The CNG option

Recently, a controversy arose when some oil-gas producing company sold its to-be-flared gas to some CNG dealers. Pre-flared gases come out of the oil wells and are a mixture of many compounds, although, it is predominantly (more than 80%) Methane which when compressed is called CNG. It would be a safety hazard if out-of-spec fuel is sold to the general public. It may be a different situation, as we will discuss later, that the case of specialized industrial user may be somewhat different.

Methane from wells is burnt/flared as a next best solution. Venting Methane would be 28-80 times injurious to climate health than burning Methane gas and producing CO2 and flaring it. Until recently, this has been the best solution. Burn the waste, if you cannot do anything about it. However, now the thinking is that waste is a waste when you think that it is a waste. It has been found that waste contains many useful things. It may contain energy and materials that can be recycled. Bulk of the metals used today come from recycling than from mines.

Around 140 bcm of natural gas is flared annually these days out of 10,000 oil well stacks. This amount of natural gas is more than what Europe imports from Russia, it is said. This is a major source of soot, methane and black carbon injuring human and climate health. Around 70% of the gas is flared on a near-continuous basis. In the Net Zero emission (NZE) target, it has been decided that 95% of non-emergency flares would be stopped by 2030. This would avoid more than 365Mt CO2 equivalent of emission.

In Pakistan, there is quite some confusion on the issue. There are apparently four points of view among this confusion: 1. There is no significant flaring going on, and excess gas is supplied to industries around; 2. Using flared gas is uneconomic, therefore flaring is unavoidable; 3. Flared gas cannot be used in CNG. No explanation is given that is it the case even after processing; 4. There is flaring done surreptitiously. More than 100 mmcfd is flared which is a lot of resource and money, although the wells are dispersed.

There is a very good but simple idea with respect to the useful utilization of the natural gas, which may otherwise be flared. In South America, in a small country, gas is being produced on its eastern side and the population and other users are on the western side. There are probably less than 100 wells which flare gas. Individual gas output is small. What they did was they collected the un-flared gas (which is actually burnt) in pressurized cylinders and transported it to one or more centralized processing facilities to produce CNG and other normal gas. In our recent case, some enterprising entrepreneurs reportedly started distributing unprocessed gas to be sold as CNG. It is reported that some 80% of the wells’ gas was collected and distributed in this fashion.

Thus technical solutions are available, if not many, but are there. The issue is economics. Would it be worthwhile in terms of cost and prices to collect transport, and process the un-flared gas to a central processing facility. These days, LNG has set a price level of 12-15 USD per mmbtu.

Normal gas price is around USD 6 per mmbtu. It all depends on how extensive processing is required and what would be its selling price. Is it competitive and affordable? This is also a comparative issue. For some consumers, it may not be affordable like low-end domestic consumers, especially, in Pakistan. It may be attractive to CNG pumps and their users whose prices are the highest. Nearer locations may be more attractive than farther ones. Feasibility of individual projects would decide the outcome. Hence, no price regulation may not be advisable. Let the market decide.

CNG has stringent composition requirements for safety reasons, specially, when general users use the CNG. However, there may be some industrial or commercial users in whose case, safety rules and composition may be relaxed. Also, there may be nearby factories which may be using diesel or some dirty fuels. These may be SME industries like brick kiln, ceramic, tiles, etc. Such plants may not require processing or extensive processing. No wonder, there has been difference of opinion on the issue within the OGRA hierarchy. Flexibility and innovative thinking may help solve it or lessons could be learnt from others.

Technology has also improved over the years, favouring smaller scales and mobile solutions. There are skid-mounted gas cleaning small plants. There are long CNG Cylinders of 40ft container size with 18-24 inch dia which can carry a lot of CNG unlike the normal size ones.

Then there are programmes like Carbon market which can make a solution more economic by adding the revenue from the Carbon market. However, it may not be sure that the solution may be accepted by the potential emission buyers.

Firing is very important to think about the energy and the industry. Germans started firing their coal power plants when there was a gas supply and prices crisis. Everybody is cognizant about the commitment of Germany to the environmental and climate objectives. We have discussed in the afore-mentioned some of the possible solutions. More may be thought of, e.g., making LNG at the well site, if found feasible.

CNG option appears to be the most viable as CNG stations are dispersed and location matching of the source and users may be possible. On the other hand, there may be possibilities of regional processing plants from where refined gas may be shipped to the users. The profit motives of CNG dealers may be channelized through devising solutions and showing those. A safe use of CNG and profitability may not be contradictory. Gas used and saved from CNG can fire industrial equipment and boilers and furnaces.

Gas price regime has changed significantly. One has to re-examine the issues that may have been rejected in the past. A lot has changed since then: technology, prices and costs. Those in the oil and gas sector, who are opposing it, should have a fresh look. Secondly, the environmental and climate aspect should not be forgotten, especially, when it brings in revenue and resources.

I am scared that someday Carbon tax may be levied on non-performing countries. We may be caught unprepared. But here in case of such projects as Flare-CNG and Biogas, we get resources, money and environmental goodwill.

Copyright Business Recorder, 2023