Moving natural gas stranded reserves to market in Poland

Andrzej J. Piwowarski, Polish Oil and Gas Company, Poland Stanisaw Rychlicki, University of Mining & Metallurgy in Cracow, Poland Abstract
Since several years there is an intention in Poland to monetize the natural gas from marginal gas fields which are not connected to the national grid for many reasons especially for small gas deposits or they are geographically isolated, their production is declining or the gas is poor quality. An assessment carried out gives for the natural gas stranded potential the figures from 0.7 to 0.9 Tcf , including off-shore marginal deposits in Baltic Sea. Several options of these gas fields utilization have been taken into consideration and for moving these gas stranded reserves to the Polish market. Among several solutions four main are regarded as the most feasible: (i) for small and medium size CHP generation units for local uses, (ii) for Natural Gas Vehicles (NGV), (iii) for LNG production in small scale projects, and (iv) for Gas-to-Liquids (GTL) process plants producing Diesel Oil and/or kerosene especially in S-E part of the country where small size oil refining plants are existing and can use very pure D.O. or kerosene for blending. Mini co-generation, NGV and LNG have been chosen as the priority options but GLT can be also envisaged in some specific cases as a new niche for natural gas. While reviewing the existing marginal gas fields in Poland, determining the economics of envisaged solutions, comparing the economic indicators as break even gas values at the plant inlet and optimized size of the plants, we will finely select and recommend appropriate natural gas conversion methods which permit to move the natural gas stranded reserves to market in Poland.

1. Introduction
Very substantial decreasing of gas consumption mainly in the industrial sector during the transition period of national economy coupled with improving of gas utilization efficiency of all categories of consumers has urged Polish Gas Industry on searching the new niches for natural gas uses. This process would have been accelerated through the existing of the indigenous natural gas fields including stranded gas reserves. With the annual consumption of about 11 Bm3 (388 Bcf) Poland is quite well endowed with own natural gas resources and could have covered if needed about half of her present total demand. The proven gas reserves represent approx. 126 Bm3 (3.6 Tcf), of two kinds of natural gas: high methane natural gas (HMNG) and low methane natural gas (LMNG) containing average 71% of methane totaling (in volume) 150.46 Bm3 (4.32 Tcf) of natural gas. Only approx. 100 Bm3 are economically recoverable. The developed gas fields produced last year 2001 approx. 4.1 Bm3 of HMNG and covered approx. 32% of total country gas demand. There are good prospects for new discoveries which can increase in incoming years the proven gas reserves up to 171 Bm3. Potential natural gas resources in Poland in form of undiscovered (undrilled) reserves represent approx. 1,013 Bm3 of which 68 Bm3 is in Carpathes, 186 Bm3 in Carpathian Foreland and 759 Bm3 in the Polish Lowlands. The gas stranded reserves are estimated to represent from 10 to 15% of 126 Bm3 i.e. from 13 to 19 Bm3 ; some of them are offshore gas fields in Baltic Sea with 2.3 Bm3 of natural gas containing condensates. The biggest onshore marginal gas field has reserves 3.5 Bm3.

In our paper we will look at four niches for natural gas especially supplied from the gas stranded reserves: co-generation heat and power (CHP) and especially the mini co-generation being in the initial stage of the development; until now more than 80 small CHP projects are identified and subject for further development. Natural Gas Vehicles in the form of Liquefied Natural Gas (LNG) and Compressed Natural Gas (CNG); the process of implementation of CNG has recently started but still the results are very modest. LNG issue in general is only little known in Poland . However, the LNG import project has been envisaged since one decade but never has been completed; several pre-feasibility studies have been carried out. A new LNG terminal in N-W part of the country project has appeared recently but it is still in very initial stage of development awaiting for the clarification of gas supply diversification policy. Nevertheless, the cryogenic technology has been introduced three decades ago; a Nitrogen Removal and Helium Recovery Plant using low temperature process has been built in locality Odolanw in S-W of Poland. This plant can treat 2.0 Bm3 of natural gas with high N2 content (average 35%) and recover helium (0.1 to 0.4% of He present in gas). The plant is producing now without any troubles in the gas processing some 30 tons of LNG per day; and this capacity will be increased up to 100 tons/day with the use of a cryogenic liquid turbo-expander. A new LNG trading company "LNG Logistics" has been established, and another plant of capacity of 1.5 Bm3/yr is planned in this region. The last niche taken into consideration, Gas-to-Liquids (GTL) is practically unknown in Poland if we can neglect the use of Fischer-Tropsch process for the production of gasoline from coal during the II World War in the plant located in Owicim. With the dramatically rapid development and improvement of GTL, this technology can be interesting in the utilization of low commercial value natural gases (with quite high content of N2) as we have in central and S-W parts of Poland, and also for the fields in S-E region when small oil refining plants exist and can use valuable GTL products for blending. This category of natural gas utilization projects will require a previous assessment study to receive the answer concerning their viability in Polish conditions. Several conditions shall be accomplished to implement these envisaged natural gas utilization projects: The technical and safety rules and regulation must be prepared and existing legislation shall be changed or amended several sessions of training programs should be initiated and organized The mode of the financing should be defined and the necessary funding should be find Governmental and local authorities, gas industry and environmental agencies should be involved in the development of these projects.

