The Main Challenges of Fully Monetising Natural Gas Resources

Posted by Julia



Today, after toughening the regulations for excessive flaring keeping the current pace of gas exploration along with minimising environmental footprint has become a complex and expensive task, especially in offshore locations. A lot of companies are therefore developing offshore projects on the monetisation of natural gas resources. This article, by Regina Chislova, Project Director of EPOCH 2020, explores various options to monetise gas resources, considers the challenges that companies can face, and describes a real example of such a project.

In general, at many oil facilities, the associated gases (APG) contained in oilfields are monetised or used for oil operations, and any excess of it is exported or pumped back into the reservoir and then flared. In offshore fields and old facilities, there is not the infrastructure for utilisation or evacuation of gas, so the surplus hydrocarbon gas is flared. For example, Nigeria is currently ranked 9th in the world on natural gas reserves but has continually flared most of its excess gas.

However, after toughening the environmental regulations for flaring gas, producers have had to look for ways to monetise natural gas resources in offshore locations.

The most popular options for monetisation of gas resources

In a search for the best economic solutions, they are trying to keep up with the latest trend – to use hydrocarbon resources in different ways and reduce the impact on the environment. Therefore, such options as oilfield injection, power generation, export via LNG, export via pipeline, and petrochemical products are the most popular among them. The selection of a suitable gas monetisation option is not only based on the resource size, but it is also influenced by the volume and quality of the gas resource, its location, and capital costs.

The main challenges

However, gas producers are facing different challenges in monetising their resources. Firstly, there are high costs associated with storage and transportation of natural gas. For example, exporting APG through a submarine pipeline can be very expensive because of the possible increase of sea depth. Producing electricity from natural gas with CO2 capture and storage is also an expensive option due to the high capture costs for electricity and heat requirements. Secondly, the monetisation of natural gas resources can be complicated by the absence of the infrastructure for the utilisation of gas. To take oil injection as an example, it can be seen that existing infrastructure is not developed to implement it, in view of weight, space, handling capacity and power. Depending on the scale of the project, a special platform might be required to conduct offshore gas injection projects. Moreover, the global LNG market is expected to be oversupplied soon and global prices for LNG may be extremely low. Export via LNG therefore cannot be a suitable monetisation option for the next decade.

Equatorial Guinea's projects as a real example

However, there are some companies that have already succeeded in launching monetisation projects in offshore locations.

On 1 April, Equatorial Guinea's Ministry of Mines and Hydrocarbons signed Definitive Agreements to monetise gas from the Alen Unit, operated by Noble Energy EG Ltd. Natural gas produced from the offshore field will be processed at the existing Alba Plant's liquefied petroleum gas processing plant and the LNG production facility at Punta Europa in Bioko Island.

The Alen offshore platform will undergo minor modifications to export gas, while primary condensate will continue to be produced and lifted offshore via the Aseng FPSO. A 70 km pipeline will be installed to transport gas from the Alen Platform to Punta Europa, where it will be transported for sales in the global market. The pipeline will be capable of transporting 950 million ft3/d of gas, with first gas expected in 1Q21.

The project will provide an additional source of gas for the Punta Europa facilities and will transform the Alen platform into an offshore gas hub for the development of additional Gulf of Guinea gas fields.

Moreover, according to the Norwegian research company Rystad, the global energy sector will see more than 100 offshore projects in 2019. The largest individual projects are expected in Saudi Arabia, the United Arab Emirates, Guyana, Qatar, Mozambique, Brazil, Azerbaijan, and Vietnam.

In this way, knowing the possible challenges in the monetisation of natural gas resources, and seeing case studies allows the the best economic solution to be chosen. To help companies make that choice, the Exploration & Production Offshore Congress Hub (EPOCH) 2019 has gathered together experts in the offshore oil and gas industry, such as Hellenic Petroleum Upstream S.A., National Oil Corporation of Libya and the Lebanese Petroleum Administration at a closed-door upstream event on 16 - 17 September in Greece. We look forward to seeing you.

Author: Regina Chislova, Project Director of EPOCH 2020

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