20th World Petroleum Congress, Doha 2011

Forum 20: Industry responses to climate change

Global Gas Flaring - A Burning Issue

Mr Bent Svensson, World Bank, USA

Abstract
The World Bank estimates that over 150 billion cubic meters (bcm) of natural gas associated
with crude oil production is being flared and vented annually. This volume represents 5% of
the global natural gas production and adds the equivalent of 400 million tons of carbon
dioxide (CO2) in annual emissions. It is also a loss of valuable resources which, in many
cases, could be used for the benefits of local communities or for export projects. Overall, the
loss of revenues through global gas flaring is estimated at approximately US$ 25 billion per
year at $5.00 per MMBTU.

The Global Gas Flaring Reduction ("GGFR") public-private partnership was launched at the
Johannesburg World Summit on Sustainable Development in August 2002 with the objective
of facilitating governments and oil companies' efforts, under the World Bank's leadership, to
reduce global gas flaring, improve energy efficiency, and mitigate impact on climate change.

Progress to date

- Satellite estimates for global gas flaring show a decline in global gas flaring volumes
from 171 bcm in 2005 to 134 bcm in 2010.

- Global awareness and understanding of the gas flaring and venting issues: Major
flaring countries have decided to tackle the flaring issue (i.e. Russia, Nigeria, Angola) and
many companies' policies do not allow flaring in new oil developments.

- Development of tools to monitor and measure the flaring worldwide: Satellite imaging
of gas flares worldwide in partnership with NOAA, and Improvement of metering and
estimating tools and methodologies

- New Regulations on Gas Flaring in several countries: "No flaring" laws in Russia,
Angola, Kazakhstan, and Gabon. New laws being progressed in Indonesia, Cameroon,
Nigeria.

- Gas Flaring Reduction Plans on the way in several countries: Canada, Nigeria,
Kazakhstan, Azerbaijan, and Uzbekistan have completed their plans or are in progress to
complete them, while Russia (KM), Qatar, Gabon are starting up.

- Gas Utilization Projects have been identified in a number of countries: Angola,

Nigeria, Kazakhstan, Qatar, Uzbekistan, Gabon, Cameroon, and others.

- GGFR and its partners are improving Carbon finance methodologies of to improve
the economics of gas flare reduction projects.

Public-private partnership aspects

GGFR is a public-private partnership led by the World Bank. The Bank is in a unique position
to approach and work with governments and companies as a trusted neutral third-party
capable of facilitating the much needed collaboration among relevant public and private
sector stakeholders. GGFR Partners' experiences are turned into best practices through its
networks with partners. A major challenge in addressing gas flaring is that progress depends
upon governments' and companies' investments in actual associated gas utilization projects.

© World Petroleum Council

 20th World Petroleum Congress, Doha 2011
Forum 20: Industry responses to climate change

Global Gas Flaring Reduction

Bent R. Svensson, Program Manager, GGFR/World Bank

The World Bank estimates that 134 billion cubic meters (bcm) of natural gas associated with
crude oil production was flared and vented in 2010. This volume represents 5% of the global
natural gas production and adds the equivalent of 350 million tons of carbon dioxide (CO2) in
annual emissions. It is also a loss of valuable resources which, in many cases, could be used
for the benefits of local communities or for export projects. Overall, the loss of revenues
through global gas flaring is estimated at approximately US$ 25 billion per year at $5.00 per
MMBTU. Emission reductions are high on the international/domestic agendas and gas flaring
reduction is a significant contribution to energy efficiency and climate change mitigation.
The Global Gas Flaring Reduction (”GGFR”) public-private partnership was launched at the
Johannesburg World Summit on Sustainable Development in August 2002 with the objective
of facilitating governments and oil companies’ efforts, under the World Bank’s leadership, to
reduce global gas flaring, improve energy efficiency, and mitigate impact on climate change.

Gas Flaring is declining

Satellite estimates for global gas flaring show a decline in global gas flaring volumes from 171
bcm in 2005 to 134 bcm in 2010 despite an increase in oil production.

Global gas flaring from satellite data

200 90,000
190 85,000
180 80,000
Gas flared, bcm

Oil production, 'ooo b/d

170 75,000
160 70,000
150 65,000
140 60,000
130 55,000
120 50,000
110 45,000
100 40,000

Gas f laring Oil production

Inconsistent data and under-reporting of gas flaring by governments and companies has
complicated the global effort to track progress on flaring reduction. GGFR’s cooperation with
the US National Oceanic and Atmospheric Administration (NOAA) to use satellite data aims to
improve the reliability and consistency of global gas flaring data. This has now resulted in
more consistent national and global estimates of gas flaring volumes from 1995 through to
2010. Appendix 1 shows the Flaring Intensity (i.e., the volume of gas flared per barrel of oil
produced) for GGFR partner countries as well as globally.