2. Main characteristics of the stranded gas reserves

In function of natural gas utilization we are taking into consideration various stranded gas reserves. So, for mini co-generation can be used the fields located on the whole territory of the country. For LNG the preference is given for the gas fields located in S-E part of Poland, and for the offshore gas field in Baltic Sea. These natural gases contain very good quality natural gas more adequate for liquefaction, contrary to gas fields in S-W of the country which have the natural gas with high content of nitrogen. LMNG can be envisaged for GTL process based on Syntroleum technology which permit this kind of natural gas. CNG can use HMNG from S-E gas fields and also from gas transmission system in any point throughout the Polish territory. About 90% of Polish gas reserves are accumulated in Miocene and Permian strata; remaining 10% are shared by the Carpathian flysch the Carpathian basement and by Devonian and Carboniferous reservoirs in the Polish Lowlands. For LNG purposes, the envisaged gas fields belong to the Carpathian deposits reservoirs of highmethane natural gases without toxic components and impurities so relatively easy for liquefaction. The recovery of gas reserves is variable and depends on period of exploitation and production rate. In Carpathian and Carpathian Foreland the recovery ratio is approx. 64%.

During the last years approximately a hundred of gas fields were in operation and 74 were non operated. The number of producing wells were approx.1,300 ; Approx. 330 wells were ready for connection to the national grid but not connected due to the low flow rate, significant distances from gas pipelines and high level of impurities. In our envisaged region we have 850 operating wells and more than 200 are planned to come on stream until year 2000. There are 16 marginal gas fields totaling 78 idle wells. The potential reserves of these fields are estimated at 4,800 thousands cu meters. GIP is going from as low as 70 million m3 to more than 3 Bm3. Well head pressure range is from 5 to 28 MPa (700 to 4,060 psig). Daily possible output is estimated at 1,090 thousands cu meters. The offshore gas field in Baltic Sea is owned by semi-private company Petrobaltic. The revised recoverable gas reserves are approximately 2.3 Bm3 of rich gas (38 MJ/m3 i.e. 1,020 Btu/cf) containing condensates. The probable reserves located in three blocks in Cambrian formations at 1,450 meters, in shallow water (60 meters) are around 10 Bm3, and the possible reserves of Polish Shelf are evaluated even at 100 Bm3. The valorization of these gas stranded reserves will need FPSO barge. The distance from seashore for LNG shipping is approx. 80 km. This kind of gas fields could have been also monetized in the form of GTL products off-shore or the gas can be transported on-shore using for ex. Coselle CNG barge.

