Natural Gas in Croatian Energy Future

Natural Gas in Croatian Energy Future

Daria Karasalihović, Lidia Maurović, Snježana Šunjerga

Department of Petroleum Engineering, Faculty of Mining, Geology and Petroleum Engineering, Zagreb, Croatia

Key words: natural gas, supply, environment

Abstract

Energy, which makes modern society possible is not as available as it used to be. World energy crises, the impending decline of fossil fuel supplies and uncertainty of nuclear power's future have increased interest in renewable natural energy sources. But, nevertheless, non of them is expected to take up the role of oil and natural gas any time soon.

Due to recent assessments, the global natural gas supplies, if the expected growth of consumption is taken into consideration, should be sufficient for many years. On the basis of today global production and average annual consumption, the, so- called, statistic time rate of sufficient production, can be calculated. It's approximately 60 years.

In this thesis we'll try to characterise gas position among the different energy resources serving the worlds energy demand today. Croatia produces and utilises the following primary energy sources: coal, fuel wood, crude oil, natural gas and hydropower.

How gas competes with other fuels?

So in this moment natural gas is to be a truly competitive fuel with respect to other fuels. Gas will be promoted through the development and liberalisation of the energy market as well as the problem of storage. The price and environmental considerations render gas the most efficient fuel, to be widely used in its primary form as heat energy.

Also very important thing is that greater utilisation of natural gas could dramatically improve environmental conditions in Croatia. Developing the natural gas sector makes sense economically and also stimulate significant new foreign investment for gas projects. By improving natural gas consumption Croatia is beginning to acknowledge its rules in shaping a response to the problem of global ecological issues.

1. Natural Gas in the World

The role of natural gas in the world’s energy supply is growing rapidly. Natural gas is produced or utilized in over 100 countries across the globe. This number is constantly increasing. Natural gas is daily replacing other fuels in residential and commercial sector. Resource availability, cost and environmental issues all favour growing gas application in industry and power plants (electricity generation) as well as in emerging markets such as transportation cogeneration and cooling. The share of natural gas in global primary energy consumption amounts to 23% and is steadily increasing.

Growing demand for natural gas is expected in all regions of the world. Over the next two decades, natural gas use is estimated to rise at more than three times the rate for oil use, with an expected increment of annual gas use of about 1870× 109 cubic meters (figure 1).

The highest growth rates in natural gas demand are projected for the developing countries of the world, where overall demand in the reference case rises by 5.0% annually between 1995 and 2015 (figure 2). Much of this growth will be used for electricity generation, industrial energy and also infrastructure construction for natural gas to replace polluting home heating and cooking flues in major cities. Gas markets are also expected to undergo substantial development during next 10 to 15 years.

Industrialized countries, where natural gas markets are most mature, will also increase their reliance on natural gas. Over the next two decades, demand in the industrialized countries is expected to grow by 2.6% annually, more than twice the rate of increase in oil use. In the United States, gas demand is expected to rise by 1.7% annually, mainly because of growth of electricity generation.

It is estimated that, industrialized regions of Western Europe, will have highest growth rate in natural gas use (3.8%). Resource availability, government energy policy and infrastructure development all favour increased use of natural gas in Europe. Privatisation and restructuring of energy sector in many W. Europe countries has resulted with increase of natural gas use for electricity generation. Government’s environmental policy also encourages natural gas use. Based on a fact that natural gas is one of environment- friendly fuels many countries consider natural gas as one way to cut air pollutant emission from energy sector and to decrease greenhouse effect. Considering all previously stated, and also as a way to cut the reliance on oil and coal, use of natural gas as well as the development of gas infrastructure is encouraged by many W. European governments.

Natural gas consumption in Eastern Europe and the former Soviet Union region is expected to rise by 2.7% annually. Much of the presumed growth in this region is related to the countries of Eastern Europe than the former S. Union. Most of the E. Europe industry is still controlled by national governments. The process of privatisation and restructuring is lately beginning to take hold. It is estimated that foreign investment is likely to play a big role in future development of natural gas industry. In addition to the estimated growth in natural gas consumption within E. Europe and former S. Union region, Russia sees Europe as strong market and is positioning itself as dominate supplier.

Over next 20 years natural gas consumption in Central and South America is expected to grow by 5.3% annually. The countries with the least amount of present natural gas infrastructure are expected to be the fastest growing markets for natural gas.

Natural gas consumption in Asia, as a whole, is expected to triple considering current levels. On that continent analyst and natural gas suppliers consider South Korea as one of the most important markets for natural gas.

