Gas distribution network for households in Saudi Arabia: economic and demand estimation studies

Abstract

This study evaluates the economics of establishing a residential natural gas network in Saudi Arabia’s Eastern Province (EP) to cater to the household demand for natural gas. The paper focuses primarily on household use of natural gas for cooking. Additional economic analysis of other household uses – as air conditioning, space and water heating – is incorporated. Demand streams of various consuming segments are analysed to estimate the volume of the daily natural gas supply by the network. Economic analysis employs financial net present value methodology to define the cost effectiveness of the proposed network. Economic rent and opportunity costs of utilising other sources of energy and their efficiency differences are plugged into the economic equation. The quantity of natural gas supply for the targeted 322,000 households located in the EP is estimated at 23.2 MMscfd. The effect of the government subsidy of natural gas prices is quantified. The study concludes that the project has a positive net present value – at a range of natural gas fuel prices and required rate of returns of future incomes – during the life span of the project.