3. Review of the selected natural gas utilisation niches 3.1. Mini Co-Generation Niche
The present situation in the power and heat sectors in Poland is characterized by (i) the over capacity electricity generation units (installed capacity 31,400 MWe, max. utilized 22,800 MWe) supplying National Power Grid (NPG), (ii) existing potential for local electricity sources going from 3,000 to 5,000 MWe not connected to NPG, and (iii) very increasing gas use for space heating in the commercial sector[4]. As only one good niche in this field we perceive the mini co-generation i.e. small and medium size CHP units. Until year 2000 there were not existing in Poland, gas fired co-generation plants but after, several large CHP plants are planned and implemented or are being under construction (Gorzw Wielkopolski, Nowa Sarzyna, Lublin, Rzeszw, Zielona Gra) sometimes directly supplied with gas from the neighbouring natural gas fields. In mini co-generation more than 80 small and medium size projects have been already identified and investigated during 2001 year. For the development of these projects a new company called Polish Gas Fired power Plants was established in 2000 year ; her main objective is seeking for potential mini co-generation customers in the range from 100 to 300 kWe (small projects) and from 1 to 12 MWe (medium size projects), and to start with conversion from coal to natural gas a big number (approx. 40,000) obsolete coal fired boilers installed throughout the country. Preference has been given to the customers close to the existing gas networks and close to the indigenous natural gas stranded reserves. In view of accelerating the development of this niche Polish Oil & Gas Company (POGC) signed on Feb. 13, 2002 an agreement of cooperation with Gasunie and Shell from Netherlands. Independently of that what has been done, still many constraints for the development of these projects are existing in the Polish energy market, and they are as follow: high and volatile gas prices still indexed on the oil products prices versus relatively low level of coal and electricity prices, decreasing of gas captive industrial sector potential due to the transition period, strong "coal lobby" and very often coal hidden subsidizing practices.

3.2. Natural Gas Vehicles Niche

This gas utilization, however well known in Poland in 60' is today in very initial stage[5] but with good prospects for the development in the near future. An assessment of the NGV potential market prepared by two companies designated for its development Budgaz and Investgas in Warsaw shows that in the beginning 2 Mm3/yr of natural gas may be used for NGV. In the first few years this gas utilization can reach from 20 to 50 Mm3 per annum and in the horizon of 2015 year around 500 Mm3/yr can be used for NGV. At the present time approx. 100 vehicles are running using natural gas as the fuel, 20 buses of urban transportation in Przemyl in S-E of Poland and in Cracow and Warsaw the vehicles of services of gas industry. Three new gas filling stations are under construction in the towns Warsaw, Inowrocaw and Wrocaw. Budgaz and Investgas have selected a hundred of locations for CNG stations througout of Poland. Two kinds of filling stations were designed: (i) classical stations with compressors and electrical movers, and (ii) innovative gas booster-compressor using for compression the gas under high or medium pressure from gas pipelines arriving to the adjacent pressure reduction station; "pressuremotor" of gas is for compression work and the gas is after send out to the medium pressure (4 bar) network (approx. 4,000 m3 for one filling); there is a constraint of flow rate which should be at least 15/20,000 m3/hr. A big advantage of the booster solution is a very low cost of gas compression. As in the case of mini co-generation several constraints are hampering the expansion of NGV in Poland and among other they are: lack of incentives and support from the governmental milieu, administrative difficulties in obtaining a the permission for filling stations construction, lack of good marketing and resistance of the municipal transportation companies for introducing NGV, also lack of modern equipment especially HP cylinders. To attract the new consumers the pricing policy is quite flexible and the prices in use are very competitive, and for now there is no the excise taxes for this kind of fuel. The prices of CNG are going from approx. 12 US cents per m3 (VAT included) for the gas on the gas field to 25 US cents for the gas from gas pipeline. The booster solution permit also the price decreasing. CNG is selling on the basis of annual contract (stable price for one year) or it can be negotiated. In year 2003 we expect a special preferential tariff for CNG from the gas industry, and an environmental premium.

3.3. LNG Niche

We expect possible and propose the following LNG utilization[1-3, 7]: To cover short term peakshaving demand during winter time in gas distribution networks of Local Distribution Companies (LDC's) and high short demand of some industrial customers for ex. district heating plants For anticipated natural gas supply to the remote from gas pipeline system localities using LNG satellite facilities For conversion from obsolete LPG-Air facilities in our four small towns in N-E of the country For the works of maintenance or repairing of gas pipelines without interruption of gas supply to the customers For NGV (buses, trucks, car and locomotives) in form liquid or regasified under 200 bar pressure. For each of the envisaged LNG utilization we will review available natural gas liquefaction technological processes and used for small scale LNG projects. Nevertheless as a small source of LNG at least on the first phase of LNG introduction on the market, we consider existing Nitrogen Removal from Natural Gas Plant located in S-W part of Poland; another plant of this kind is planned in the same region. The volume of LNG received as the by-product in the installation is evaluated now at 30 tons per day and in the near future, after installing a new cryogenic liquid turbo-expander approx. 100 tons/day.

