However, the major differences between both forms include:

1.     CNG has a lower cost of production and storage compared to LNG as it does not require an expensive cooling process and cryogenic tanks.

2.     However, CNG requires a much larger volume to store the energy equivalent of gasoline or petrol and the use of very high pressure (3000 to 4000 psi, or 205 to 275 bar). As a consequence of this, LNG is often used for transporting natural gas over large distances, in ships, trains or pipelines, where the gas is converted into CNG before distribution to the end user.

Although, virtual pipeline solutions are relatively more expensive than physical pipeline solution (as shown in Figure 1), they provide a reliable mechanism for gas delivery for stranded customers in locations where pipeline infrastructure is unavailable.Prices for pipeline gas, CNG and LNG are typically stable over a long period of time, except for annual escalation for inflation, due to the long term nature of gas contracts. As such these prices are predictable and subject to lesser fluctuations when compared to alternative fuel sources which are dependent on crude prices.

Overall, Natural Gas Based solutions (pipeline and virtual pipeline) can deliver at least a 30% reduction in fuel cost when compared to other fuel sources such as diesel, PMS and LPG.But most Importantly, natural gas can be the catalyst needed to propel Nigeria’s industrialization and economic advancement.

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