Quantifying the Value of Flexibility in Oil and Gas Projects: A Case Study of Centralized Vs. Decentralized LNG Production Systems

THE PAPER PRESENTS THE RESULTS OF AN ANALYSIS FOCUSING ON the evaluation of large-scale oil and gas projects under market uncertainty and flexibility in engineering design. Keppel Offshore and Marine Technology Centre (KOMTech) has developed a proprietary Pre-cooled Nitrogen Expander (PreNex) technology as a solution for offshore associated gas applications for small-to-medium scale capacity (~0.2 to 1 MTPA). This technology is also suitable for onshore micro-LNG applications. This study is concerned with the long-term design and deployment of the technology in the Australian market to provide LNG for transportation purposes. There are currently two designs considered: 1) small decentralized micro-LNG production facilities combined with fueling stations, and 2) a big centralized production facility with satellite fueling stations along the pipeline. The first alternative enables a flexible phasing deployment strategy in the design that can improve economic performance compared to the other solution, by dealing explicitly with market uncertainty. The results demonstrate about 36% economic value improvement for the decentralized system compared to the centralized inflexible solution, increasing as uncertainty in parameter estimation increases. INTRODUCTION Background and Motivation The advantage of using gas products has increased over the last three decades, resulting in a considerable demand growth for LNG. For instance, demand and supply forecasts in Australia indicate a potential shortfall of 300 to 600 TJ/day by 2015, and between zero and 600 TJ/day by 2020. Forecasts indicate there is a need to source at least 1,100 TJ/day of new production by 2020.