1

ECONOMIC VIABILITY OF UNDERGROUND NATURAL GAS STORAGE

CASE STUDY: NIGER DELTA

BY

NWACHUKWU KELECHI .C. (20061516763)

IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF BACHELORS OF ENGINEERING (B.ENG)

IN PETROLEUM ENGINEERING.

SUBMITTED TO

THE DEPARTMENT OF PETROLEUM ENGINEERING

SCHOOL OF ENGINEERING AND ENGINEERING

TECHNOLOGY

FEDERAL UNIVERSITY OF TECHNOLOGY, OWERRI.

OCTOBER, 2011.

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CERTIFICATION

This is to certify that this work titled “Economic Viability of Underground

Natural Gas Storage; Case Study: Niger Delta” was done by Nwachukwu

Kelechi .C. (20061516763) a final year student of the department of Petroleum

Engineering, School of Engineering and Engineering Technology, Federal

University of Technology Owerri and was duly approved by the following;

……………………….. ……………….

Engr. B. Nzeribe Date

(Project Supervisor)

………………………. ………………..

Engr. Dr M.S Nwakaudu Date

(Head of Department)

……………………… ………………..

External Supervisor Date

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DEDICATION

This work is dedicated to God all mighty for his love, guidance, protection

and divine enablement throughout this work. This work is also dedicated to my

dearest family for their immense support in making sure this work was done well.

This work is also dedicated to Engr. B. Nzeribe, sir your immense support

and trust during the period of this work, may God repay you in full.

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ACKNOWLEDGMENT

It seems impossible to accomplish an academic task of this nature without

experience in some intellectual depths, in recognition of this fact therefore, I

acknowledge all those group or persons whose moral support had assisted me to a

maximum extent in the realization of this work. I specially give thanks to my dear

parents Mr. & Mrs. G.O Nwachukwu and sisters for their moral and financial

support in the production of this work.

I also acknowledge the good effort of my lecturers and course mates for

their kind support and love, may the good God bless you all.

My thanks goes to all my friends Inyang, Chinasa, Funmi, Ekele, Ebube,

Ike, Marvelous, Obumse, Tony, Solomon and all Gymites you people are the best,

I wouldn’t have achieved half of this work without your support and love. Thanks

a million

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TABLE OF CONTENT

TITLE PAGE

CERTIFICATION…………………………………………………………i

DEDICATION…………………………………………….……………....ii

ACKNOWLEDGEMENT……………………………………….…….….iii

TABLE OF CONTENT…………………………………………………...iv

ABSTRACT…………………………………………….…………...…….vii

LIST OF ABBREVIATIONS……………………………………….……..viii

LIST OF FIGURES……………………………………………….….…….xi

LIST OF TABLES…………………………………………………...……..xiii

CHAPTER ONE: INTRODUCTION…………………….………………..1

1.1 OVERVIEW OF UNDERGROUND STORAGE………………………1

1.2 FACTORS FAVOURING UNDERGROUND GAS STORAGE IN

NIGERIA………………………………………………………….…………..4

1.3 FACTORS AFFECTING/LIMITING UNDERGROUND STORAGE IN

NIGERIA………………………………………………………………………4

1.4 STATEMENT OF PROBLEM………………………………………....6

6

1.5 SIGNIFICANCE OF STUDY…………………………………….……6

1.6 PROJECT OBJECTIVES………………………………………………7

1.7 SCOPE OF STUDY…………………………………………………....7

CHAPTER TWO:LITERATURE REVIEW………………………….....8

2.1 DESCRIPTION OF NATURAL GAS STORAGE PROCESS

………………………………………………………………..………………8

2.2 FACTORS TO BE CONSIDERED IN UNDERGROUND NATURAL

GAS STORAGE........................................................................................10

2.3 TRADITIONAL USE OF UNDERGROUND NATURAL GAS

STORAGE ................................................................................................10

2.4 TYPES OF UNDERGROUND NATURAL GAS STORAGE…...….14

2.4.1 Depleted Reservoirs……………………………………………15

2.4.2 Aquifers ..................................................................................19

2.4.3 Salt Caverns………….……………………….………………..22

2.5 ECONOMICS OF GAS STORAGE………………….………………..26

2.6 NIGERIA AND NATURAL GAS…………..…..…………………..31

CHAPTER THREE: METHODOLOGY…………..……………………36

3.1 CASE STUDY……………………………………………………........36

3.2 FIELD HISTORY……………………………………………………...36

3.3 GEOLOGICAL DATA………………………………………..……….37

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3.4 COMPOSITION OF NATURAL GAS TO BE STORED….………38

3.5 DESIGN, OPERATION, AND MONITORING OF UNDERGROUND

STORAGE RESERVOIRSINVOLVE RECOGNITION OF

THREE BASIC REQUIREMENTS………………………………………...43

3.6 COST OF OPERATION AND DEVELOPMENT…………………..45

3.7 GAS UTILIZATION PROJECTS …………………………………....48

3.8 GAS PRODUCTION AND UTILIZATION IN THE REGION……..48

CHAPTER FOUR: RESULT AND DISCUSION…………………………49

4.1 STORAGE CAPACITY……………………………………………..…..49

4.2 MINIMUM REQUIREMENT FOR CONSIDERING AN UNDERGROUND

PROSPECT………………………………..………….…51

4.3 GAS UTILIZATION PROJECTS AND PRODUCTION……..……….54

4.4 DISCUSSION…………………………………………………………...

CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS……64

5.1 CONCLUSION…………………………………………………………64

5.2 RECOMMNEDATION………………………………………………...67

REFERENCES………………………………………………………….….68

APPENDIX…………………………………………………………………71

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ABSTRACT

For proper gas utilization, proper storage facilities are required to sustain

supply, and proper analysis must be carried out, in other to choose the best

candidate for storage. This work focused on the viability of underground gas

storage in the Niger Delta in order to sustain supply using deliverability,

containment, cost of operation and development, inventory, gas utilizing facilities

in the region; anticipated, ongoing and fully functional and the present rate of gas

production with the anticipated demand. To achieve this, data were gotten for

proper analysis of gas volume capacity for depleted reservoir indicated the cushion

gas requirement, working gas capacity and total volume of gas that can be stored.

The analysis of the work showed that total cushion gas requirement for the

well=8.99 BScf-10.79 BScf. Total working gas requirement = 7.19 BScf – 8.99

BScf and best option for storage in Niger-delta as depleted wells due to its

availability, size, cushion gas requirement, containment etc. The work further

recommends investment, full development and encouragement of underground

storage facilities in the region as soon as possible and certain incentives should be

put in place by the Government.

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LIST OF ABBREVIATION

A: areal extent of the reservoir

AENR: Agip Energy and Natural Resources

API0: oil gravity

ALSCON: Aluminium Smelting Company Of Nigeria.

AGA: America Gas Association

BBL: barrel (unit of oil or liquid measurement)

Bscf: Billion Standard Cubic Feet

Bscf/d: Billion Standard Cubic Feet per day

CNG: Compressed Natural Gas

G: Volume of gas to be stored

GDP: Gross Domestic Product

GFEG: Gas Fired Electric Generation

GTL: Gas To Liquid

H: Reservoir average thickness

JVC: Joint Venture Company

LNG: Liquefied Natural Gas

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LPG: Liquefied Petroleum Gas

M3: Cubic Meters

Mbbls: Million Barrels

Mmscf: Million Standard Cubic Feet

Mscf: Thousand Standard Cubic feet

NAFCON: National Fertilizer Company of Nigeria

NAOC: Nigeria Agip Oil Company

N.D: Niger Delta

NEPA: National Electric Power Authority

NGC: Nigerian Gas Company

NGL: Natural Gas Liquids

NGMP: Nigerian Gas Master Plan

NNPC: Nigerian National Petroleum Corporation

NOG: Nigeria Oil & Gas

NPDC: Nigerian Petroleum Development Company

NPV: Net Present Value

O&G: Oil and Gas

OML: Oil Mining Lease

Pc: Critical pressure

Ppc: Pseudo-critical pressure

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Ppr: Pseudo-reduced pressure

PHCN: Power Holding Company of Nigeria

PSI: Pounds per Square Inch

SCF: Standard cubic foot.

STB: Stock tank barrel

Swc: Connate or irreducible water saturation in a reservoir.

UGS: Underground Storage

Vb: Bulk volume

Vp: Pore volume

WAPG: West Africa Gas Pipeline

Z: Gas deviation factor

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LIST OF FIGURES

Fig 2.1: Gas Processing…………………………………………………….9

Fig 2.2 Working Gas Capacity by Type of Storage……………………..23

Fig 2.3 Daily Deliverability by Type of Storage…………………………23

Fig 2.4 Nigeria’s Historical Gas Utilization and Forecast Potential

Demand……….……………………………………………………………35

Fig 2.5: Gas infrastructural blueprint (NGMP)…………………………..35

Fig 3.1:Cost estimation for UGS storage development…………………..47

Fig 4.1: Estimated cushion gas requirement……………………………...55

Fig 4.2: Estimated rate of deliverability…………………………………..55

Fig 4.3: Estimated Containment…………………………………………...55

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LIST OF TABLES

Table 3.1:Average Compostion Mole Percent of Natural Gas in Nigeria……38

Table 3.2:Computation of Average Molecular weight, etc………………….39

Table 4.1:Results of computation……………………………………………48

Table 4.2 - Example Storage Contract for Depleted Reservoir Storage……..52

Table 4.3- Storage Facility Characteristics ………………………………….53

Table 4.4:Gas production and utilization (Mscf),2002–2010 ……………..53

Table 4.5:Gas production and utilization by Company(Mscf), 2010 ……….54

Table 4.7: Mean Impacts of main items of investment cost…………………54

Table 4.6:Gas utilization projects……………………………………………56

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CHAPTER ONE

1.0 INTRODUCTION

Natural gas is stored underground when it can be injected into natural rock

or sand reservoirs that have suitable connected pore spaces, and it is retained there

for future use. Underground natural gas storage can therefore be defined as the

storage of gas at various depths beneath the earth surface when the gas is not

needed for immediate consumption in order to support the natural gas demand in

domestic, commercial, industrial and export purpose when it is needed. The

underground storage of gas has played and continues to play a vital role in

supporting the development and stabilization of the gas market worldwide.

