Development of an Optimization/Economic Model for Virtual Gas Pipelines

Abstract

Abstract This is the first of a series of papers describing the application of simulation-optimization methods coupled with an economic model to "Virtual Gas Pipelines". Virtual Gas Pipelines consist in transporting compressed (CNG) or liquefied natural gas (LNG) in tanks to remote locations. In this paper we apply the use of a Virtual Gas Pipeline to a CNG system (compressed natural gas systems). This system is composed by a mother station (compression station with truck upload) with "n" satellite stations (delivery points). The results presented here illustrate the potential in cost-effectiveness that can be made by employing logistics simulation as the foundation for a wide-ranging search for solutions to gas transportation problems. Two models are developed for a virtual CNG pipelines: a simulation model and an economic model to represent the process of transporting using of trucks. These models are integrated. A field application case is detailed for CNG for vehicular use (NGV) with many NGV sale stations. Important optimization aspects are discussed such as mother station size, location, gas load distribution, number of loads, truck use and others. Economics aspects are also discussed specially presenting cutoff parameters for determining the application of Virtual Pipelines. Service level efficiency and also business profitability are two key elements of this integrated analysis This methodology can be adapted for the use of other technologies to a Virtual Gas Pipeline System. These new technologies can be another gas transformation method such as liquefaction (LNG) or another gas transportation system such as shipping (barges). Introduction In the early 1990's, the Brazilian government targeted an increase of from 2% to 12% in the share of natural gas to be used in the overall energy mix by the year 2010 [1].Therefore, additional national and local laws and regulations have been created encouraging the use of natural gas, and guaranteeing competitive practices for private companies involved in gas distribution. There is an abundant source of indigenous and imported gas in Brazil ensuring reasonable pricing for many years to come. Vehicular natural gas usage in Brazil over the next five years is expected to increase significantly. In southern of Brazil there are today around 150,000 taxis and light vehicles that are using compressed natural gas, the potential demand for natural gas for NGV use is 3 million STD m3/day [1]. Currently, CNG for vehicles is retailing for about 51% of the equivalent cost for gasoline. This differential price is causing tremendous demand. The vehicle conversion rate is increasing as word spreads regarding the cost savings to be had when using CNG instead of gasoline. CNG availability is the only constraint to this growth rate. CNG availability is limited by the existing pipeline infrastructure, which is expanding quickly, but not enough to meet demand. One major issue that we face in Brazil nowadays is how to interiorize gas distribution since Brazilian gas pipeline network is very limited and its expansion is slow. Virtual Pipelines consist in transporting compressed (CNG) or liquefied natural gas (LNG) in tanks to remote locations. Virtual Pipelines promote the natural gas market growth and make "real" gas pipeline network expansion viable. Virtual Pipelines can also be used to produce natural gas reserves from onshore and offshore fields that have no pipeline infrastructure and that are not feasible to exploit with the use of pipelines.