Economic Model for Gas-to-Power Project Capitalization in Developing Economy

摘要

Gas-to-power electricity generation is an effective means byrnwhich oil and gas companies can move natural gas from bothrnonshore and offshore reserves to the market. But due to thernpeculiar risks in developing regions like Nigeria, very littlernprogress has been made in project capitalization in thisrnenergy sector.rnIn this paper, an integrated economic model, made up of thernbasic cash flow, scenario, and risk simulation analyses hasrnbeen developed. Authors of similar works stopped at thisrnlevel. But here, based on projects’ risk profile, companiesrnequipped with their risk aversion levels (1/investment capitalrninitially) can obtain their risk-discounted profits and hencernable to decide whether to invest or not. Decisions on bestrnshares for capitalization can also be obtained in real time. Arngas-to-power System of 5 MMscfd gas supply generatingrn14.4MW electricity was used as the test project. A 20-yearrnproject life was assumed.rnThe results show that the natural gas supply aspect of thernproject is more profitable, earning US$1.84 per US$1.00rninvestment as against US$1.29 for the power generation.rnProfits of gas-to-power projects are mostly affected byrnchanges in gas and electricity prices and supply reliabilities.rnFor capitalization, investor A, an independent oil companyrnwith US$10 million investment capital can capitalize thisrnproject all alone (100% best share) obtaining a risk-discountedrnprofit of US$4.34million. But investors B and C withrnUS$2million and US$1.33million capital would have to sharernin 60%:40% project participation ratio earningrnUS$1.55million and US$1.03million respectively to profitablyrncapitalize the project.rnWith this model, gas-to-power risks are proactively identified,rnevaluated and communicated for effective decision-making.rnBest shares for profitable project capitalization even in arndeveloping economy like Nigeria are easily determined.