The purpose is to meet the growing demand for gas in the future and to stop

the wasteful flaring of gas at the same time. Natural gas is a mixture of

hydrocarbon gases and impurities. The hydrocarbon gases normally found in

natural gas are methane, ethane, propane, butanes, pentanes, and small amounts of

hexanes, heptanes, octanes, and the heavier gases. The impurities found in natural

gas include carbon dioxide, hydrogen sulphide, nitrogen, water vapour, and heavier

hydrocarbons.

1.1 Overview Of Underground Storage

The underground storage of natural gas began in Canada in 1915, and in the

United States the following year. These two countries were the first to realize the

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economic importance and technical possibility of storing natural gas in natural

reservoirs. The use of gas storage spread considerably with the development and

production of gas reservoirs at large distances from the areas where the gas was

used, and especially with the development of importation from one country to

another

UGS is the process which effectively balance a viable demand market with a

nearly constant supply of energy provided by the pipeline system. Natural gas is

stored underground in geological structures whose properties allow gas to be stored

and withdrawn when required. Gas storage is described as conventional when it is

carried out using depleted or partially depleted gas production reservoirs, semi

conventional depleted oil reservoirs or aquifers (in other words geological

structures containing water) are employed, and special when caverns excavated in

underground salt formations or abandoned coal mines are used.

The tendency to store gas in order to modulate supply began by using tanks

located at the surface near towns and as production fields became depleted, by

converting these into storage reservoirs. These have extremely high storage

capacity and are thus more suited to the growing need of the gas market for

storage. Today there are more than 580 storage fields in the world, of which 70%

are in the United States; the remainder are concentrated almost exclusively in

Europe and Russia.

Essentially, any underground storage facility is reconditioned before

injection, to create a sort of storage vessel underground. Natural gas is injected into

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the formation, building up pressure as more natural gas is added. In this sense, the

underground formation becomes a sort of pressurized natural gas container. As

with newly drilled wells, the higher the pressure in the storage facility, the more

readily gas may be extracted. Once the pressure drops to below that of the

wellhead, there is no pressure differential left to push the natural gas out of the

storage facility. This means that, in any underground storage facility, there is a

certain amount of gas that may never be extracted. This is known as physically

unrecoverable gas; it is permanently embedded in the formation.

In addition to this physically unrecoverable gas, underground storage

facilities contain what is known as 'base gas' or 'cushion gas'. This is the volume of

gas that must remain in the storage facility to provide the required pressurization to

extract the remaining gas. In the normal operation of the storage facility, this

cushion gas remains underground; however a portion of it may be extracted using

specialized compression equipment at the wellhead. 'Working gas' is the volume of

natural gas in the storage reservoir that can be extracted during the normal

operation of the storage facility. This is the natural gas that is being stored and

withdrawn; the capacity of storage facilities normally refers to their working gas

capacity. At the beginning of a withdrawal cycle, the pressure inside the storage

facility is at its highest; meaning working gas can be withdrawn at a high rate. As

the volume of gas inside the storage facility drops, pressure (and thus

deliverability) in the storage facility also decreases.

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1.2 FACTORS FAVOURING UNDERGROUND GAS STORAGE

IN NIGERIA

The principal drivers for the development of natural gas are usually

ü Urgent need to reduce flaring in the country

ü Desire for economic growth a

ü Desire for broad gas based industrial development

ü Governments desire to Transform the domestic market into a vibrant and

fully commercial gas market where the gas price stimulates investment in

supply and the sustainability of the market compliments the other regional

and export LNG markets enabling a balance portfolio.

ü The Nigerian Gas Master plan.

1.3 FACTORS AFFECTING/LIMITING UNDERGROUND GAS

STORAGE IN NIGERIA

Today’s commercial demand of gas in Nigeria is gradually increasing and is

expected to shot up in the next 5 – 15 years. Even if over the years the utilization

of gas in Nigeria has increased, yet a considerable amount is still been flared,

Instead of flaring this large volume of associated gas we should consider storing

them as done in other countries for future use when the prices of gas is high or

demand goes up.

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Factors hindering underground gas storage

Ø Lack of gas markets: Kirkland (ibid), chevron managing director(October

1997) noted gas commends such a low price in Nigeria, that it is difficult to

economically justify gas project and he advised that there is need to find and

develop markets that support higher gas price.

Ø Lack of adequate gas infrastructure to the available local markets from the

area of production

Ø Low technology and industrial base for energy consumption in the country

Ø Inadequate fiscal and gas pricing policies to encourage investment

Ø Cost of storage facilities

Ø Physical factor: physical isolation of Nigeria from international gas markets

due to vast distance rules out the possibility of gas export pipeline.

Ø The private sector are not playing to full capacity in the utilization of gas

and putting in place relevant gas infrastructures.

Ø Legislative factors: amount charge per thousand ft3 of gas to be flared is

something the company comfortable pay. Obviously operators in the

industry prefer to pay the penalty than put in place a gas utilization scheme.

Ø Inappropriate domestic pricing policy—government policy may also heavily

influence gas pricing, for example, through social or sector policies

Ø Economic factor: investigation shows that the main disincentive to

investment in the gas sub-sector is the non guarantee of good returns on

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investments. flaring is seen more economical when compared to cost of

processing and storage (this include cost of conversion into gas storage well

in the case of aquifer and salt cavern, cost of maintenance and monitoring

gas leakage, cost of injection and withdrawal).

1.4 STATEMENT OF PROBLEM

Sustainable supply of gas to support projects utilising gas within and outside

the country is a challenge with the anticipated increase in gas utilization in the

coming years, and the present production rate of about 6.55Bscf/d and the flaring

of 24.30% of the total production is not encouraging considering the future of the

gas market in Nigeria.

1.5 SIGNIFICANCE OF STUDY

This project will be significant in the following ways;

i. It will encourage O&G companies to stop the unnecessary wasteful flaring

of gas and protect the environment.

ii. Create a sustainable gas supply system for the various gas projects.

iii. Sustain governments zeal for gas to have a multiplier effect on the economy

iv. The future demand of gas will be taken care of at almost no cost i.e. cost of

base gas.

v. Help determine the viability of UGS in Nigeria

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1.6 PROJECT OBJECTIVES

• The main aim is to determine the viability of UGS in the Niger Delta.

• To determine the storage capacity of a depleted reservoir D in the region.

• To encourage the storage of gas instead of flaring, and to determine the

feasibility of gas storage in the region

• Cost specification of storage type(cavern, aquifer, depleted reservoir).

• Estimate the need of UGS in Nigeria

• Estimate the future expansion of natural gas transmission and distribution

• Gas utilization projects and plans .

• Promote the development of Nigeria underground natural gas storage.

1.7 SCOPE OF STUDY

This study will be restricted to the Niger Delta region of the country since

this is the source of the oil and gas in the country. The determination of the

viability of UGS facility in the region will be based its availability, capacity,

containment, cost of operation and development, gas utilization projects in the

country and the production rate of gas in the region. This is as a result of

insufficient data since it is not being practiced in the country at this time.

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CHAPTER TWO

LITERATURE REVIEW

2.1 DESCRIPTION OF NATURAL GAS STORAGE PROCESS

Gas stored in the reservoir must of course flow through the formation to the

well bore, this process being called the inflow performance of the gas well. It must

then flow upward through the well tubing to the surface. During this phase of the

production, two factors are important: the friction loss experience in the well

tubing and the resultant pressure drop and the amount of suspended water present.

Even for a well producing hardly any water at all, an accumulation of water in the

well tubing will build up in time, depending on the production rate. This will lead

to an overall increase in density of the flowing gas with a consequent high

hydrostatic pressure drop. This phenomenon of liquid held up is particularly

important at flow rates.

Finally after leaving the wellhead, the gas will have to be dehydrated and

treated to pipeline quality, making sure that the gas is sweetened (removing the

sulphur content), gas is then compressed by increasing its pressure; this is then

injected into the storage reservoir with the pressure being monitored to know we

reached full storage capacity of the reservoir in use. The main surface

facilities of storage fields are the compressor station, the gathering system, the

treating and gas metering plants. The treatment of the gas withdrawn consists in

the separation of water and hydrocarbon liquids in order to meet the quality

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standards required for pipelines and consumers. As a consequence, on the whole,

the treatment processes are not different from the ones of the gas producing fields.

The only difference is that during the withdrawal period there is a wide range of

pressures and rates which require a higher flexibility to take into account sudden

closures and openings or sharp variations in flow rates. The most widespread and

convenient dehydration process uses triethylene glycol (V. Bolelli,1991)

Fig 2.1: Gas Processing

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2.2 FACTORS TO BE CONSIDERED IN UNDERGROUND

NATURAL GAS STORAGE

Geology is a key issue for determining the location of new traditional

underground storage projects and the expansion of existing projects. There are

areas that have the geological characteristics to construct storage fields; other areas

do not. Selection of any new underground gas storage location depends on

geological and engineering properties of the storage reservoir, its size and its

cushion, or base, gas requirements. It also depends on the site’s access to

transportation pipeline infrastructure, gas production sources, and to markets

(FERC,2004).

2.3 TRADITIONAL USE OF UNDERGROUND NATURAL GAS

STORAGE

Storage facilities were developed to allow the production capacity of natural

gas to be moved from one point in time to another. Natural gas that reaches its

destination is not always needed right away, so it is injected into underground

storage facilities where it can be stored for an indefinite period of time. Primarily,

underground storage provides an economical way to supply large volumes of gas

when it is needed. Storage improves the transmission line load factor by providing

a choice of delivering gas either to the users or to the underground storage

reservoir. Another use is the transfer of gas from a highly competitive field to a

field wholly controlled by one company. Under this arrangement the gas can be

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withdrawn as needed and used to best economic advantage. Also, the storage field

can be used advantageously to store gas from low pressure wells, usually the

smaller wells, during the off-peak season. In the case of long transmission lines,

underground storage near the consuming centres also acts as a safeguard or

reservoir in case of pipeline failures. Since the world production and distribution

capacity is only slightly above demand and periodic increases in demand or

decrease in production are quickly felt by consumers, governments and private

consuming companies. The large reserves required to provide effective protection

from supply interruptions have led many of these reserves to be primarily based

underground. A final major advantage of underground storage is safety. The

placing of hydrocarbons underground in a protected, oxygen-free Underground

Storage of Natural Gas environment greatly reduces the risk of fire or explosions

(Ikoku C.U, 1989). In general The traditional services offered by storage reservoirs

are production services, seasonal control services and strategic reserves

services(Eni, 2005).

