A World Bank-sponsored partnership, using information from US satellites, found the world is flaring 5.5% of the gas it produces, worth about US $40 billion last year.
Naturally, that kicked off a call by some environmental groups with statements such as, “We demand an immediate end to gas flaring, and an end to exploration and new oil field development until facilities are in place for the utilization of all associated gas,” in advising Nigeria how to run the country.
The study showed the amount of gas flared has been between 5.3 Tcf and 6 Tcf (150 Bcm and 170 Bcm) a year since the mid-1990s. It also showed Russia flared more than
any other country and more than twice as much as Nigeria, the second-place nation on the list.
Well, just don’t stand there; do something.
Actually, oil companies and governments are doing something. In 2002, the World Bank with energy company and government partners formed the Global Gas Flaring Reduction Partnership (GGFRP). That was the group that sponsored the satellite survey, the first of its kind. Those partners include all of the major oil companies. Most of the partners in the group have agreed to endorse a voluntary standard to eliminate venting and reduce flaring significantly in the next 5 to 10 years.
Many areas of the world already have strict rules about flaring gas. That shows in the results from the survey. Gas flaring has decreased in areas such as the North Sea and the Gulf of Mexico.
Many more areas are getting tougher. Russian President Vladimir Putin met with ministers and the heads of Gazprom, Transneft and Rosneft and told them to deal with the waste of associated gas. The government has mandated that 95% of associated gas must be used by 2011.
Just to push the point home, the Ministry of Natural Resources proposes increasing fines for five fold flaring, according to a report publicized by BBJ in Hungary.
Even with the higher fines it’s still cheaper for most operations to flare the gas and pay up than to create a market.
Nigeria and other parts of the world face a similar problem. Once the gas is produced, there’s no place to send it, unless companies create an onshore infrastructure — build pipelines, power plants and electricity transmission lines, and chemical plants — or send the gas to liquefied natural gas (LNG) plants already running near maximum.
Nigeria even has contracted to send gas to Equatorial Guinea’s LNG plant. And it has mandated an end to flaring associated gas next year, although it’s unlikely operators will be able to meet that deadline. That puts Nigeria in the position of halting a substantial amount of production and the payments that go with it or waiving the requirement for a whole bunch of special cases.
Incidentally, Nigeria has huge gas resources, and no one is specifically looking for gas there.
Rashad Kaldany, director of oil, gas, mining and chemicals for the World Bank, offered a path toward a solution to the flared gas problem during a talk last December in Paris at the Global Forum on Flaring & Gas Utilization.
The GGFRP efforts clarified the situation. “We now better understand the barriers that we need to overcome for reducing flaring, including the lack of reliable data to gauge the magnitude of the practice;
- “We are more conscious of the need for countries to have not only effective regulations but also clear policies with the right incentives for operating companies so that the necessary infrastructure is put in place and markets for gas utilization are developed;
- “We are also more aware of the critical role that leadership and commitment play in both the public and private sectors in order to sustain progress over the long term;
- “And perhaps most importantly, we have confirmed that reducing gas flaring requires a global and concerted effort by governments and industry as well as financial institutions and local communities,” he said.
The world’s most developed nations need what Kaldany called the three Es; energy security, environmental protection and economic growth. He said, “This is precisely what gas flaring reduction can achieve; lowering CO2
emissions while opening new economic opportunities through gas utilization and at the same time enhancing energy security by increasing available supplies.”
That goal will take a powerful set of partnerships. Shareholders demand profits from their companies. Without a profit, it would be up to national oil companies operating at a loss to find uses for flared gas. On the other hand, government cooperation and policies can help public companies find ways to make a profit while solving these kinds of problems.
Too often, however, instead of setting policies to make the use of flared gas profitable, countries follow the Russian example by trying to make it unprofitable to flare. Many times that smothers development by placing public companies between two unprofitable alternatives.
It would be nice if every country could use Saudi Arabia’s approach. It reduced gas flaring from 1.3 Tcf (38 Bcm) annually in the early 1980s to 4.2 Bcf (120 MMcm) in 2004, but it had to create a petrochemicals industry to do it.