8.1.2 Quantifying the Value of Flexibility in Design and Management of Onshore LNG Production System

Abstract

AbstractThis paper presents the results of an analysis focusing on the evaluation of a large‐scale onshore liquefied natural gas (LNG) project under market uncertainty and flexibility. Market studies have shown increasing trends in LNG demand in the next few decades in the transportation sector. A proprietary technology has been developed as a solution for offshore associated gas applications for small‐to‐medium scale capacity (~0.2 to 1 million ton per annum or MPTA). This technology is also suitable for onshore micro‐LNG applications as a company is evaluating business opportunities in the transportation industry. This study is concerned with the long‐term design and deployment of the technology in a growing market to provide LNG for transportation purposes. There are currently two designs considered: 1) small micro‐LNG production facilities combined with fueling stations, and 2) a big centralized production facility with satellite fueling stations along the pipeline. A third design alternative is developed based on a flexible phasing deployment strategy to improve the economic performance in comparison with other design strategies. To compare the design alternatives under uncertainty, a structured methodology is introduced and applied based on several economic lifecycle performance indicators (e.g. Net Present Value, Initial Capital Expenditure (CAPEX), etc.). Different demand scenarios are incorporated explicitly in the project evaluation procedure. The final results demonstrate about 36% value improvement for the flexible design as compared to a centralized inflexible design strategy, increasing as uncertainty in parameter estimation increases. A Graphical User Interface (GUI) is developed to simplify evaluation procedures, and provide better support for decision‐making and dissemination across a major company's activities. The flexible design helps deliver more value to the clients.