Production Services

For technical and financial reasons, production reservoirs are developed in

such a way as to consider optimal a daily production profile which is essentially

flat. This is due to the fact that the determination of the size of the treatment plants

and the number and type of wells to allow production fields to follow market

fluctuations would entail additional costs and financial problems. Production

services thus involve the storage of a sufficient volume of gas in order to obtain

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optimal performance from the production system, both from the point of view of

production and of surface facilities.

Seasonal Control Services

Seasonal control is the traditional service provided by storage systems. Gas

is injected during the spring and summer and then withdrawn during the autumn

and winter to meet the demands of the market. Each natural gas sales company

estimates the need for stored gas on an annual basis at the beginning of winter.

More specifically, each company defines, on the basis of availability from national

production and/or imports, the contribution required from storage reservoirs to

meet its total predicted sales (both in terms of seasonal volumes and daily peak

rate), on the basis of individual sales sectors, i.e. the residential, industrial and

thermoelectric sectors.

Strategic Reserves Services

Another fundamental role played by storage systems is to provide the

strategic reserves to be used to guarantee supply: the volume of gas which must be

kept in storage reservoirs for this purpose is generally established by the relevant

government authorities of each country. The gas held in storage reservoirs may be

owned by storage operators or by gas sales companies. Strategic gas reserve is only

withdrawn under unusual circumstances such as particularly hard winters, or

significant and prolonged reductions in gas imports or national gas production.

Once produced, other gas is re-injected into the reservoirs during the summer in

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order to maintain the volume considered necessary to ensure gas supply at a

national level. The issue of strategic reserves is particularly important in countries

where the availability of gas depends heavily on imports and is thus subject to

potentially prolonged reductions due to political problems, or the partial or total

unavailability of transport systems due to breaks in pipelines or the failure of

boosting stations.

Special Services

Among the new services on offer, the most common are listed below.

ü Parking/Peaking Services - This involves injecting and withdrawing gas

over short periods of time, ranging from a week to a month, thus allowing

the customers of the storage to meet temporary imbalances in the volumes

supplied and sold, avoiding the application of penalties by the transport

company.

ü Interruptible storage - This is a service in which both working gas and peak

rate are offered at particularly low prices, since the storage operator may

interrupt supply at very short notice. These services which are offered on the

basis of the capacity margins inherent in a storage system may become

unavailable in the event of unplanned maintenance work, plant failures, the

closure of wells, etc.

ü Speculative Market Services where high deliverability storage quickly

responds to changing gas prices capitalizing on price movements at market

centres, and Emergency strategic storage (i.e. able to make up for a possible

27

temporary suspension of supplies) is becoming more and more crucial to

safeguard the continuity in imports but also to better negotiate supplies.

ü Meet the regulatory obligation to ensure supply reliability at the lowest cost

to the ratepayer by maintaining specific levels of storage inventory

ü Support other electric generation loads

2.4 TYPES OF UNDERGROUND NATURAL GAS STORAGE

There are three main types of underground storage: depleted gas and oil

reservoirs, aquifers, and salt caverns. Today most gas storage is carried out in

depleted gas fields (around 70%), followed by those performed in aquifers and

those in salt caverns. However, all have similar operational characteristics. All

underground storage has a capacity measured in Bcf (billion cubic feet), which can

be divided amongst the amount of working gas and base gas within a facility.

Often when a capacity of a storage facility is quoted, it is referring to the working

gas capacity seeing as it is the amount which can be withdrawn and injected into a

facility. Every storage facility comes attached with a maximum and minimum

withdrawal and injection rates which are typically expressed in Bcf/day. The

injection and withdrawal rates for natural gas fluctuate based on the amount of

pressure (PSI) within the storage facility. Withdrawal rates share a direct

relationship with pressure while injection rates maintain an indirect relationship.

Pressure for a facility is also bounded by a maximum and minimum quantity which

28

is determined by the volume, depth, and structure of a facility. These operational

characteristics determine the operational flexibility of a facility.

2.4.1 Depleted Reservoirs

An underground gas storage field or reservoir is a permeable underground

rock formation (average of 1,000 to 5,000 feet thick) that is confined by

impermeable rock and/or water barriers and is identified by a single natural

formation pressure (FERC, 2004), it is the most prominent type of underground

storage due to their wide scale availability. These storage facilities are gas or oil

reservoir formations that have already been tapped of all their recoverable resource

through earlier production, leaving an underground formation geologically capable

of holding natural gas. As a result, storage facilities of this nature are abundant in

producing regions. Of the three types of underground storage, depleted reservoirs

are the cheapest and easiest to develop, operate, and maintain. Using an already

developed reservoir for storage presents the opportunity to reuse the extraction and

distribution equipment left over from when the field was productive, reducing the

cost of conversion to gas storage (Natural gas .org,2004).

The expertise developed in countries where depleted gas reservoirs are used

allow guidelines to be drawn up for the selection of fields which are to be

converted into gas storage. This selection is based on a careful analysis

of geological data and the physical parameters of the pre-selected structures. The

most important factors are: the shape and dimensions of the geological structure,

29

the aquifer size, the gas-water contact (in the case of depleted or partially depleted

reservoirs), the properties of the reservoir rock and cap rock.

The most important physical parameters of the reservoir rock, which require

careful evaluation, are:

• The porosity, which should be extremely high, thus providing greater storage

capacity.

• The permeability, which expresses the ease or otherwise with which the rock

allows a fluid, liquid or gas, to flow through it; the higher the permeability of the

reservoir rock, the better suited it is to storage.

• The water saturation, which should be as low as possible since, if it is high, it

reduces available volume.

Another factor to be considered is the ‘drive mechanism’, which expresses

the ability of the aquifer to move within the reservoir rock as the reservoir is filled

and emptied. In the depletion drive reservoirs the gas-water contact remains

substantially stable during the productions and injection phases allowing high

performances and minor problems during the production. On the contrary, in the

water drive reservoirs the gas-contact moves upwards during the production phase

and the water which has risen must be pushed back during the gas injection phase.

In these reservoirs the performance is reduced due to water production and the

need for more pressure to displace the water.

Storage in partially or wholly depleted oil reservoirs has similar

characteristics to that in gas reservoirs converted into storage; consequently some

30

of the operational and development methods applied to the latter remain valid. In

some cases, the injection of gas into an oil reservoir may form part of the

secondary recovery project for the oil itself; in this case as well as the typical

benefits of storage there are also those of the additional recovery of oil. It should

be added that the treatment facilities needed to give the gas the requisite quality

specifications before it is channelled into the transport network often differ from

those needed for gas reservoirs, since the fraction of liquid hydrocarbons

suspended in the gas must be removed (Eni, 2005).

In order to sustain pressure in depleted reservoirs, the facility maintains

equal parts base and working gas. However, depleted reservoirs, having already

been filled with natural gas, do not require the injection of what will become

physically unrecoverable gas seeing as it already exists in the formation. Depleted

reservoirs with high permeability and porosity are ideal for natural gas storage,

porosity lending itself to the amount of natural gas it can hold and permeability

determining the rate of flow of natural gas through the formation. This in turn

determines the injection and withdrawal rate of working gas. Foh et al., (1979) in

his work discussed the delivery rates and how it could be enhanced by an active

water drive, using water to displace gas by filling previously gas-filled pores. A

suitable aquifer for storage will have geology similar to depleted gas reservoirs.

The potential reservoir must have ample porosity and permeability with an existing

formation pressure and large reservoir capacity. Gas stored within aquifers are

31

typically drawn down once during the winter season. However, aquifers may be

used to meet peak load rates.

Disadvantages of using depleted reservoirs are the uncertainty of capacity.

The configuration of the geological formation is never fully used since it runs the

risk that injected gas may diffuse into the outer veins of the formation and becomes

inaccessible. Other disadvantages include a reservoir’s limited cycling capabilities,

where working gas volumes are usually cycled only once per season. In addition,

reservoirs are characterized with having low deliverability and thus would not be

well suited for peaking services. It is most typically employed for seasonal cycling

(NaturalGas.org 2004).

George G Bernard et al(1970) evaluated the effectiveness of foam in

preventing the escape of gas from a leaky gas storage reservoir. They simulated the

behaviour of a leaky gas reservoir with a sandstone model and found that foam was

99% effective in reducing leakage of gas through the model. Foam, because of its

unique structure, reduces gas flow in porous media. The blocking action of foam

was uniquely suitable for sealing leaks in underground gas storage reservoirs. It

was discovered that the amount of foaming agent required to seal a leak depends

on the adsorption-desorption properties of the agent. The best result was obtained

after testing some foaming agents with a modified anionic esters of relatively low

molecular weight. He suggested that foam generation is an effective and

economical method for reducing or stopping gas leakage from an underground gas

storage reservoir.

32

2.4.2 Aquifers

Only if a depleted gas or oil reservoir is unavailable or unsuitable would

Storage of Natural Gas consideration be given to using a water-bearing structure or

aquifer as a storage medium, tests would have to be conducted to determine the

suitability of such a structure to hold gas without leakage to overlying or

underlying formations(Ikoku, 1989). Aquifers are underground permeable rock

formations that act as natural water reservoirs (Dietert and Pursell, 2000). When

reconditioned, these formations may be used as natural gas storage facilities where

gas is injected on top of the water formation displacing the water further down

within the structure.

Advantages of aquifer storage include their close proximity to markets

where other geological reservoirs are not readily available. Deliverability rates may

also be enhanced due to the presence of an active water drive which increases the

storage facilities overall pressure. The high deliverability allows the working gas

volumes to cycle through the facility more than once per season.

Most of the following requirements must be satisfied for a properly designed

aquifer storage. There should be a large enough layer of water bearing rock to

accommodate a worthwhile volume of gas. The rock should have a porosity that

enables water to be forced out by gas at a reasonable pressure and the rate at which

gas can be withdrawn should be suitable. The structure of the layer should

preferably be dome shaped, and the aquifer should be closed on all sides. There

33

should be a suitable layer of completely impermeable rock above the aquifer layer.

And the aquifer should be situated in a continuous, unfaulted layer of rock.

The most important requirement for storage facilities in aquifers is the seal

of the cap rock, which must be suitably thick and have low permeability values,

close to zero, as in shale formations. This second requirement is necessary as

during the injection of gas the hydrostatic pressure is always exceeded. When the

original pressure is exceeded in order to increase the volume of working gas in

storage of this type (and that in depleted gas reservoirs), care must be taken not to

exceed the threshold pressure, in other words the pressure above which the gas

begins to pass through the cap rock. The threshold pressure is determined in the

laboratory by means of tests on cores collected during the drilling phase, and

subsequently with long injection tests performed in the wells (early injection).