In Africa, natural gas markets are dominated by Algeria and Libya, although there have been significant gas discoveries in Tunisia and off the coast of Egypt. Much of the resulting gas production is for marketing Southern Europe, although there are an increasing number of projects aimed at fueling domestic gas- fried power plants.

At Middle East Iran established itself as major gas exporter.

Natural gas reserves are less concentrated than oil reserves worldwide. Despite high rates of increased gas consumption, especially over the past decade, regional reserves- to- production rates tend to be high. Over past two decades natural gas reserves in the industrialized countries were fairly stable, although they slightly decreased since 1993 (figure 3,4,11). On the other hand in Eastern Europe, former Soviet Union and developing countries the reserves have dramatically increased. Proven natural gas reserves suffice for more than 70 years of current production. Additional recoverable reserves will be added over time and are currently estimated at more than 100 years of current production. In addition, significant volumes of natural gas will become available from various sources such as advanced coal gasification, waste or hydrates.

About 73% of the world’s reserves are located in former Soviet Union and countries of the Middle East. Eastern Europe and former Soviet Union account for approximately 40% of world’s proven natural gas reserves. Russia alone has 33% of the world’s total proven gas reserves what’s more than any other country in the world. Russia’s potential gas reserves may be even five times greater than proven. As for natural gas production, Russia currently accounts for more than 26% of the world’s total production. The Middle East has reserves to production ratio of more than 100 years, the E. Europe/former Soviet Union 80.4 years and Central and South America 73.9 years. In many regions, deposits of gas are known to exist but are not considered to be reserves because the lack of infrastructure needed to gather and distribute the gas makes them, at this moment, non- economical.

Although average LNG prices have, in most regions, remained higher than prices of competing fuels, LNG markets appear to expand with a more diversified range of customers and suppliers. There are a growing number of LNG supply contracts worldwide. The growth in relatively high- cost LNG market is considered to be a direct consequence of rapid expansion of natural gas in recent years. The costs associated with processing and transporting LNG make it an expensive source of fuel. Bringing LNG to the costumer is not as simple as bringing natural gas. It must be converted to liquid before shipping, must be shipped in specially designed refrigerated ships and delivered to specially equipped ports. Finally, it must be regasified and distributed to customers.

2. Gas as a fuel

The synthesis of different energy fuel use represents the final essence of energetic. One of energy sources is not enough for covering entire state economy that is why combination of single energy fuel is inevitable.

Technology development, different needs of human society and significant environmental issues are causing the transfer from one energy fuel to another. This kind of transition is a long term process. In this moment Croatia is in unenviable condition with necessary objective review of energy analysis in front. It is of great importance that all energetic institutions establish the same knowledge that the natural gas is the fuel of the future. In order more objective and realistic review, it is necessary that evaluation of fuels is carried out. Evaluation can be reviewed through fuel reserves analysis, useful energy amount, investment level and market price, environmental impact, development and availability of new technology.

Defining of particular fuels use is done by utilization level and market price with different socio-political factors. Fuel consumption leads to loses while fuel is transformed into efficiency. Biggest losses are formed through commercial energy production. During the process of energy transformation into another form of energy 41% of commercial energy is lost, almost 43% is lost trough energy transformation and only 16% ends as efficient energy. Particular fuel and energy processes evaluation is possible if the net energy is introduced. It represents efficient energy that can be gained from particular energy source and reduced for amount of energy spent for efficient rate of work and loses in the process of finding, production, storage and transportation.(figure 5).

Further, electricity is not acceptable for heating and fuel oil, natural gas and solar energy are the most adequate fuels. Since, solar energy still has not got strong economic justification and fuel oil represents environmental threat, gas stays as most perspective fuel of future. Comparison of energy per units price also favours gas as future fuel. Beside the primary part of natural gas and its preference ahead other fuels, it is necessary to mention cogeneration as a way of combined production of electricity and heat and also combi processes. The efficiency of heat consumption represents the basic difference between those two processes. Utilization level of cogeneration process it is at high level of 85-95%. Electricity produced from cogeneration plant is consumed for its own purposes or it is delivered into central energy system. Beside natural gas, other fuels are used for cogeneration plants although their share is minor. Except 37% of primary energy savings of cogeneration plants, it is essential also to mention reduced emission of CO2 (59%) and nitrogen oxides(26%). Combi processes plants run with gas or steam turbine and they are characterized with both production of electricity and heat. Beside previously mentioned, the gas fuelled microcogeneration, energy installations of minor power (< 100 kW), must also be taken into consideration. Those kinds of plants are adequate for household and smaller industry needs. Cogenerations can provide safe supply with sufficient power and better adaptation to customer needs that is why are considered to be a big competition to conventional energy and heat systems. This represents the great energy potential and also the possibility of change in the future energy routes. [2]