© World Petroleum Council

 20th World Petroleum Congress, Doha 2011
Forum 20: Industry responses to climate change

Public-private Partnership
GGFR is a public-private partnership led by the World Bank. The Bank is in a unique position
to approach and work with governments and companies as a trusted neutral third-party
capable of facilitating the much needed collaboration between relevant public and private
sector stakeholders. GGFR Partners’ experiences are turned into best practices through its
networks with partners1. A major challenge in addressing gas flaring is that progress depends
upon government and company investments in actual associated gas utilization projects.

Over the past eight years GGFR partners have accumulated a wealth of experience, lessons
and best practices about gas flaring reduction, so they now better understand how to
overcome the barriers, including:

• Better data to gauge the magnitude of the practice at the country and company levels.
• Governments need to have not only effective regulations in place but also clear
policies with the right incentives for industry, so that the necessary infrastructure is
put in place and markets for gas utilization are developed.
• Country buy-in, high-level support and an effective local partnership between
government and industry are key ingredients to ensure success in gas flaring
reduction. There should no longer be any doubt that government and the private
sector need to work as real partners if tangible results are to be achieved.
• Leadership and commitment play a critical role in both the public and private sectors
in order to sustain progress over the long term.
• New and small-scale gas utilization technologies need to be nurtured to
commercialization, to provide additional economic alternatives to flaring.

GGFR works with governments and industry to address some of these issues in the following
manner:

Regulations and Incentives

GGFR has carried out two major studies of global gas flaring regulation. In 2004, GGFR
published a study of 44 oil producing countries investigating the role of regulation in the
2
context of gas flaring and venting. The study found that most developing countries that
produce oil lack efficient and effective gas flaring and venting regulations and have
inadequate institutional capabilities with often overlapping responsibilities among institutions.
In many developing countries, companies that are supposed to be regulated are responsible
for carrying out regulatory functions.

More recently, GGFR launched a review of the international experience of gas flare reduction
regulation and policies in a number of partner countries. The preliminary conclusions are
that3:
• Government commitment to reduce flaring is critical to success: i) national strategies
and master plans for the oil and gas sector must include consideration of associated
gas utilisation and flaring reduction, and ii) Government must work to ensure that
midstream and downstream markets support flared gas utilization.
• Industry consultation mechanisms are important in ensuring flaring targets are
feasible and regulations are realistic.
On the regulatory side emphasis should be placed on encouraging industry to look for
opportunities to utilise associated gas economically. Deadlines or other limits on flaring need
to be seen as part of a package of other market enabling measures, as deadlines by
themselves are unlikely to be effective or will result in reduction of oil production unless
backed up by measures such as creation of viable downstream markets. On the other hand,
only enabling markets without effectively enforced regulation of flaring will not reduce flaring

1
GGFR currently has three Partner Networks: a Carbon Finance Network, a Communication and a
Technical Network.
2
Regulation of Associated Gas Flaring and Venting: A Global Overview and Lessons from International
Experience, World Bank/GGFR Report Number 3, February 2004. http://www.worldbank.org/ggfr
3
International Regulatory Best Practices: forthcoming on the GGFR website:
http://www.worldbank.org/ggfr

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 20th World Petroleum Congress, Doha 2011
Forum 20: Industry responses to climate change

to minimum levels. Any penalties must be set at levels that are realistic deterrents but should
be used only in combination with market enablers.

Global Standard
Today, most GGFR partners have endorsed the Global Standard for Flaring and Venting
Reduction, introduced by GGFR in 20044. This Global Standard is a way to engage
stakeholders in gas flaring reduction, and provides a framework for governments, companies,
and other key stakeholders to consult with each other, take collaborative actions, expand
project boundaries, and reduce barriers to associated gas utilization.
GGFR partners that have endorsed the Global Standard are committed to no venting, no
routine flaring in new projects, and to eliminate continuous production flaring in 5-6 years from
their joining the GGFR, unless there are no feasible alternatives.
Key Elements of the Global Standard include:
• Initial global with focus on large sources that can make a significant difference early
• Collaborative action and implementation planning through
• Producer driven Associated Gas Recovery Plans (AGRP) and consultation
• Government driven Country Implementation Plan and consultation
• Ultimate goal for longer term continuous improvement
• Recommendations for measurement, public reporting and verification
• Recommended timeline
The Global Standard calls for operators and governments to prepare AGRPs through
identifying flare reduction projects and following through executing the projects. AGRPs have
been prepared in Azerbaijan (Socar) and Uzbekistan and are under preparation with
assistance from the GGFR Partnership in Qatar, (see below), Kazakhstan, Gabon, Khanty-
Mansyisk in Russia and Nigeria (Nigeria Gas Flare Committee). A guidance document5 has
been published on how to effectively prepare such plans.