When storage is initiated in an aquifer, the gas displaces the water, advancing more

rapidly where permeability is higher, and thus leads to the formation of a gas

bubble. After a few years, as injection continues, the water in the upper part of the

reservoir is entirely displaced by the gas; at this point the storage can become

operational (Eni, 2005). It was observed that in an underground gas aquifer

containing water concentration of dissolved solids, knowledge of the hydrostatic

head at two points does not necessarily enable one to determine the direction of

flow, if any, between the two points. Secondly, a trough filled with dense water

can serve as a barrier to flow and also, that a downward potential gradient across a

cap rock can decrease the chance for leakage of stored gas. If the water above and

34

below the cap have different densities, this must be taken into considerations in

determining the total effect of the observed gradient (D.C. Bond & K. Cartwright,

1969). Slagle et al presented the problems associated with using slotted liners and

sand screen in protecting the aquifer storage from sand production, the liners either

plugged or had holes eroded in them by the sand, The slotted liners allowed too

much sand to be produced and had to be removed when the wells needed

stimulating and cleaning out. Therefore, the method of plastic sand consolidation

was investigated by them. They came to a conclusion that for the ultra-low-

temperature, high-stress requirements imposed on an aquifer storage reservoir the

plastic consolidation system appears to be the best (slagle et al, 1969). Advances in

aquifer storage concern the reduction of investment costs of cushion gas by

partially substituting it with inert gases such as CO2 or N2 . The risk is the

possibility of mixing these inert gases with working gas, thus not respecting the

pipeline quality standards (V. Bolelli,1991).

Dehydration is necessary in storage projects involving aquifers or water

drive fields, The produced gas is saturated with water and, in cold weather,

hydrates form and plug surface fittings. This is often prevented by wellhead heaters

or by methanol injection at the Wellhead. The gas then Loses its water to

diethylcne glycol or a dry desiccant before it travels on to the market (Keith H.

Coats, 1966)

Aquifer storage is the least desirable form of storage due to its physical and

economic disadvantages. A significant amount of time and money is spent testing

35

the suitability of an aquifer for natural gas storage and subsequently developing the

infrastructure needed for an effective natural gas storage facility. In addition, in

aquifer formations, base gas requirements are as high as 80 percent of the total gas

volume. Unlike base gas from depleted reservoirs, this base gas is unrecoverable in

aquifer storage due to the risk of facility damage. This high base gas requirement

increases the initial cost of capital for aquifer storage projects, thus limiting their

number. Most aquifer storage facilities were developed when the price of natural

gas was low, meaning this base gas was not very expensive to give up (Natural

gas.org,2004).

2.4.3 Salt Caverns

For storage in salt formations, caverns obtained by dissolving the salt mass

in fresh water pumped through one or more wells are used. The salt is then

extracted from the water; when this is not considered economically viable, it is re-

injected into another suitable geological formation. An understanding of the shape

of the cavern and the properties of the rocks surrounding it are important elements

for determining the minimum and maximum pressure at which the storage can be

operated (Eni, 2005). Salt cavern capacity typically is 20 percent to 30 percent

cushion gas and the remaining capacity is working gas. Working gas can generally

be recycled 10-12 times a year in this type of storage facility. These facilities are

characterized by high deliverability and injection capabilities and are mainly used

for short peak-day deliverability purposes (i.e., for fuelling electric power plants)

(FERC 2004, pp4).

36

Fig 2.2 Working Gas Capacity by Type of Storage

Fig 2.3 Daily Deliverability by Type of Storage

Three factors should be considered in selecting a storage cavern to be

created by solution mining: a sufficient salt thickness at adequate depth, an

adequate supply of fresh water for salt leaching (solutioning), and a means of brine

disposal. The process of constructing caverns by solution mining salt formations is

conceptually simple, involving the injection of unsaturated "raw water" into a salt

deposit and removing nearly saturated brine, thereby creating a cavity. This general

procedure has been used for hundreds of years for the production of salt, but

generally little or no concern was given to the shape, stability, or pressure tightness

of the produced caverns (Ikoku C.U, 1989). lain Knott and K.G. Cross described

how new site selection criteria were established in a feasibility study, summarises

37

the engineering and geological requirements for cavity development through

leaching, concentrating on the evaluation and interpretation of existing geological

information in the area to establish the most favourable site and then concluded

that that the geological study was the most important criteria in assessing a new

Greenfield site location and The chosen new site location cannot be proved

feasible until a well is drilled to prove suitable salt thickness and purity to support

cavity development. However, the geology study increased confidence in finding a

suitable site before committing to major expenditure (lain Knott and K.G.

Cross,1992).

Han et al., (2006) in his work indicated that developed caverns will possibly

intercept various lithologies within bedded salt formations and each layer will

contain its own set of properties that affect creep rates, deformation, and slip

between bedding planes . Underground salt formations are well suited to natural

gas storage allowing for little injected natural gas to escape from the formation

unless specifically extracted. The walls of a salt cavern have the structural strength

of steel making it resilient against degradation over the life of the facility. Base gas

requirements are the lowest of all three storage types, requiring on average only 33

percent of total gas capacity to the natural gas storage vessel which maintains very

high deliverability rates, exceedingly higher than that of depleted reservoirs and

aquifers. This allows for natural gas to be more readily withdrawn, sometimes on

as little as an hour’s notice, which is well suited for satisfying unexpected surges in

demand. Yuan Guangjie et al (2008) introduced various corrosion phenomena that

38

are encountered during the operation of leaching salt caverns and during natural-

gas injection and withdrawal. He discussed the main factor that causes corrosion

such as brine, air, microbes, components of natural gas, gas injection velocity,

operating status as well as some measures of preventing corrosion. He concluded

that the flow velocity of injection water, the mass of dissolved oxygen and partial

pressure of carbon dioxide are the main corrosive factors of wellhead and strings.

He presented the measures of preventing corrosion such as; Oxygen scavenger and

disinfectant (i.e. addition of either ferrous chloride or stannous chloride or

hydrazonium regularly into the injection water), coating protection, and annulus

protection liquid and cathodic protection.

The caverns also offer operational flexibility having the ability to cycle

working gas four to five times a year, reducing the per-unit cost of each thousand

cubic feet of gas injected and withdrawn. This multiple cycling capability coupled

with its high deliverability is why salt caverns are well suited for peaking services

as well as responding to volatility in natural gas market prices for commodities

traders. . Salt domes are thick homogeneous bodies located largely along the Gulf

Coast. Due to the salt’s homogeneous nature and thus isotropic properties caverns

created within domes are structurally stable above a depth of 6000 ft Below 6000 ft

salt deformation is great and cavern stability is difficult to maintain (Bruno et al.

2002)

Drawbacks of this form of storage are volume limitations where each cavern

size typically ranges from 5-10 Bcf of working gas, considerably smaller than

39

capacity capabilities of depleted reservoirs and aquifers. In addition, start-up costs

generated during cavern development are substantial, and the disposal of saturated

salt water produced during the solution mining can be detrimental to the

environment (NaturalGas.org 2004).

2.5 ECONOMICS OF GAS STORAGE

The variations in the physical characteristics of each of the storage facilities

affect the amount of pressure that can be maintained in the different facilities. The

amount of pressure a facility can hold is important because it determines the speed

with which gas can be injected into and withdrawn from storage. Higher pressures

allow the gas to be injected into and withdrawn from the storage facility more

quickly, providing what is referred to as a higher deliverability rate. Facilities with

higher injection and withdrawal rates can be filled and emptied more times over

the course of a year, in other words facilities with higher deliverability rates are

able to have more injection/withdrawal cycles per year.

When a storage facility is full, the pressure is higher than when it is only

partially full. Thus, injection and withdrawal occurs at faster speeds when a facility

is fuller. The more empty a cavern is, the more difficult it becomes to extract the

gas. Some gas may not be able to be extracted at all. This non-extractable gas is

called the “base gas” or “cushion gas.” The extractable gas is called the “working

gas.” The three types of underground storage vary in the percentage of capacity

that ends up as base gas.

40

The investment cost for the development of a new storage field depends on

the type of storage and, in the case of identical types of storage, on its capacity,

which may or may not permit economies of scale. Investment costs for a storage

project can be subdivided into:

a) exploration costs (unnecessary where partially depleted or depleted gas/oil

reservoirs are used)

b) drilling costs which are related to the number and depth of the storage wells.

c) costs of the cushion gas volume

d) costs of surface facilities, related to the size of the treatment and compression

plants.

The overall cost of a single storage facility depends on:

a) the size of the surface facilities necessary for treatment and compression of the

gas.

b) the number and depth of the wells

c) the number of caverns/wells in the case of salt cavities.

d ) the volume of cushion gas.

Jerzy Stopa et al stated that UGS require high capital costs and definitely lower

level of operation cost in the future (Jerzy Stopa et al,2009)

Operating costs

The cost of managing gas storage can be divided into fixed and variable costs.

Fixed costs are those related to the workforce, insurance, maintenance work, etc.

41

Variable costs are the costs of the fuel and/or electrical energy required to power

the compressors, consumer goods, etc.

Economic considerations on the development of storage in depleted

reservoirs

For this type of storage exploration costs are generally unnecessary, since

the reservoir is already well-known from the point of view of both the geology and

productive behaviour. On rare occasions additional wells may be necessary in

order to locate the boundaries of the reservoir more accurately; more frequently,

new wells of a different type from existing wells may have to be drilled (horizontal

wells, wells with gravel pack, i.e. wells with calibrated sand filters or wells with

large diameter tubing) to allow high daily flow rates and reduce the time required

to inject/withdraw gas. Most existing surface facilities (gas dehydration plants,

compressors, pipelines, instrumentation, control room, etc.) and wells can also be

used for storage facilities, even though with some modifications. The volume of

gas to be immobilized as cushion gas depends on the size of the reservoir and the

drive mechanism (the volume of gas is smaller for reservoirs which produce by

simple expansion than for those which produce by water-drive). The impact of

cushion gas on total investments depends on how much of this is still present in the

reservoir when it is converted into a storage site, and on how much must be

purchased at market prices and injected into the reservoir (Eni, 2005). Apart from

natural gas, which during UGS construction is injected, increasing the buffer

42

capacity, there still remains native natural gas. In the case of future exploitation of

the field, this gas would be exploited and sold, generating income to the owner.