Furthermore, market price is another advantage of natural gas among other fuel that should be considered. It is one of the most sensitive issue in whole energy analysis. Beside the investment into energy fuel transformation plants, it is necessary to compare the basic fuel price. The comparison is possible considering heat equivalent or fuels amount that can provide the same amount of heat (in this case 11,63 kWh-Figure 6). It is obvious that electricity as energy fuel is several time expensive than gas, although is considered to be highly practical. Fuel oil is very common on market but its environmental unfriendly issues make it an unfavourable fuel.

Today natural gas price fluctuate among different suppliers, but nevertheless gas is still fuel with lowest market price. Fuel wood and its net calorific value depending on wood quality and sort, is the only fuel with similar market price but the comfort of its use makes it also unfavourable.

Other important natural gas characteristics are: no secondary products while burning (ash), its air mixture availability, η > 90%, lower heat losses, clean fuel and other numerous advantages related to primary consumption possibility and fuel comfort.

Final Establishment of natural gas as a future prime and widespread fuel it is done through gas reserves consideration. (Figure 2)

Environmental aspects of energy development and future use of particular fuels are nowadays of great concern. The consumption of all energy form is both directly and indirectly affecting our environment. These impacts can occur during energy extraction, processing, conversion, transportation, distribution and consumption. Considering environmental issues, nowadays a strong environmental initiative to replace high-sulphur heavy fuel oil with cleaner burning natural gas is taking place. Governmental environmental policy also encourages natural gas use as away for reducing the greenhouse gas emission. (Figure 7)

The nations must seek to reduce the environmental impacts associated with both conventional and renewable forms of energy. While energy is usually linked with air- quality issues, its impacts on land and water should also be considered. When all types of environmental impacts are considered, natural gas stands out as a most clean energy form that is now in use and as that, natural gas can meet today’s but also future’s environmental challenges.

3. Gas in Croatia

In 2000 the total primary energy supply amounted to 359.2 PJ (table 1). Natural gas participated with the highest rate ever, i.e. 32.4 percent (figure 8,14). The share of natural gas in total primary energy supply grew by 1 percent compared to the previous period and amounted to 26.4 percent, a typical share level of this source.

As regards to domestic production of natural gas, from 68 percent in 1996, production dropped till 1999 to 59 percent and in 2000 it grew to 62,5 percent. (Table 2)

In energy transformation gas was participating with 10.1 percent. Consumption of the liquid fuels was the highest, 69,8 percent. A disturbing fact is that the highest increase, comparing to previous years, was realised in the consumption of coal, as much as 159 percent, due to operation commencement of the Plomin 2 thermal power plant. We can say that this power plant was one of the mistakes in Croatia energy development.

If we analyse the share of individual energy forms within energy sector own use, we notice that by far the largest share is taken by natural gas. In final energy demand the biggest share decrease was realised in the consumption of natural gas, so that with the 15.3 percent present the lowest level recorded. Better situation was in final energy demand in industry where natural gas was participating with 25.4 percent (figure 9).

In the final energy demand, in sector like households, services, agriculture and construction, natural gas participate with 19.8 percent, right after electricity and liquid fuels. Unfortunately in transport natural gas does not have important role. Share of LPG remained on the lowest value of 0.7 percent.

Figure 13 show the structure of natural gas consumption in some sectors for period from 1988 to 1999. We can see that consumption in industry decreased regarded to war that took place in Croatia during this decade. But increase of consumption in households and services is noticeable as well as hardly the same consumption of gas in agriculture during this period.[3]

Production and Processing

Natural gas is produced from 17 gas fields, which covers about 60 percent of total consumption. The largest quantities come from the Molve, Kalinovac and Stari Gradec fields, where the Central Gas Plants for processing and transportation were built-Molve I, II and III. (Table 3)

Transport

Natural gas transport system comprises 2178 km of high pressure pipelines with diameters ranging from DN 80 to DN 700. The system was designed for the pressure of 50 bar and partially 75 bar. During peak demands the system transports 540 thous.m3/hour. The system also includes 139 reduction-metering stations (RMS) with 210 metering points. (Table 4, figure 12)

Distribution

There are 38 distribution companies in the Republic of Croatia and their gas pipeline length is 14027 kms. Also, there are three distribution companies for town gas and LPG/air mixture, and their gas pipeline length is 339 kms. Total pipeline length is 14366 kms.