The LNG is obtained directly from the processing train and represents approx. 1.5% of the flowing gas. LNG is transported by truck to six consumers located not far from the plant and to one peakshaving installation in Jastrzbie Zdrj in the recreational area . The plant will be very quickly equipped with 2 cryogenic vacuum tanks filled with perlite of 60 m3 each; in the second half of this 2002 year additional tank of 200 m3 will be installed; this will permit to expand the LNG business. The role of Odolanw Plant is very important as a precursor of LNG introduction on the Polish market. We acknowledge a new planned LNG importing project (3.6 thousands tons of LNG yearly), nevertheless this project cannot be taken seriously into consideration mainly to too high technical and financial risk and uncertainty of its implementation. For our purposes we have taken into consideration the following natural gas liquefaction processes: for medium size peakshaving plants of type "mother plant" (used also to supply satellite plants) we envisaged ARC Cycle; the feed gas will be provided from high pressure gas pipeline; this kind of LNG source we think to use for ex. for city of Warsaw. We consider also integral incorporated cascade cycle process of Gaz de France for the same peakshaving plant we discussed with Linde company the process using for liquefaction, the cold from Air Separation Plant producing oxygen for steel factory; LNG plant will be in confinement of steel factory and will be feed with gas from medium pressure network; surplus of liquid nitrogen will be used through heat exchanger to liquefy natural gas for small localities (in the beginning four small towns in N-E: Ek, Pisz, Olecko, Suwaki) using the formula of anticipated gas supply with satellite plant we will envisaged several sources: (a) from existing Nitrogen Removal Plant, (b) from LNG-FPSO barge approach, using a single mixed refrigerant process which is simple but have a lower overall thermal efficiency than other processes; in this case we think to use the gas from marginal offshore fields for small localities gas supply and NGV, we think to use if available American company Cryenco (now Praxair) process TADOPTR ((Thermo Acousticaly Driven Orifice Pulse Tube Refrigerator) representing a new non conventional technology being developed for small LNG production using natural gas from small marginal gas fields.

3.4. Gas-to- Liquids Niche

This gas utilization niche is very interesting but still in the initial stage of development in the world and in the Polish conditions will require a preliminary study concerning the choice of the natural gas for conversion[6,7]. The study should examine the size of the plant, location and estimated construction cost and cost per- barrel-per-day of capacity and also the implications of Fischer-Tropsch product entry in eight potential markets: (i) diesel oil, (ii) kerosene, (iii)naphta, (iv) detergent feed stock, (v) lubricants, (vi) (6) solvents, (vii) paraffin waxes, and (viii) drilling fluids. Each market should be profiled and discussed relative to planned GTL plant capacity and possible strategies. Dispite of limited today prospects of this niche as it concerns petroleum products such D.O. and jet fuel, significant supply/demand changes can occur in several higher value petroleum by-products, such as lubricants, solvents, detergents and paraffins, as a new superior synthetic Fischer-Tropsch process products compete for market share. However the production of ultra clean fuels for the environmental reasons can appear to be economically feasible in Poland.

4. Regulatory and safety issues 4.1. Mini co-generation

There are several legal provision in the Polish Energy Law favorable for CHP development as: (i) mandatory purchase of electricity generated by CHP by LDC's or by Power Grid Operator, (ii) protection by Energy Regulatory Authority the customers against too high level of energy and fuel prices, (iii) legal possibility of including in justified cost of gas the specific premium for the environmental protection, and (iv) CHP plant will be recognized as an eligible consumer for TPA. As it concerns the safety issues there are in the country appropriate technical and safety rules used by the power and district heating companies. 5