This fact should be accounted for when assessing the economic efficiency of an

UGS in a partly depleted field (J. Stopa et al, 2009). However, they generally have

low injection and withdrawal rates due to their low porosity, which keeps pressure

low in the wells. Consequently, most depleted gas fields are only capable of having

one injection/withdrawal cycle per year. In order to keep pressure up, about 50% of

the capacity of depleted reservoirs must be kept as base gas (Recon, 2009).

Depleted fields are the least expensive type of gas storage facility to develop at $5-

6 million per Bcf of working gas capacity (FERC 2004,).

Economic Considerations On The Development Of Gas Storage In

Aquifers

The search for these geological structures requires considerable exploration

expenditure to identify those suitable for storage. Once the structure has been

identified, it is necessary to drill all of the development wells and build the

treatment and compression plant, without the possibility of using existing facilities.

The volume of gas to be immobilized as cushion gas is large, since the front of the

aquifer must be kept at a distance from the productive zone; the impact on total

investments is significant, since all of the gas used for this purpose must be bought

on the open market and injected into the reservoir (Eni, 2005). Aquifers are

underground porous, permeable rock formations that act as natural water

43

reservoirs. Some aquifers can be converted into gas storage reservoirs, though at a

higher development cost than the other two types of underground gas storage. Gas

extracted from a water-bearing aquifer typically requires further dehydration prior

to shipping. Aquifers typically require more base gas than depleted fields, up to

80% of capacity. Because of the high cost, aquifers are typically only used if there

are no depleted gas fields or salt caverns nearby (Recon, 2009).

Economic considerations on the development of gas storage in salt

caverns

These types of storage use underground caverns which are sometimes

created by the exploitation of salt formations to extract rock salt; in other cases

they are created specifically for storage. It is clear that in the former case

investment costs are limited to those for wells and the treatment and compression

plant, whereas in the latter case exploration costs and the cost of artificially

creating the cavity must also be taken into consideration. The volume of gas used

as cushion gas is relatively modest, and is conditioned only by the minimum

pressure which we wish to maintain at the end of the flowing cycle (Eni, 2005).

Salt caverns are storage facilities created in naturally occurring salt domes or salt

beds. Salt domes are large salt formations that usually go far down into the earth.

Salt beds are shallower than salt domes. To form a cavern for storage, salt domes

are drilled and then leached with water to dissolve the salt. The resulting brine is

pumped out, a process which requires a large amount of water. Natural gas is

44

pumped into the resulting cavern to create pressure. Sometimes abandoned salt

mines are used as caverns, saving the expense of drilling and leaching a new

cavern. Smaller, shallower salt caverns can also be drilled in salt beds. Salt caverns

are generally smaller than depleted gas fields, averaging around 5 to 10 Bcf of

working capacity per cavern. However, salt caverns require only about 33% of

total capacity to be base gas. The higher pressure pushes gas in and out of the

storage facility more quickly. This provides for higher injection and withdrawal

rates, allowing for multiple injection/withdrawal cycles over the course of a year.

Although the higher pressure in salt caverns gives them more rapid deliverability,

it also makes them more prone to blowouts if there is a weakness in part of the

cavern (Recon, 2009).

2.6 NIGERIA AND NATURAL GAS

Nigeria is endowed with abundant natural gas resources with estimated

proven reserves of about 184 TCF. This represents about 4% of the world’s proven

gas reserves, making Nigeria the seventh largest gas reserve holder in the world

and the largest in Africa with 95TCF AG and 89TCF NAG, the gas is rich in

quality with 0% sulphur and rich in NGL (Abubakar L.Y,2007). The United States

Geological Society (USGS) has indicated that Nigeria’s gas reserve could reach

about 600 trillion cubic feet with dedicated gas exploration (Dr E.O. Egbogah,

2011). But, more than 60% of the reserves are associated, meaning that the

reserves exist with crude oil as free gas. Over the years, lack of adequate domestic

gas utilisation infrastructure, domestic gas market and inefficiency of existing gas

45

utilisation infrastructure, has resulted to the flaring of over 50% of the reserves or

in some cases reinjection of gas for enhanced oil recovery, presently Nigeria

produces about 6.55 Bcf/d and flares 24.30% of the produced gas(NNPC,2011).

However, there has been no significant gas exploration to date and growth in

the gas reserves are largely linked to oil exploration. Earth scientists believe that

there are more gas reserves not found which when discovered may double the

current figures. These resources are evenly distributed between associated and non-

associated gas and are greatly characterised as some of the best quality in the

world. However, due to low utilization in domestic and industrial usage of natural

gas and the limited gas distribution infrastructure, Oil industries producing natural

gas in association with their crude oil production have been compelled to flare

these gases due to some of the reasons listed below (Ukpohor & Excel T.O, 2009):

1. Limited numbers of appropriate reservoirs conducive for gas re-injection

and storage and the economics of the process.

2. Financial commitment of developing major and interconnecting network of

gas pipelines.

3. Low technology and industrial base for energy consumption in the country

4. Limited regional market

5. Inadequate fiscal and gas pricing policies to encourage investment.

However, growing pressure from environmentalists, government’s concerns

over revenue loss from flared gas and increasing local and international demand

46

for natural gas have renewed the interest of Nigerian government to seek

alternative strategies for utilising the abundant gas reserves in the country.

The current and expected increase in natural gas demand in the Nigerian

region, coupled with the greater complexity of natural gas market operations,

requires all natural gas market players to optimize flows of natural gas in order to

ensure uninterrupted supply of the fuel, its delivery at affordable prices and

flexibility in meeting demand peaks as well as various other consumer needs.

While efficient operation of the natural gas industry is certainly a prerequisite for

the vast majority of companies for maintaining desirable profitability and meeting

prescribed technical standards and safety requirements, it is also considered to be a

condition for improving security of supply.

There is an expected rise in demand for natural gas in Nigeria over the next

5 to 15 years as a result of the various projects utilizing gas and the Governments

zeal to make gas have a multiplier effect on the economy, stimulate a gas based

industrialization and facilitate the use of gas in power generation by introducing

the Nigerian Gas Master plan(the Domestic Gas Supply Obligation, the Gas

Pricing Framework and the Gas Infrastructure Blueprint), has further accentuated

the pressure on the natural gas industry to guarantee reliable delivery from ever

increasing distances at a competitive cost (Nigerian Gas Master Plan). (Diezani

.A,2010) noted that the unprecedented growth in natural gas demand has however

created a short term challenge for the sector in terms of response. This prompted

the reform of the sector through the Gas Master-plan. Underground gas storage

47

within the whole industry chain might play an important role in securing a reliable

and efficient supply of natural gas to industrial, residential and other consumers in

the region and country at large.

Considering the increasing importance of natural gas in power generation,

liquefied natural gas(LNG), gas to liquid technology(GTL), methanol and fertilizer

production, cement, aluminium and steel industry, only the constant supply of gas

can effectively yield the expected result in this sectors and this supply can be

achieved by the storing of gas when the demand is low and supplying it to meet the

demand during peak periods. Presently over ₦500 billion is needed to complete all

the projects required in the power sector (Bart Nnaji,2011). Strategically gas

storage allows security of supply in case there are disruptions to production,

transport or supply.

48

Fig 2.4 Nigeria’s Historical Gas Utilization and Forecast Potential Demand

[source:www.ngmproadshow.com]

Fig 2.5: Gas infrastructural blueprint (NGMP)

49

CHAPTER THREE

3.0 METHODOLOGY

The main aim is to determine the viability of UGS in the Niger Delta, and

considering the various storage types the available one is storage in depleted

oil/gas reservoirs, we will be concentrating only on the storage capacity of

reservoir D whose prevalent drive mechanism is gas cap, with available geological

data an assessment of Obigbo north field is carried out with the quality of a typical

gas produced in the region that would be injected and also to determine benefits for

storage in Niger delta with reference to

Ø Deliverability.

Ø inventory.

Ø containment .

Ø cost of developing and operation.

Ø Available gas utilization projects.

Ø Gas produced and flared in the region.

3.1 CASE STUDY:

Field and geological data were acquired from Obigbo north field. This data

were used in estimating the reservoir storage capacity.

50

3.2 FIELD HISTORY

The Obigbo North field is located some 18km north-east of Port Harcourt

and straddles OML's 11 and 17. The field was discovered in October 1963 by

exploratory well Obigbo North-1 and covers approximately 50 km2. The

exploration well was drilled on the main accumulation of the Obigbo North field

and encountered hydrocarbons between 6,540 and 10,000 ftss. The field contains

66 reservoir blocks, of which 55 oil bearing and 11gas bearing. Except for the E6.0

and deeper reservoirs, which contain light oil the average reservoir contains

medium gravity (API=26°, Rsi 300 to 400 scf/stb) oil.

3.3 GEOLOGICAL DATA GIVEN AS:

Swc=connate water saturation=0.20

A=areal extent of the thickness =100acres

H=reservoir average thickness (ft) =100

P=initial reservoir pressure=4900psi

T=reservoir temperature =710oR

H=well depth (ft) =10000

Ct=total compressibility (psi-1) =259×10-6

µ=gas viscosity=0.0235cp

51

K=permeability=250md

Vb= bulk volume of cone sample =8.03 ft3

W1=weight of dry cone sample=786.94lb

W2=weight of saturated core sample=2831.56lb

e= density of non volatile liquid=849.36lb/ft3

3.4 COMPOSITION OF NATURAL GAS TO BE STORED

This is the average composition of gas to be stored in the storage facility, it

is an average composition of gas produced in the Niger Delta.

Table 3.1:Average Compostion Mole Percent of Natural Gas in Nigeria

Symbol Name Formula Average Composition (mole %)

C1 Methane CH4 85.82

C2 Ethane C2H6 6.46

C3 Propane C3H8 2.71

iC4 Iso – Butane C4H10 1.25

nC4 Normal – Butane C4H10 0.92

iC5 Iso – Pentane C5H12 0.42

nC5 Normal – Pentane C5H12 0.28

C6 Hexane C6H14 0.16

C7+ Heptanes C7H16 0.26

N2 Nitrogen N2 0.41 (Impurity)

Co2 Carbon dioxide Co2 1.16 (Impurity)

H2S (ppm) Hydrogen Sulphide H2S <0.15 (Impurity)

Source: Compiled from SPDC

52

In this case, the compressibility factors which depends on the quality of gas

needs to be calculated together with the formation porosity before we can

determine the volume of the reservoir.

