Sir Suma Chakrabarti, EBRD President
Global Gas Flaring Reduction (GGFR) Partnership Forum
Together with the GGFR, we can play an important role in raising awareness
Distinguished guests, it is with great pleasure that I welcome you at the EBRD as the host for this Global Gas Flaring Reduction (GGFR) Partnership Forum. I understand this is a special meeting of the Partnership which is celebrating 10 years of work and results.
Special thanks to the World Bank and the GGFR partnership for organising the meeting.
The challenges confronting us are daunting. A slowing pace of growth, high unemployment in a number of countries, high energy and raw material prices, and unfolding implications from the global financial crisis are placing huge strains on economies worldwide. In this difficult current context, pressing environmental issues such as climate change today appear as intractable as ever.
It is precisely because of this context, that the work of groups such as the GGFR is so important. Confronted with difficult issues and challenges, GGFR demonstrates that there are viable opportunities to build upon.
Reducing gas flaring provides significant opportunities
Huge volumes of associated petroleum gas (APG) are currently flared or vented from oil fields worldwide.
This APG has a significant impact on the environment – and represents a valuable untapped resource. Global APG flaring is equivalent to 30 per cent of current European Union gas consumption, or 75 per cent of Russia’s gas exports and contributes to more than 400 million tonnes/year of CO2 emissions.
If all the APG was captured, it would have a market value of close to 50 billion dollars per year.
However, while the opportunity and benefits from reducing APG flaring are clear, there are a number of significant barriers. There are: gaps in the technical engineering knowledge required to develop APG solutions
- regulatory and market barriers. For example, there is often a lack of pressure by governments on oil companies to implement environmental measures such as APG flaring reduction
- in addition, governments, particularly in the EBRD region, often have poor monitoring, compliance and enforcement regimes to ensure such projects are implemented
- from a market perspective, upstream oil operations are often very distant from markets – requiring the construction of expensive delivery infrastructure such as gas pipelines, LPG/gasoline bunkers and transport networks, and sometimes connections to the electricity grid.
- Together these barriers raise interesting challenges to the systematic exploitation of this energy resource and the resulting reduction of the environmental impact of oil fields.
Important role of GGFR
These regulatory and market barriers are complex – and require a concerted, coordinated effort to be effectively addressed.
This is why the World Bank GGFR is so important. The GGFR brings together the world’s leaders in gas flaring reduction in a high-profile public-private partnership to cooperate on awareness, technology dissemination, policy dialogue and regulation development.
I commend the GGFR for its achievements to date. In just 10 years since its creation at the Summit on Sustainable Development in Johannesburg, the GGFR partnership has already achieved some significant results. These include:
- building a strong membership covering major oil companies, the OPEC Secretariat and 15 countries that account for around half of the world’s gas flaring
- establishing the Global Standard for gas flaring reduction, which the majority of partners have endorsed
- implementing demonstration projects for associated gas utilisation in eight countries and
- assisting Indonesia, Kazakhstan, Mexico, Nigeria, Qatar, Russia and other countries to reduce flaring to minimum levels, through increased collaboration between operators, the national oil company and the regulator.
Countries in the EBRD region of operations lag behind in efforts to reduce gas flaring
So why is the EBRD such a strong supporter of GGFR?
The EBRD countries of operations present huge investment opportunities associated with the reduction of gas flaring.
Russia alone is estimated to flare more than 20 billion cubic metres of gas per year – around a quarter of global gas flared.
Together with the GGFR, the EBRD can play an important role in raising awareness, as well as facilitating and scaling up investments in gas flaring reduction.
The EBRD is providing leadership on investments in gas flaring reduction. In all our upstream oil projects, the EBRD ensures that our clients minimise as much as possible gas flaring.
This approach is bearing fruit – in recent years, the EBRD has financed two important gas flaring reduction projects in Russia (Monolit (55 million US dollars) and Irkutsk Oil (115 million US dollars)). Both projects share a similar approach in the technical and commercial arrangements. Monolit, for instance, is an excellent example of how an integrated approach can be employed to address the environmental problems of gas flaring and deliver several valuable products. At Monolit:
- the APG is treated with innovative technology for gas processing and gas-to-liquid conversion
- dry gas is delivered through a newly built 70 km-long gas pipeline
- gasoline and LPG are delivered with new road tankers and
- electricity is used on site and sold to other nearby oil operations, thus minimising the need for grid infrastructure.
- Irkutsk Oil is developing a similar concept in phases, whereby the residual APG also is re-injected into the oil fields.
- The projects have an IRR in the range of 20 per cent, and deliver an estimated total savings around 1.7 million tonnes CO2 per year.
- The EBRD is also working to raise awareness of APG flaring reduction issues. For example, we are currently performing a joint study for Russia, Kazakhstan, Azerbaijan and Turkmenistan. We have high expectations that this study will help us to identify further investments in APG flaring reduction.
This is an important event
To conclude, ladies and gentlemen, let me re-emphasise that the challenges we face in significantly reducing gas flaring are significant.
They will take a determined and sustained effort to be addressed effectively.
This is why this GGFR meeting is an important event. This forum provides a unique opportunity for all stakeholders to gather and discuss ways to address the barriers to gas flaring reduction effectively and to seize the significant economic, financial and environmental opportunities in this area.
So best wishes for a productive meeting within the walls of the EBRD’s HQ, happy anniversary to the GGFR and thank you for your attention.