How to Cost Model a Net Zero Pathway from a Gas Foundation

Overview

An ASX listed company engaged BE&R in March 2022 to model costs for a potential new gas field and renewables development within an African country. The cost modelling needed to be simple, comprehensive and transparent. The study had a short timeline of 6 weeks to target early engagement with the customers and local government. The aim was to develop a model that the Client’s customers could understand and see used in front of them to examine different supply options and so engage them on cost of supply.

Cost modelling of Solar PV and BESS systems were included, and the scope expanded to include a full country business development strategy, incorporating a phased transition to a renewable energy business integrated with other high potential ventures.

Cost Models

The overall cost models developed included the following components: Natural gas trucking model for LNG and CNG options.

1. Pipeline sizing model.
2. Mapped field and customer locations.
3. The set of development scenarios.
4. A simple Input/Output page to enable the Client to be able to drive the model in front of prospective gas customers.

• The study included the particular aspects of interest:
• Roads in Africa can be different to Australia and the model incorporated specific speeds for the local sealed highways and unsealed access roads.
• CNG comprised a simple gas treatment plant, mother station to compress the gas and daughter stations at customer sites to receive the high pressure gas.
• LNG had a complex gas treatment plant with higher capacity trucks.
• Locally specific labour costs were included for different skill levels in operation and logistics.
• Distances and routes to likely and possible customers – power stations – public and private utilities across the country with distances ranging from 100 to 1,000 km.

Cost Modelling Study Insights

Simple understandable analysis is powerful. If the model is not complicated it can be communicated easily, and if it can be easily communicated it is easier to build trust with stakeholders and gain approvals.

Flexibility: Scoping models must be able to accommodate a wide range of ideas. The modelling sophistication lies in quick adaptability, rather than diving deeply into modelling, especially where key inputs remain very uncertain.

Speed of Execution: The most important aspect of the exercise was being able to deliver a model in time for the client to use with their planned engagements with customers.

Full Development Strategy

In conjunction with the client, BE&R explored the wider context of the country development against current local and global policy. A strategy was developed and in now being implemented encompassing:

• Installation of Solar PV as part of the energy hubs.
• Planned future expansion of solar PV with grid scale batteries, as and when they become economic.
• Incorporation of agriculture development to make use of natural synergies with the gas field development – local jobs, treatment and use (rather that disposal) of produced water, use of local power and consideration of a range of methods to improve the farming outcomes.
• Expansion of the Energy Hub to an Industrial hub that has now established a MOU to build a Solar PV panel manufacturing plant.