Case studies
The world’s top 20 gas flaring countries in 2010 based on satellite data are shown in
Appendix 2. The table shows that Russia and Nigeria top the list. Both countries, however,
have seen a decline in gas flaring over the last 5-6 years. The following three sections
summarize the gas flaring reduction efforts in Russia, Nigeria and Qatar.

Russia
In Russia alone, more than 35.2 bcm of gas was flared in 2010, down from 50 bcm in 2005
according to satellite estimates.

In 2008, the government issued an Order “On the Measures Stimulating Reduction of
Atmospheric Pollution by Products of Associated Petroleum Gas Flaring.” It sets a target for
2012 and beyond, limiting flaring levels to only 5 percent of the entire associated gas output.
Starting Jan. 1, 2012, producers will be liable to pay increased fees for excessive flaring. The
fees will be increased by 4.5 times from the current 8 USD per ton of methane and 10 cents
per ton of CO2.

The government policies accelerated activities oil companies operating in Russia and regional
governments were carrying out to utilize the associated gas. From 2010 to 2015 Russia’s
biggest oil companies are planning to invest more than 10 billion USD in the implementation
of flared gas utilization projects. However, in some regions, e.g. Yamal-Nenets oil production
is expected to increase significantly from 2012 and infrastructure to gather the gas and
transport it to markets is not yet in place, so increased gas flaring from new fields may offset
earlier reductions.

4
A Voluntary Standard for Global Gas Flaring and Venting Reduction, Report No. 4.
http://www.worldbank.org/ggfr
5
Preparing Effective Flare Management Plans: A Guidance Document, GGFR, IPIECA and OGP,
forthcoming.

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 20th World Petroleum Congress, Doha 2011
Forum 20: Industry responses to climate change

GGFR has successfully worked with administrations at the regional level in Khanty-Mansiysk
and Yamal-Nenets to improve legislation, economically assess small scale gas utilization
projects, and establish reliable data on flared gas volumes.

Furthermore, in September 2011, the European Bank for Reconstruction and Development
(EBRD) and the World Bank/GGFR launched a joint study on the “Associated Petroleum Gas
Flaring Study for Russia, Kazakhstan, Turkmenistan and Azerbaijan”. Main objectives of this
study will be: 1) to review and analyze the existing situation of associated gas flaring in study
countries; 2) to identify and analyze options for utilization of flared gas, in terms of viable
technologies and business models; 3) to develop ten bankable investment projects; 4) to
disseminate the results of the study through a number of workshops in the four countries
covered by the study.

Nigeria
Nigeria joined the GGFR from the start. Gas flaring in Nigeria has dropped 1/3 since 2004.
The Nigeria Flare Reduction Committee (NFRC) was created in 2007 to facilitate a reduction
of gas flaring by assisting the Federal Government of Nigeria in developing a roadmap for
achieving reduction in gas flaring within a realistic time frame. The NFRC is chaired by the
Ministry of Petroleum Resources and facilitated by the GGFR, consists of representatives
from relevant Government ministries and agencies in the petroleum sector, and from the main
oil and gas operators in Nigeria.

The main activities of the NFRC include: i) Review each operator’s flare reduction program to
ascertain if any acceleration of the implementation of the program is realistic and, where
possible, establish how this can be achieved; ii) Combine individual operator’s plans to
establish a comprehensive “Nigeria Flare Reduction Plan” (NFRP), integrated into the
Nigeria’s Gas Master Plan developed by NNPC; iii) Develop and evaluate options to
accelerate reduction in gas flaring and advise the Ministry of Petroleum Resources of the
consequences – financial and operational – of implementing each of these options, iv) Identify
opportunities for co-operation between operators in implementing the NFRP; v) Develop and
implement a coordinated Communication Strategy to ensure regular and effective
communication of FGN’s flare reduction plans and policies; vi) Provide assistance to the
Department of Petroleum Resources in monitoring the implementation of the integrated
Nigeria Flare Reduction Plan.

The NFRC has identified technically and financially viable options for the accelerated
reduction of gas flaring that would be acceptable to all stakeholders, and advised the
government on mechanisms for implementation of these options.

Small-Scale Associated Gas Utilization Project

The Global Environment Facility (GEF) approved funding for a project to assist Nigeria in
pursuing its low-carbon development priorities by helping to adopt technologies for small-
scale associated gas utilization. The project will be implemented by the World Bank/GGFR
and is anticipated to enable a pilot development which will reduce flaring by some five million
cubic feet per day with emissions of over 400 tonnes per day of CO2, and supply 20,000
households and businesses with electricity and improved fuels such as LPG in The Niger
Delta.
The project will provide technical, commercial and legal resources to develop and execute a
feasibility study and business plan, and finance the construction of a small-scale facility
utilizing associated gas.

