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HORIZON

Flaring Efforts Stall Despite Decarbonization Drive

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AP_21324753345828-methane

Efforts to eliminate routine gas flaring by 2030 have stalled despite the growing urgency to decarbonize. Improved practices at individual companies are helping. But experts point to a general lack of government action in terms of policy carrots — or sticks to penalize the worst offenders. Still, sustained high prices and energy security concerns could increasingly make gas capture an economic necessity rather than a choice.

New World Bank data show a marginal increase in the volumes of associated gas that went up in smoke in 2021 compared with the previous year, in line with higher oil production. Around 144 billion cubic meters (14 billion cubic feet per day) was flared at upstream facilities around the globe — not much less than Europe imported from Russia. Adding likely “methane slip” from inefficient combustion and entrained NGLs bumps up the figure to a whopping 264 Bcm, equal to 7% of global gas demand and $75 billion of lost revenue, according to gas flare consultancy Capterio.

Ten countries accounted for three-quarters of flaring last year. Seven — Russia, Iraq, Iran, the US, Venezuela, Algeria and Nigeria — have figured among the 10 worst offenders for the past decade. The other three — Mexico, Libya and China — have seen flaring jump significantly in recent years. While progress has been made since satellite observations began in 1996, flaring volumes have plateaued in the past 10 years, with declines in some countries offset by dramatic increases in others, the World Bank says.

Harnessing, processing and transporting the gas to viable markets would be expensive, particularly when flare "sites" are far from existing infrastructure. It would cost an estimated $100 billion-plus to end existing routine flaring, Zubin Bamji, program manager of the World Bank's Global Gas Flaring Reduction Partnership, tells Energy Intelligence. He cites significant barriers, including “lack of prioritization by operators, unsupportive regulatory environments, and inadequate infrastructure and macroeconomic risk.”

What Are the Options?

“With today’s high gas prices and the political imperative to diversify away from Russian gas, there is a tremendous window of opportunity to accelerate work on reducing gas flaring,” Capterio says.

North Africa is a prime example. Algeria, Egypt, Tunisia and Libya waste roughly 23 Bcm/yr, according to a report by Capterio and the Columbia Center on Sustainable Investment. Capturing that gas would allow Europe to replace up to 15% of Russian supply within 12-24 months using existing Algerian export infrastructure. At today's prices, annual revenues could be close to $29 billion, the report reckons.

But North African operators have yet to announce integrated energy projects on the scale of Iraq’s agreement last year with TotalEnergies to capture associated gas from the Ratawi oil field. Opportunities for gas use and capture abound in Iraq, where flared volumes edged up to almost 18 Bcm last year, accounting for 12% of global flaring. By comparison, Iraq imported about 10 Bcm of gas in 2020, the World Bank said.

Out of Sight

Things could get worse as larger public companies with emissions-reduction goals offload assets to smaller players, often private and without targets. This is already happening in Nigeria. Domestic oil companies (DOCs) are inheriting poor infrastructure, lack international firms' resources and may not be held to account in the same way by investors or high-profile litigation, the Stakeholder Democracy Network (SDN) tells Energy Intelligence. “DOCs tend to flare more gas and spill more oil per barrel of oil produced,” past analysis by the local NGO shows.

The shallow-water assets that Exxon Mobil agreed in February to sell to local firm Seplat are said to have the highest concentration of gas flaring in Nigeria. The deal, which includes the Yoho field in OML 104, has reportedly been pre-empted by Nigeria National Petroleum Corp. Still, whoever buys the assets will have a tough job tackling the problem.

Small-Scale Opportunities

Technologies such as floating or small-scale LNG could help curb flaring or venting at a competitive cost. In Nigeria, UTM Offshore plans to install a 1.2 million ton per year floating LNG (FLNG) plant at Yoho. CEO Julius Rone tells Energy Intelligence the scheme will tap flared gas from OML 104 to cut emissions and monetize more gas for the domestic and global markets, as well as use reinjected gas as feedstock for the FLNG project. Rone hopes to have the development on stream by the end of 2026.

While the World Bank says Nigeria has made “significant” progress cutting flaring since observations began in 2012, flaring intensity has increased even as production has fallen. The SDN adds that the government’s Gas Flare Commercialization Program stalled last year, making it harder to capture and use gas from smaller, more scattered fields. The issue is not unique to Nigeria, the bank says. These “missing middle” sites account for nearly 60% of the associated gas flared each year, and Bamji says they should be a priority.

World's Top 10 Gas Flarers 2017-21
(Bcm)20212020201920182017
Russia25.4124.8723.2121.2819.91
Iraq17.8017.3717.9117.8217.84
Iran17.3913.2513.7817.2817.67
US8.7611.8017.2914.079.47
Algeria8.159.329.349.008.80
Venezuela8.198.589.548.226.99
Nigeria6.637.197.827.437.64
Mexico6.565.764.483.893.78
China2.502.722.021.821.55
Libya5.992.475.124.673.98
Top 10 Total107.40103.33110.50105.4897.63
Global Total143.00141.00149.00145.00141.00

Topics:
Flaring, CO2 Emissions, Offshore Oil and Gas, Floating LNG
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