Developing a Prototype for Determining Alternative Sources of Natural Gas Supply

Article excerpt

INTRODUCTION

Despite its rapid growth in recent years, Liquefied natural gas (LNG) remains a relatively small contributor to world gas demand (under 7% of the total world gas demand in 2005) and even to total internationally traded gas, (about 22% of gas trade) according to the National Petroleum Council (2007). Pipeline gas still dominates international trade most notably supply to Western Europe from Russia, North Africa and Norway and supply to the US from Canada. With regards to regional LNG trade, the Pacific Basin and Asian markets almost double the size of the Atlantic Basin and Mediterranean markets.

By end of 2010, LNG trade is expected to be more than 10 trillion cubic feet (tcf) annually from the recent 6.5 tcf, with the United States expecting most demand followed by Northern Europe, Japan, South Korea, China and India (BP, 2005). Although trade movement is lower in the Pacific, countries in this region supplied 59% of the global LNG market. In 2006 and 2007 LNG shipment rose by 11.8% and 7.3% respectively; which is in line with historical average considering increased shipments from Qatar and Nigeria (Riihl 2007 & BP 2008). Asia, recorded an incremental average of 10% in LNG imports with Japan and South Korea being the major importing nations (PRLog, 2007), while European imports rose by 20%. In 1995, there were eight LNG exporting countries and nine importing countries (Ogj, 2007). By 2007 the number has increased to 15 exporting countries and 17 importing countries. World trade in LNG reached a total of 211.1billion cubic meters (bcm) in 2006, an increase of 11.7% on figures for the previous year, according to Cedigaz (2008).

In 2002 only 23% of world gas consumption was imported and 26% of that was in the form of LNG (Jensen et al., 2004). Between 2000 and 2020 world demand is forecasted to grow by 1727bcm (IEA, 2002). In the same light the US energy information administration also predicts a similar growth of 54tcf between 2005 and 2030 (EIA, 2008). With the exception of Russia and other countries of Eurasia, natural gas production is expected to represent a significant portion for exports in the Mideast (Qatar) and Africa (Nigeria, Algeria, Egypt and Libya).

STATEMENT OF THE PROBLEM

The evolution of natural gas trade between Eurasia and its western neighbors cannot be cited without upheavals. In the past, gas importing countries feared an interruption in important gas supplies for a variety of reasons such as contract disputes between Algeria and its customers (Hayes, 2006), political unrest in Indonesia (von der Mehden & Lewis, 2006) and transit country risk such as in Ukraine and Belarus for Russian exports (Victor & Victor, 2006). In March 2008 disputes between Russia and Ukraine accompanied a reduction of Russian supply for 3 days, and Turkmenistan cut supplies to Iran citing technical issues with the pipeline and a breach of pricing contract (EIA, 2008). According to Stratfor (2008), Turkmenistan shut natural gas supplies to Iran (which holds the world's second largest natural gas reserves) at the start of 2008 due to pricing squabbles between the two countries.

STATEMENT OF THE OBJECTIVE

The objective of this project is to investigate the present status and trends of natural gas supply and develop a prototype to accommodate planning and implementation by providing the following capabilities: (i) provision of alternative efficient natural gas distribution routes in terms of minimum cost and risk, (ii) identification of the alternative natural gas supply sources given a scenario (supply crisis), and (iii) assess the influence of stakeholders in the selection of alternative sources of natural gas supply. This paper focuses on the exposition of the prototype components and its features while special emphasis is placed on the contribution of this system in providing integrated solutions to the natural gas supply source problem. …