Table 3.2:Computation of Average Molecular weight, Gas gravity etc of Gas from Nigeria

Comp Yi Mi YiMi Pc (psia)

YiPi (Pci) (psi)

Tc (oR) YiTc(Tci) (oR)

C1 85.82 16.043 1376.81 667.8 57310.6 343 29436.3 C2 6.46 30.070 194.25 707.8 4572.4 549.8 3551.7 C3 2.71 44.097 119.50 616.3 1670.2 665.7 1804.1 iC4 1.25 58.124 72.65 529.1 661.4 734.7 918.4 nC4 0.92 58.124 53.47 550.7 506.6 765.3 704.1 iC5 0.42 72.151 30.30 490.4 206.0 828.8 348.1 nC5 0.28 72.151 20.20 488.6 136.8 845.4 236.7 C6 0.16 86.178 13.79 436.9 69.9 913.4 146.1 C7+ 0.26 100.205 26.05 396.8 103.2 972.5 252.9 N2 0.41 28.013 11.49 493.0 202.1 227.3 93.2 Co2 1.16 44.010 51.05 1071.0 1242.4 547.6 635.2 H2S (ppm)

0.15 34.076 5.11 1306.0 195.9 672.4 100.9

Ma = ∑ YiMi����

∑ Yi����

� ………………………………………………(1)

=1974.62100�

=19.75 Kg.Kgmol-1

53

g=� ��

= ��.����

........................................................................................(2)

= 0.68 (air =1)

using the Standard katz Z – factor chart for sweet gas since the amount of non

hydrocarbon component is less than 5% by volume.

Ppc = ∑ YiPc����

∑ Yi����

� ……………………………………………..(3)

= 66877.4100� =668.77psi

Tpc = ∑ YiTc����

∑ Yi����

� .......................................................................(4)

=38245.55100� =382.46oR

Ppr = P Ppc� …………………………………………………………(5)

= 4900668.77� =7.33

Tpr =TTpc� .........................................................................................(6)

= 710382.46� =1.86

54

Z=f(Ppr, Tpr) ……………………………………………………….(7)

=f(7.33,1.86)

Z =1.13

Gas formation volume factor

Bg = VrVs� = 0.283ZT

P� .....................................................................(8)

= 0.283 ∗ 1.13 ∗ 7104900�

Bg=0.0463

Depleted gas reservoirs are normally pressurized to back to their

original discovery pressure when they are converted to storage reservoirs.

However, if a good cap-rock is present, a top storage pressure higher than

discovery pressure can be considered. This practice has two advantages, the larger

storage capacity and higher flow capacity. However, compression requirements,

market needs, production problems, and economics must be considered when

selecting the storage top pressure. A storage top pressure above the discovery

pressure should not be selected when the caprock is thin or mechanical

conditions are questionable.

55

For higher deliverability, pressure higher than the initial reservoir pressure is

chosen: a pressure of about 6500psi (the higher the injection/reservoir pressure the

higher the storage capacity and deliverability).

Porosity � = VpVb� ........................................................................(9)

Vp =� ��� ��

=����.������.�����.��

=����.�����.��

Vp =2.41

Vb =8.03

ϕ = ����

=�.���.��

=0.3

Reservoir Capacity, G

G=�× �× ϕ× ����� ��× �× ����× �× �

.....................................................................(10)

G=�����× �× �× ϕ× ����� ��× �× ����× �× �

G=�����× ���× ��× �.�× ����.��× ����× �����.�× ���× �.��

G=17,976,822,760scf=17.98 Bscf

56

3.5 Design, operation, and monitoring of underground storage

reservoirs involve recognition of three basic requirements:

1). INVENTORY: which represents the volume of the gas that resides

in the storage horizon. In depleted reservoirs, in order to sustain pressure, the

facility maintains equal parts base and working gas. However, depleted reservoirs,

having already been filled with natural gas, do not require the injection of what

will become physically unrecoverable gas seeing as it already exists in the

formation unlike storage in aquifers where the base gas is unrecoverable due to

fear of facility damage.

2). DELIVERABILITY: Which represents the ability of the storage

field to deliver the gas stored to the market when needed. Deliverability depends

on the pressure which is a function of the volume of the gas in the storage;

therefore deliverability is related to inventory. Depleted wells has a limited cycling

capability, where working gas volumes are usually cycled only once per season.

Reservoirs are characterized with having low deliverability and thus would not be

well suited for peaking services or speculative market services. It is most typically

employed for seasonal services, strategic reserve services or production services.

When compared to storage in salt caverns it’s deliverability is low.

3). CONTAINMENT: Which represents the ability of the storage field

to prevent movement of gas away from the storage horizon. Migration of gas

away from the storage horizon results in attrition of the inventory and

57

consequently loss of the deliverability. The gas loss due to migration often

depends on the pressure in the storage field which is related both to inventory and

deliverability.

Geologically, the reservoirs of depleted wells have proven capable of

holding gas, since the reservoirs once trapped hydrocarbons that migrated up from

the underlying source rock. However, some reasons for caution should be noted. In

a few instances, reservoirs that once held gas actually continuously lost gas over

geologic time up to the time of production. In other cases loss of gas occurred until

the pressure dropped below the cap-rock threshold pressure i.e. the pressure

required for gas to displace capillary water. In this instance loss of stored natural

gas would occur once operating pressure was increased. To contain gas the

reservoir must have high permeability and porosity and successful traps to seal the

gas within the reservoir. The high permeability and porosity allows for large

volumes of gas to be stored and for the operation of high gas injection and

withdrawal rates. Traps that successfully contain gas are either structural, such as

an anticline, or stratigraphic, such as an impermeable layer. Depleted reservoirs

with high permeability and porosity are ideal for natural gas storage, porosity

lending itself to the amount of natural gas it can hold and permeability determining

the rate of flow of natural gas through the formation. This in turn determines the

injection and withdrawal rate of working gas.

58

3.6 COST OF OPERATION AND DEVELOPMENT.

Underground storage fields have different costs associated with their development

and operation. It has been estimated that investors require a rate or return between

12 percent to15 percent for regulated projects, and close to 20 percent for

unregulated projects. The higher expected return from unregulated projects is due

to the higher perceived market risk. In addition significant expenses are

accumulated during the planning and location of potential storage sites to

determine its suitability, which further increases the risk(Eni, 2005). Underground

storage is more economical than LNG or LPG even on a 1-day basis (Harold E. S,

1971)

The investment cost for the development of a new storage field depends on

the type of storage and, in the case of identical types of storage, on its capacity,

which may or may not permit economies of scale. Investment costs for a storage

project can be subdivided into:

a) exploration costs (unnecessary where partially depleted or depleted gas/oil

reservoirs are used)

b) drilling costs which are related to the number and depth of the storage wells. c)

costs of the cushion gas volume

d ) costs of surface facilities, related to the size of the treatment and compression

plants.

The overall cost of a single storage facility depends on:

59

a) Size of the surface facilities necessary for treatment and compression of the gas.

b) The number and depth of the wells

c) The number of caverns/wells in the case of salt cavities.

d ) The volume of cushion gas.

The capital expenditure to build the facility mostly depends on the physical

characteristics of the reservoir. First of all, the development cost of a storage

facility largely depends on the type of the storage field. .Cost is estimated by the

type of storage facility to be developed and its intended use. Expenses include

development of caverns and/or above ground infrastructure, the amount of cushion

gas required, and the cost of operation for a single cycle facility versus a multi-

cycle facility. Plant costs represent the cost to erect the facility, cushion gas cost is

based on actual examples and are not directly comparable, and operation costs

incorporate facility performance, maintenance, and cost of utilities. Aquifers are

generally the most expensive to develop, whereas salt caverns are the most

economic to operate.

Depleted Reservoirs: For this type of storage exploration costs are generally

unnecessary, since the reservoir is already well-known from the point of view of

both the geology and productive behaviour. They are generally cheaper (in $/Mcf)

to develop and operate than aquifers. In order to keep pressure up, about 50% of

the capacity of depleted reservoirs must be kept as base gas. Depleted fields are the

60

least expensive type of gas storage facility to develop at $5-6 million per Bcf of

working gas capacity. The reservoirs have an existing infrastructure in place and

Fig 3.1:Cost estimation for UGS storage development

are already proven to trap and contain gas. Most depleted gas reservoirs contain

residual natural gas that was never recovered from production. The abandoned gas

can be used to meet cushion gas needs, thus reducing the cost and amount of

cushion gas that must be injected.

Aquifer: They have the highest cushion gas requirements (about 80% capacity)

and longest development times. It typically takes five years to develop an aquifer

due to reservoir characterization and constructing the above ground infrastructure.

They are more expensive to develop and operate and are used only in the absence

of depleted reservoirs and salt cavern.

Salt Cavern: are the most economical option for underground natural gas

storage. However, the development ($/Mcf) of the caverns and related

infrastructure is a large capital expense. Although the higher pressure in salt

61

caverns gives them more rapid deliverability, it also makes them more prone to

blowouts if there is a weakness in part of the cavern.

3.7 GAS UTILIZATION PROJECTS

There are various gas utilization projects, ongoing, completed and

anticipated and their required gas feeds in the next 5–10 years in the country. The

development of an underground storage facility is dependent on the availability of

a sustainable gas market that will offset its high capital expenditure with time. The

traditional use of UGS was for seasonal variation in order to store during the hot

months and withdraw during cold ones when the demand for gas to heat homes and

offices is high, but since the climate over here does not support seasonal variation,

we will be considering other gas utilizing facilities like LNG, GTL, NGL/LPG,

fertilizer, methanol, GFEG, aluminium and steel, etc where the demand for gas is

constant over the year and they have impact on the nations GDP.

3.8 GAS PRODUCTION AND UTILIZATION IN THE REGION

The gas produced and flared in the region has experienced an overturn over

the past couple of years as a result of more gas utilization projects like NLNG,

GTL, LPG/NGL, fertilizer, Power generation, etc in the country. The quantity of

gas flared has been on the decrease yet there is still significant loss in revenue and

the consequent environmental damage as a result of the quantity of gas still flared

in the region. With the anticipated boom in the domestic and international demand

for gas this wasteful flaring has its demerits in the nearest future where the

problem of the country won’t be demand any longer but supply.

