Optimal profitable allocation of associated natural gas resource on a countrywide basis to mitigate flaring

Abstract

The flaring of large volumes of the natural gas that is produced as a by-product of crude oil, has puzzled the energy-hungry world for long. In recent years, it has also drawn the angst of the environmental and global-warming advocacy groups. The issues behind gas flaring are complex, as they involve a dynamic interplay of geosciences, engineering, economics, finance and natural resource policy-making.The purpose of this research is to analyze the associated gas problem quantitatively from a country-wide perspective. Unlike prior studies, this work focusses on the upstream side where the crucial strategic decisions are made upfront. To this end, a mathematical model is proposed for seeking the optimal integrated management strategy for the said national resource. The model is based on the Mixed Integer Linear Programming (MILP) technique and consists of scores of techno-economic decision variables and constraint equations along with a profit maximization objective.The model is general in nature but is applied herein to Nigeria as a case study. Several simulation runs are made to provide results for explanatory and prediction purposes. Model results indicate, for example, that a minimum gas price of $4.4/Mscf and minimum spend of $22B are jointly required to achieve zero-flaring, yielding a $10B profit. This is achievable via a strategy of reinjecting all associated gas produced from medium and large-sized fields, but gathering and selling all gas from small fields. Capital availability, rather than nationwide government-decreed flaring control, is shown to be the dominant determinant of profitable flaring mitigation. The model has proven to be a valuable tool for establishing the inter-relations between the key problem parameters under various pricing and resource base scenarios, and for prognosticating the trajectory of the gas industry in various jurisdictions.