Qatar
Qatar was the first GCC country to join GGFR in January 2009. Over recent years, Qatar has
successfully reduced gas flaring even in a period when oil and gas production was increasing.
A key gas utilization project was the Al-Shaheen Project, which is also the largest gas flaring
project approved for carbon finance in the world. A number of other gas flaring reduction
projects were implemented in Ras Laffan by the LNG operators, on the offshore oil fields and
on the onshore Dukhan field.

Gas flaring in Qatar was estimated at around 2 bcm in 2010.

© World Petroleum Council

 20th World Petroleum Congress, Doha 2011
Forum 20: Industry responses to climate change

GGFR has held a number of workshops jointly organized with the participation of the Ministry
of Environment, Qatar Petroleum, and operators of upstream and downstream industries to
address gas flaring in technical working groups in each zone of operation. The purpose has
been to:
• Identify flares, collect data, and determine a baseline
• Identify potential opportunities for gas utilization
• Develop guidance on flaring measurement, accounting and reporting
• Improve coordination and information sharing between the regulatory bodies
• Develop a standardized reporting system for flaring and GHG emission that would be
adopted by all regulatory bodies
Qatar also has set new ambitious objectives in its "Qatar National Development Strategy for
2016" including halving gas flaring intensity in the country between 2008 and 2016. This
document also sets the development of a flaring monitoring tool as one of the top national
environmental projects.

In this context, Qatar has established a regulatory entity for HSE matters. A first task of this
entity is to draft flaring and venting regulations and develop the above mentioned monitoring
tool. GGFR is assisting the counterpart in these areas.
A number of new gas flaring reduction projects have been identified during the GGFR-QP co-
operation, including the "Jetty Boil Off Gas" project which will cost US $1 Billion and will
reduce gas flaring significantly.

Conclusion and Next Steps

Overall efforts to reduce gas flaring are paying off, but global flaring still accounts for more
than 130 bcm per year. Continued support of GGFR partners is crucial to sustain the
momentum and downward trend in flaring reduction in the next few years and oil companies
and governments that are not yet partners are encouraged to join GGFR. Gas flaring
reduction is a concrete contribution from the oil industry to reducing greenhouse gas
emissions, improving energy efficiency, and expanding access to energy particularly in
countries where it is much needed.
Major challenges ahead also need to be addressed, particularly in countries that recently
joined GGFR. Gains in global flaring reduction may potentially be reversed in countries
planning major new oil production where GGFR support will be relevant and much needed.

Flaring intensity: % change from 1996

0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
-40%
-45%

Global Partner countries

© World Petroleum Council

 20th World Petroleum Congress, Doha 2011
Forum 20: Industry responses to climate change

Estimated flared volumes from satellite data

Change
from
Volumes in bcm 2006 2007 2008 2009 2010
2009 to
2010
Russia 50.0 52.3 42.0 46.6 35.2 (11.4)
Nigeria 18.6 16.3 15.5 14.9 15.2 0.3
Iran 12.2 10.7 10.8 10.9 11.3 0.4
Iraq 7.2 6.7 7.1 8.1 9.1 1.1
Algeria 6.4 5.6 6.2 4.9 5.4 0.5
Angola 4.0 3.5 3.5 3.4 4.1 0.7
Kazakhstan 6.2 5.5 5.4 5.0 3.8 (1.2)
Libya 4.4 3.8 4.0 3.5 3.8 0.3
Saudi Arabia 4.2 4.2 4.3 3.9 3.7 (0.3)
Venezuela 2.1 2.2 2.7 2.8 2.8 0.0
Mexico 2.1 2.7 3.6 3.0 2.5 (0.5)
Indonesia 3.2 2.6 2.5 2.9 2.3 (0.6)
China 2.9 2.6 2.5 2.4 2.1 (0.3)
Canada 1.7 2.0 1.9 1.8 2.1 0.2
USA * 2.0 2.1 2.3 2.0 2.1 0.0
Uzbekistan 2.9 2.1 2.7 1.7 1.9 0.1
Qatar 2.3 2.4 2.3 2.2 1.9 (0.3)
Oman 2.3 2.0 2.0 1.9 1.8 (0.1)
Malaysia 1.9 1.8 1.9 1.9 1.5 (0.4)
Egypt 1.7 1.5 1.6 1.8 1.5 (0.3)
Total top 20 138 133 125 126 114 (11.8)
Rest of the world 23 21 22 21 20 (1.1)
Global flaring level 162 154 146 147 134 (12.9)

Source: NOAA Satellite data

* Coverage limited to GOM, Alaska and partial continental USA

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