62

CHAPTER FOUR

4.0 RESULTS AND DISCUSSION

4.1 Storage Capacity

Below are the results of the computation in chapter three;

Table 4.1:Results of computation

Term Type Gas Reservoir Depth 10000 ft Working Gas Capacity if base =60% 7.19 BScf

Working gas capacity if base is 50% 8.99 BScf

Base gas at 60% 10.79 BScf Base gas at 50% 8.99 BScf Volume capacity 17.98 BScf Porosity 0.3 Z factor at 0.65 1.13

In order to confirm that this depleted reservoir is of high quality for gas

storage in it, we will take a look at the various petro-physical properties of the

reservoir.

Porosity: the Porosity value obtained is high and so is very good.

Permeability: any porous formation is usually permeable, so we postulate that the

formation is permeable.

63

Cap rock: this reservoir has a sealing cap rock, which is easily deduced from the

fact formation formally housed crude oil deposits.

Depth: the depth is 10000ft, which is a good one, since it will allow for storage of

gas at a pressure of about 6500psi.

Pore volume: from the calculation above, it is evident that not only will this

reservoir supply the needed volume of gas; it will still have more left in the

reservoir as a cushion gas for pressure maintenance.

Volume capacity=17.98BScf

In a developed reservoir about 50% of the gas is considered cushion gas; 50-60%

of this is considered non-recoverable and should be depreciated. The recoverable

cushion gas is included in the investment but is not depreciated. The recoverable

cushion gas is included in the investment but is not depreciated. Fixed charges of

depreciation return on investment and taxes dominate the operating cost of gas

storage.

For 60% cushion gas

Cushion gas=60% of gas (17.98BScf) =10.79BScf

For 50% cushion gas

Cushion gas=50% of (17.98BScf) =8.99BScf

Volume available for market= 7.19 BScf for 60% cushion gas

64

Volume available for market=8.99 BScf for 50% cushion gas.

So on withdrawal of 40/50% of gas from this storage, about 50/60% will remain as

cushion gas for pressure maintenance.

Capillary pressure: gas is more volatile than water, as the production well is

opened for flow, the gas will be virtually displaced before water can start coming

out of the reservoir.

The gas produced here that will be injected into the storage facility is a

sweet gas (≤ 0.15% sulphur content) therefore having less acid removal plants and

better quality.

The storage facility is located in an area of great importance to gas

transmission to various gas utilization projects in the region. The storage facility is

located in Obigbo North of Port-hacourt which supplies gas to Ibom power plant,

Aba industries, Ala-Oji power plant, calabar,etc.

4.2 Minimum requirements for considering an underground

prospect for gas storage include:

(a)Storage Contract

In order to use any type of storage facility above, a storage contract must be

entered into. A natural gas storage contract will specify the term date for the

party’s use of the storage, the type of storage facility, as well as the physical

65

Fig 4.1: supply grid from Obigbo North(UGS facility)

constraints and operational costs of the facility. A specific catalogue of these

physical and operational components can be found in the example contract below.

b. A structure overlain by a cap rock. The water in the water filled cap rock seals

the tight rock from penetration by the gas phase and prevents the gas from rising

vertically, due to buoyant forces or from moving laterally and causes the gas to

accumulate in the storage zone below the cap rock.

66

Table 4.2 - Example Storage Contract for Depleted Reservoir Storage

Term 2/1/2012-1/31/2014 Type Oil Reservoir Depth 10000 ft Maximum Working Gas Capacity

8.99 BScf

Initial Working Gas Capacity

0 BScf

Maximum/Minimum Injection Rate

75 MMScf/day – 45 MMScf/day

Maximum/Minimum Withdrawal Rate

150 MMScf/day – 90 MMcf/day

Fuel Injection Loss Spread

1.0%- 2.5%

Maximum/Minimum Facility Pressure

6700 – 1500 psi

c. Sufficient depth to allow the storage to take place under pressures. The

pressure will allow satisfactory quantities of gas be stored into a given space and

permit gas to flow readily into and out of a storage horizon.

d. A high porosity and permeability storage zone beneath the cap rock that

permits gas to be stored in sufficient quantities and to permit the gas to

flow into and out of it readily.

e. Water below the storage zone to confine the stored gas.

All of these conditions are normally met in underground petroleum reservoir

where hydrocarbon have been found trapped below a cap rock and confined by

underlying water for millions of years. That is why many gas storage fields are

partially depleted gas (or oil) fields which have been converted to storage.

67

Table 4.3- Storage Facility Characteristics

Facility Description Injection

Withdrawal

Operating Costs

Major Use

Depleted Fields

Low deliverability, low cycling, high capacity

120-200 Days

60-120 Days

High with some fuel losses

Seasonal Cycling

Salt Caverns

High deliverability, high cycling, low capacity

20 Days 5-20 Days Low with minimal fuel losses

Peaking Services

Aquifers Low deliverability, low cycling, high capacity

120-200 Days

60-120 Days

High with some fuel losses

Seasonal Cycling

4.3 GAS UTILIZATION PROJECTS AND PRODUCTION

Table 4.4:Gas production and utilization (Mscf),2002–2010 YEAR GAS PRODUCED TOTAL GAS UTILIZED TOTAL GAS FLARED% FLARED

2002 1,651,591,488 897,789,582 753,801,906 45.642003 1,828,541,855 983,562,969 844,978,886 46.212004 2,082,283,189 1,195,742,993 886,540,196 432005 2,093,628,859 1,282,313,082 811,315,777 38.752006 2,182,432,084 1,378,770,261 803,661,823 36.822007 2,415,649,041 1,655,960,315 759,688,726 31.452008 2,287,547,344 1,668,148,489 619,398,854 27.082009 1,837,278,307 1,327,926,402 509,351,905 27.722010 2,392,838,898 1,811,270,545 581,568,354 24.3

source: compiled from NNPC

Over the past years the volume of gas flared has been on the decrease as a

result of various gas utilization projects being put on stream by the Government.

The gas market in Nigeria is undergoing an overturn with the present zeal of the

Government to make gas have a multiplier effect on the economy(NGMP) but their

68

Table 4.5:Gas production and utilization by Company(Mscf), 2010 COMPANY GAS PRODUCED TOTAL GAS UTILIZED TOTAL GAS FLARED % FLAREDJVSPDC 777,170,430.73 673,693,051.04 103,477,379.69 13.31MOBIL 479,251,265.66 356,505,522.00 122,745,743.66 25.61CHEVRON 194,327,349.00 76,018,339.31 118,309,009.69 60.88TOTAL E& P 277,253,720.31 246,778,233.10 30,475,487.21 10.99NAOC 441,864,139.00 338,975,625.00 102,888,514.00 23.28Chevron (PENNINGTON) 7,683,657.00 130,491.00 7,553,166.00 98.30PAN OCEAN 8,082,809.00 1,286,176.00 6,796,633.00 84.09SUB TOTAL 2,185,633,370.70 1,693,387,437.45 492,245,933.25 22.52

ADDAX 84,989,027.00 20,068,561.00 64,920,466.00 76.39ESSO 104,990,024.80 97,610,252.45 7,379,772.35 7.03SUB TOTAL 189,979,051.80 117,678,813.45 72,300,238.35 38.06

AENR 6,713,476.00 182,142.74 6,531,333.26 97.29SUB TOTAL 6,713,476.00 182,142.74 6,531,333.26 97.29

NPDC 10,513,000.00 22,151.01 10,490,848.99 99.79SUB TOTAL 10,513,000.00 22,151.01 10,490,848.99 99.79

GRAND TOTAL 2,392,838,898.50 1,811,270,544.65 581,568,353.85 24.3

PRODUCTION SHARING CONTRACT

SERVICE CONTRACT

SOLE RISK/INDEPENDENTS

source: compiled from NNPC

greatest challenge is supply. With a present production rate of about 6.55 Bscf/d,

the flaring of 24.30% of the total production and an anticipated demand of about

20Bscf over the next couple of years, the problem that the country would be faced

with is supply. The various gas utilization projects outlined in table 4.6 have a

multiplier effect on the economy, increasing the GDP, creating more jobs etc.

69

Table 4.6:Gas utilization projects

S/N PROJECT TYPE LOCATIO

N

GAS FEED

(MMscf/d)

1 Bonny NLNG LNG N.D 3500

2 Brass River

LNG

LNG N.D

3 Olokola LNG LNG N.D 4500

4 Escravos GTL GTL N.D 300

5 Escravos Gas

Plant

NGL/LPG N.D 700

6 Oso NGL plant NGL/LPG N.D 600

7 West African

Gas Pipeline

Gas EXPORT 170 – 450

8 Power Projects Electricity NIGERIA 3000–4900

9 Cement sector Kiln NIGERIA 350

10 Trans Sahara

gas pipeline

Gas EXPORT 700–1000

11 Steel Sector Gas NIGERIA 120

12 Fertilizer

production

Gas NIGERIA 307

13 ALSCON Gas NIGERIA 104

14 Petrochemical

feedstock

Gas NIGERIA 100

70

Fig 4.2: Domestic and Inter Governmental Export Gas Requirement

Fig 4.3: Domestic Gas Demand and Supply profile

71

Gas demand in the domestic market is on the increase, fertilizer is

anticipated to utilize about 307MMscf/d by 2015 from less than 110MMscf/d

today. The base case gas demand for the cement industry could increase from

90MMscfpd currently to 350MMscfpd by 2015. This demand in the cement

industry would be met by a combination of plant expansions, new

grassroots capacity additions, and conversion of liquid fuelled kilns to the more

efficient, gas fired kilns. The major gas consumer for cement production in Nigeria

is the West African Portland Cement Company. Other cement producing

companies (Ashaka Cement, Benue Cement, Sokoto Cement and the others) are

yet to avail themselves the use of gas as a source of energy to power their

equipments and fire their kilns despite the relative cheapness of gas over other

sources of energy. This is due to the lack of a Natural Gas Grid, which should have

made gas more accessible, but with the NGMP (Gas Infrastructural Blueprint) on

stream gas will become accessible to these cement companies. The restarting of the

steel plants in Ajaokuta since connecting infrastructure already exist will increase

the demand from 70MMscf/d to 130MMscf/d and ALSCON and the Petrochemical

sector taking a joint feed of 204mmscf/d of gas. Gas export is also on the increase

with more LNG facilities coming on stream and the export line of WAGP and the

trans Saharan pipeline requiring about 800 – 1500 MMscf/d feed gas.

