Viability of Seasonal Natural Gas Storage in the Saudi Energy System

Abstract

Abstract We assess the geological and economic viability of underground natural gas storage in Saudi Arabia under different scenarios: with and without LNG imports allowed, and under low and high domestic gas production. Depleted oil fields or aquifers are best suited for gas storage in the Kingdom. Using a model of the country's energy system, we show that in the case of high gas production, storage capacity would be built to bypass the gas transport limit for use in electricity generation in the summer. In the low production case, gas storage would facilitate optimal gas use among sectors throughout the year. The net present gain – defined as the discounted sum of the annual differences in benefits and costs – is used to determine the economic viability of gas storage. Overall, gas storage in the high gas supply case would deliver a positive gain of nearly 900 million dollars throughout the energy system. With low gas supply, the cost of gas storage for the upstream sector would exceed the benefit of lower costs realized in other sectors. The results indicate that gas storage installations are only favorable in the case of high domestic gas production. If production turns out to be low, LNG imports would instead be more sensible.