Share gas, don’t flare it

By Neil McKain, Head of the EBRD Office in Azerbaijan

Tackling gas flaring is a key challenge in today’s production of oil and gas. Building on the strong commitment of the industry to reduce gas flaring, the EBRD is now stepping up its efforts with a series of workshops which kick off with the first event in Baku on May 23. Further workshops will take place in Astana on May 28 and Moscow on June 18.

The meetings will bring together business representatives, authorities and international financial institutions to discuss a study commissioned by the EBRD and the World Bank on “Associated Petroleum Gas (APG) Flaring Study for Russia, Kazakhstan, Turkmenistan and Azerbaijan”. The goal is to find ways to improve the efficiency of oil and gas production and successfully tackle climate change.

The study, produced under the World Bank Global Gas Flaring Reduction Partnership (GGFR), looks into ways to reduce gas flaring and how to develop sustainable business practices in the oil and gas sectors of these countries. Thanks to our partners’ efforts, substantial progress has been made and they are committed to doing even more. The next step will be the joint development of investment projects.

Gas flaring remains a huge untapped resource which is wasted with harmful consequences for the environment. Global flaring of associated petroleum gas is 30 per cent of the current gas consumption of the European Union or 75 per cent of Russia’s gas exports. It contributes more than 400 million tons per year of CO2 emissions. If all APG were captured instead of flared it would have a market value of some €50 billion per year.

Despite these obvious benefits in dramatically reducing gas flaring, the study has identified a number of serious obstacles. There are technical, financial, organizational and regulatory barriers, many of which can only be tackled through a coordinated institutional approach.

The study acknowledges that there are technical and financial challenges associated with further reductions. It is not always economically viable to capture, re-inject into the reservoir or otherwise utilize associated gas, especially in the case of small-scale developments. However, technological progress is rapidly increasing the number of projects where flaring can be reduced successfully and on an economically sound basis.

The EBRD and the World Bank are proud to be leading these efforts. Experience has shown that engaging the industry and the authorities is key for progress with implementing improved techniques. The workshops in Azerbaijan, Kazakhstan and Russia represent important steps forward in this process and have been welcomed warmly by all stakeholders.

In addition to promoting policy dialogue the EBRD is also active as an investor to tackle the issue of gas flaring. The Bank has financed important gas flaring projects in Russia, which accounts for one third of all associated gas flared globally. One example is the $87 million financing package provided to the independent company ZAO UgraGasProcessing in July 2010 to convert associated gas into liquid petroleum gas and other commercially usable fuels.

In October 2012, the EBRD hosted the Global Gas Flaring Reduction Forum in London, organised jointly with the World Bank. In his opening remarks EBRD President Sir Suma Chakrabarti stressed: “Reducing gas flaring is a very profitable business opportunity with significant environmental benefits.”