The World Bank’s GGFR public-private partnership was launched at the World Summit on Sustainable Development in Johannesburg in 2002. GGFR supports the efforts of oil producing countries and companies to increase the use of associated petroleum gas and thus reduce flaring and venting, which waste valuable resources and harm the environment.
In the World Bank’s Europe and Central Asia region, the GGFR partnership supports flaring reduction efforts in Azerbaijan, Kazakhstan, Russia, Turkmenistan, and Uzbekistan, including identification and implementation of economically viable associated gas utilization projects.
Russia produced more than 66 bcm of associated gas of which 24% or 16 bcm was flared in 2010, according to official data. Satellite data from the National Oceanic and Atmospheric Administration (NOAA) shows that Russia flared 35 bcm in 2011.
Based on official data and average market prices for natural gas, Russia’s annual economic losses related to associated gas flaring are more than $5 billion per year. But the country is taking steps to address the problem.
The cooperation with GGFR is fruitful for Russia as it provides an opportunity to line up with international best practices to address this challenge, and bring all relevant stakeholders to the table.
Hurdles and Solutions
The Russian government is actively working on reducing gas flaring and venting, and has adopted several laws requiring oil companies to stop wasting valuable resources and to utilize a minimum of 95% of associated petroleum gas.
But some hurdles that Russia faces in this area include:
- Remoteness of a large number of wells with low pressure, low volumes of gas
- Potential variability of gas associated with oil production
- Inadequate infrastructure or lack of access to gas collection, processing and transportation
- Gas impurities making gas difficult to use
- Risk of damaging oil production through gas re-injection into the oil reservoir
- Low prices for associated petroleum gas and difficulties in funding investments
The Khanty-Mansiysk Autonomous Okrug-Yugra (KMAO) is located in the Western Siberia and Eastern Urals territory. The Okrug (district) accounts for 5.5% of total gas production in Russia and 1.1% of the global gas production. In 2011, oil companies operating in the region produced 36.6 billion cubic meters (bcm) of associated petroleum gas (APG), representing more than 50% of total APG production in Russia. More than 86% of produced APG was efficiently used, although the remaining (5.4 bcm) was flared.
The challenges of efficient utilization of currently flared gas in KMAO requires comprehensive solutions based on existing international best practices, implemented by public authorities and oil companies in the region. In 2004, the government of KMAO became a member of the GGFR partnership to address this challenge. GGFR provided technical assistance on further improvement of flared gas volumes data collection, and to find more efficient and economically viable ways for utilizing this gas.
As a result of these efforts, several APG utilization projects were implemented within the framework of the government’s regional program from 2007 to 2010. The volume of efficiently utilized APG increased by 7.9% and reached 86.4% of utilization rate. Previously flared associated gas was utilized at gas processing plants, for power generation, municipal heating, and at oil sites.
The work in KMAO is ongoing, and several new gas utilization projects have been identified and prepared for implementation. In 2012, oil companies operating in KMAO invested almost one billion dollars in APG utilization projects.
“We are creating a conducive environment for investing in this sector, encouraging investment, and making it clear that the efforts and resources invested by owners benefit the region,” said Natalia Komarova, Governor of the Khanty-Mansiysk Autonomous Okrug.
In cooperation with the government of KMAO, the Blue Line Project Company brought all relevant partners together through the establishment of a public-private partnership (PPP). This alliance implemented several gas flaring reduction projects. The company is planning to expand this experience to other regions.
In today’s energy debate, everyone is seeking solutions to mitigate climate change, provide access to cleaner sources of energy, and improve energy efficiency. Gas flaring reduction has the potential to do that.