4.2. NGV
This kind of gas utilization is not yet regulated. the safety rules exist in the country.

4.3. LNG
One of the biggest barriers for introduction of LNG in Poland is totally lack of regulation and technical and safety rules. In fact there are not any standards, norms concerning LNG plant and installation siting and design. The Polish legislation and especially the main act, Energy Law from 1997 and secondary legislation i.e. ordinances have any mention and any provision related to LNG. It comes from that nonconformity of Polish legislation with European Gas Directive of European Union. This situation will have repercussions on the start of LNG operations and will create an urgent need for amendment of the existing regulatory documents and for preparation of basic technical rules. We have already prepared the Polish version of the European Norm EN1473 concerning "Installation and equipment for LNG- Design of onshore installations" from May 1996 and we intend to adapt EN 1160 on " General characteristics of LNG" and "Design of onshore installations with a storage capacity between 5 and 200 tons" related to satellite plants. The safety elements are closely linked with the introduction of LNG technology. We are seeing as main specific safety issues to be addressed for envisaged small scale LNG projects: Safety distances Layout with respect to fire and explosion Quick release system and evacuation procedures Safety aspect of LNG is very important for the public in Poland, which generally is relatively negative for the natural gas as a potential danger.

4.4.

Gas-to-Liquids

The GTL products are regulated from the legal and technical point of view by the legal provisions, technical and safety rules governing in oil refining industry. In case of the introduction of this technology the important issue will be obtaining the special ecological premium for this products and for the gas used for the conversion.

5. Conclusions
In conclusion we can state that: There are in Poland a potential and relatively good conditions for the development the new natural gas niches and technologies, nevertheless there exist also specific general constraints concerning gas prices, coal subsidies, administrative difficulties etc. There are legal and regulatory solutions for gas market but very often not sufficient in particular in environmental area and in pricing policies. There are now quite favorable environment and good general feeling for introduction small scale LNG projects in Poland. This creates the pre-conditions for implementation of the envisaged projects. The LNG introduction should have expanded the local gas market. The existing gas stranded reserves can become valuable source of LNG, mainly for peakshaving, for satellite plants and for NGV. The most appropriate for these uses can be liquefaction units on skid. Gas pipeline natural gas can be used to feed LNG liquefaction plant for peakshaving demand in the big cities as for ex. Warsaw or Cracow ; this so-called "mother plant" can supply LNG to the satellite plants in the neighbourhood for anticipated gas supply projects. Some quantities of LNG, approximately 30,000 tons per year (approx. 42 Mm3/year of gas) can be provided from Nitrogen Removal Plant , and this gas can be used for example for conversion of LPG-Air installations in localities Ek, Pisz, Olecko and Suwaki in N-W part of Poland of which total annual consumption is about 6 million m3 , and for hte being developed market close to the Odolanw Plant. Another alternative but more expensive can be to supply these localities with LNG from offshore Baltic Sea gas fields when the recoverable volume will be bigger than the present one totalling approx. 2.3 Bm3.

Importing LNG Terminals located in close to big cities Szczecin or/and Gdask should have resolved many problems related to the LNG deliverability for the small scale projects but implementation of these terminals is still uncertain.

After the assessment of viability of envisaged small scale LNG projects we can formulate following main recommendations: A new gas culture -LNG requires the knowledge of technical and safety rules translated into Polish language The Energy Law with ordinances which are fundamental tools for Energy Regulatory Authority should be amended in view of insertion of provisions concerning LNG. Next step should be the training of the Polish gas men in the countries with LNG culture as United States, France, Belgium, UK, Germany etc. Follow-up of this step consists of the all kind of studies to be carried out: (i) pre- feasibility study for liquefaction process selection, (ii) LNG marketing study, (iii) LNG safety assessment

References:
1. Proceedings of 21st World Gas Conference (WOC3 Liquefied Gases). Nice, June 2000. 2. Proceedings of Twelfth International Conference & Exhibition on Liquefied Natural Gas. Perth, May 1998. 3. Fundamentals of the Global LNG Industry. Petroleum Economist. London, 1998. 4. A.Piwowarski, J.Winter "Gas-to-coal competition in Poland: Diversification and Cogeneration Strategies", 11th Annual Conference European Gas, Amsterdam, 5-6 July 2001. 5. S. Krupa "Vehicles using natural gas", VI Internatioanal Fair Oil&Gas, Warsaw, 25-27 September 2001. 6. "Gas- to-Liquids"Monetizing Gas Stranded Reserves Conference, Denver (Colorado), October 10-12, 2001. 7. Minutes of the Gas Utilization Research Forum Meeting in Denver (Colorado), October 8-9, 2001