The power sector demand is the most aggressive of all the domestic sector

demand with anticipated demand of 3000 – 4900 MMscf/d, the power sector has

the greatest impact on the economy, presently more gas is being produced in

72

Fig 4.4: forecasted power sector gas demand

Fig 4.5: Industrial base gas demand

the east(N.D) than is required for power generation so as gas infrastructures are

being put in place to transport this gas to the west where there is insufficient

73

supply, instead of flaring it can be stored. GTL converts “non valuable gases” flare

Fig 4.6: Eastern Area Power Plants Gas Requirement Vs Gas Allocation Profile

Fig 4.7: Western Area power plant requirement Vs Gas Allocation Profile

gases into useful synthetic fuels like diesel, and CNG usage in the country is

limited as a result of lack of refuelling stations and automotives in the country are

not designed to make use of it.

74

4.4 COST OF OPERATION AND DEVELOPMENT

Looking at the overall cost (in $/Mcf) of each storage option, aquifers will

be the most expensive. Aquifers use a great deal more cushion gas than the other

options. For peak load needs salt caverns are the best value, as are depleted

reservoirs for base load operations. Since we are considering more of UGS in

depleted reservoir since the Niger Delta is an oil producing zone and sufficient

depleted reservoirs are present there. A more in depth economic analysis will be

presented below.

Table 4.7: Mean Impacts of main items of investment cost

CLASS OF INVESTMENT

DEPLETED RESERVOIRS (%)

AQUIFERS (%)

SALT CAVERNS (%)

Surface plants 30 25 40 Wells 25 15 35 Cushion gas 45 60 25

According to the FERC staff report, 2004 the cost of developing an UGS

facility for depleted reservoirs is $5–$6 million per Bcf of working gas. So in the

case of reservoir D under consideration the cost of setting it up will be about $54

million.

Considering the mean impacts of investment cost, $54 million is the cost for

the cushion gas, Surface plants and wells, but since we will postulate that the

stored gas will be the gas presently being flared then the value of the cushion gas

will not be considered i.e. cost of cushion gas is $0. Therefore the total cost of the

storage project is about $30 million.

75

Fig 4.8: Estimated cushion gas requirement

Fig 4.9: Estimated rate of deliverability

Fig 4.10: Estimated Containment

0

20

40

60

80

% D

ELIV

ERAB

ILIT

Y

TYPES OF UNDERGROUND STORAGE FACILITY

depleted storagereservoir

salt cavern

aquifer

0

10

20

30

40

50

60

70

underground storage types

% c

onta

inm

ent

depleted reservoirstorage

salt cavern storage

aquifer gas storage

0

20

40

60

80

100

% C

USH

ION

GAS

TYPES OF UNDERGROUND STORAGE

depleted well

salt carvern

aquifer well

76

Fig 4.11: The analysis of sensitivity of UGS NPV to the change of key financial

factor

The sensitivity analysis carried out shows that the variable and fixed cost has little

impact on the NPV but both the price of the gas and the capital cost in setting up

the facility has a huge impact on the investments made. The cost of managing gas

storage (operation cost) is divided into fixed and variable costs. Fixed costs are

those related to the workforce, insurance, maintenance work,

etc. Variable costs are the costs of the fuel and/or electrical energy required to

power the compressors, consumer goods, etc.

77

CHAPTER FIVE

5.0 CONCLUSION AND RECOMMENDATION

5.1 CONCLUSION

In many regions across the nation geologic formations can be used to store

natural gas underground. Natural gas is stored to meet seasonal demands and to

protect against accidents and natural disasters that could cause a disruption in

supply. Storage of natural gas is used for strategic purposes, meet seasonal

demands, base load and peak load requirements,. Storage options are dictated by

the regional geology and the operational need. It is therefore proper to highlight at

this stage the various areas in the natural gas industry where opportunities abound

for private investors especially at the time of structural changes in the economy of

the country. These investments opportunities will form the best strategies to

efficiently utilize natural gas. The areas open for gas utilization in Nigeria are in

the field of increased use of electric power generation, industrial fuel, GTL

technologies, LNG for export , increased city distribution for domestic and

commercial application, as feedstock for Nigeria-based fertilizers, methanol and

petrochemical industries and for re-injection into oil reservoirs, for pressure

maintenance or secondary/increase oil recovery purpose or for storage, Also, the

fertilizer plant as one in rivers state uses natural gas as feedstock.

Currently, depleted gas/oil reservoirs, aquifers, and salt caverns are the three

main types of underground natural gas storage in use today. Underground storage

78

must have adequate capacity and containment of gas. The storage formation must

have high permeability in order for gas to be injected and extracted at adequate

rates. Porous reservoirs such as depleted gas reservoirs and aquifers must possess

an impermeable cap rock along with a geologic structure to contain and trap gas.

Mined caverns such as salt caverns contain gas by the impermeability of the

surrounding host rock.

Aquifers and depleted reservoirs possess the largest capacity and require the

greatest volume of cushion gas. The reservoirs are typically cycled once annually

and are used to meet base load demand. Unlike depleted reservoirs aquifers must

be proven to trap and contain gas. Salt caverns are solution mined and hold a

fraction of the gas volume than that of depleted reservoirs and aquifers. Salt

caverns are typically used to meet peak load demands by possessing multi-cycle

capabilities and providing high delivery rates.

Economically, aquifers cost the most to develop and operate. The major

costs contributed to the large cushion gas requirements and the need to verify the

reservoirs capability to contain gas. Salt caverns are the most economical, due to

their multi-cycle capabilities and high annual throughput of gas. Salt caverns are

typically used to meet peak load demands, but has size disadvantage, rare in this

part of the country, cost of conversion and development which includes

compression horse power, surface equipments is high. From the analysis in chapter

79

3 and 4 the best storage facility for Niger delta is depleted reservoir, considering its

availability and cost effectiveness.

In the case of Obigbo north oil field, the depleted reservoir could store about

17.98 BScf with porosity of about 30% and high permeability which makes it

suitable for gas storage. The location of the depleted reservoir in Obigbo North

field is suitable for storage considering the geology and location. The reservoir can

store gases that can be transmitted to calabar for power generation and

manufacture of cement, to Aba industries and to Akwa Ibom in times of supply

shortage.

Recent development in the gas sector (NGMP) the demand for gas over the

next couple of years is expected to increase by about 100% with the various gas

utilization projects being put into place like LNG, GTL and other gas based

industries and the reviving of old industries.

Sustainable supply of natural gas in the region is required for the

government to achieve its aim of gas having a multiplier effect on the economy

and adding 10% of the GDP of the country, so in order for this supply to be

achieved, UGS is essential so as to take care of any inefficiency in supply. Storage

of natural gas in the Niger Delta region of Nigeria is economically viable, since the

gas to be injected dose not cost anything (flared gases).

80

5.2 RECOMMENDATION

This work has assisted in giving reasons for zero flaring of gas and proper

gas utilization. However, full development and encouragement of gas projects calls

for these incentives by the government:

Ø Free import of machinery and equipment

Ø Zero percent royalty

Ø Zero percent profit tax for gas used

Ø Free duty and VAT

Ø Tax deduction interest on loans for gas project investment

Ø Capital allowance

Ø Tax dividends for period of five years.

Ø Converting depleted reservoirs with desired storage characteristics to gas

storage facility.

Ø Encourage companies to go into gas storage.

Ø Commenced implementation of the NGMP.

Ø Development of new market, gas investment opportunity e.g. packaging and

distribution of gas(manufacture of cylinders or regulators)

Ø Strategic storage of gas should be embarked on.

81

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Projects” presented at the NOG Annual Conference.

William F. Burke,(1960) “Simultaneous Underground Gas Storage and Secondary

Oil Recovery”, This paper SPE 1479–G was presented at the fourth

biannual secondary recovery symposium of SPE on May 2–3, 1960 at

Wichita falls, Texas and published in the JPT July.

Ukpohor and Excel Theophilus O,(2009) “Nigerian Gas Master Plan:

Strengthening The Nigeria Gas Infrastructure Blueprint As A Base

For Expanding Regional Gas Market”. Nigeria Liquefied Natural Gas

Company.

84

V. Bolelli,(1991) “Advances In Underground Natural Gas Storage”. Agip

S.p.A..

Yinka Omorogbe, (2011), “The NOC Perspective on the New Legal

Landscape” presented at the NOG Annual Conference.

Yuan Guangije, Wang Qinghua, Yuan Jinping, and Wang Chunmao, (2006)

“String corrosion and string protection during constructing and

operating storage facility in bedded salt deposits”. This paper (SPE

100386) was presented at the 2006 SPE international oilfield corrosion

symposium, Aberdeen 30 may.

Energy Information Administration (EIA), The Basics of Underground

Natural Gas Storage,

http://www.eia.doe.gov/pub/oil_gas/analysis_publications/storagebasi

cs/storagebasics.html.

NaturalGas.org, Storage of Natural Gas,

http://www.naturalgas.org/naturalgas/storage.asp, June 27,

2007.

National Energy Technology Laboratory (NETL), Transmission,

Distribution, & Refining, Natural Gas Storage,

http://www.netl.doe.gov/technologies/oil-

gas/TDR/Storage/Storage.html, June 27, 2007.

Steuben Gas Storage Company, Thomas Corners Field Development: Offer

of Multi- Cycle Storage Service at Market Rates, November

2004 Marketing Brochure, Arlington Storage Corporation,

Boston, MA, November 2004, found at http://www.steuben-

gas-storage.com/tc/TC_Field_Development-Nov-2004.pdf.

http://www.naturalgas.org/naturalgas/processing_ng.asp

85

APPENDIX A

Average Compostion Mole Percent of Natural Gas in Nigeria

Symbol Name Formula Average Composition

(mole %)

C1 Methane CH4 85.82

C2 Ethane C2H6 6.46

C3 Propane C3H8 2.71

iC4 Iso – Butane C4H10 1.25

nC4 Normal – Butane C4H10 0.92

iC5 Iso – Pentane C5H12 0.42

nC5 Normal – Pentane C5H12 0.28

C6 Hexane C6H14 0.16

C7+ Heptanes C7H16 0.26

N2 Nitrogen N2 0.41 (Impurity)

Co2 Carbon dioxide Co2 1.16 (Impurity)

H2S (ppm) Hydrogen Sulphide H2S <0.15 (Impurity)

86

APPENDIX B

Gas Deviation Factor for Natural Gas(after Standing and Katz)

87

APPENDIX C

Pseudo critical properties of miscellaneous gas (after Brown et al)