Realising the Value of Wasted Natural Gas a report by
Bent Svensson and Mauricio O Ríos Global Gas Flaring Reduction Partnership, The World Bank Group
As the international community seeks ways to reduce greenhouse gas emissions and move towards low-carbon economies, natural gas is an increasingly attractive component of the energy mix. Natural gas is the least polluting of the fossil fuels. However, in several oil and gas producing countries, vast amounts of natural gas are still being flared or wasted. It is estimated that about 150 billion cubic meters (bcm) of natural gas is being flared and vented annually. This amount is equivalent to approximately 25 % of US gas consumption or 30 % of EU gas consumption per year.
Gas flaring wastes resources and harms the environment, which is why it is important to step up the efforts to reduce flaring and increase gas utilisation. Gas flaring deprives developing countries of an energy source that is cleaner and often cheaper than others available, that also reduces potential tax revenue and trade opportunities. Gas flaring also has a global impact on climate change by adding the equivalent of some 400 million tons of CO2 in annual emissions.
According to satellite data (see Figure 1 and Table 1), the world’s major flaring region is Russia and the Caspian Sea (about 60 bcm), followed by the Middle East and North Africa (about 45 bcm). Sub-Saharan Africa (about 35 bcm) is the third-biggest flaring region, followed by Latin America, with some 12 bcm of gas flared annually. The ranking of flaring countries shows Russia at the top of the list, followed by Nigeria, Iran and Iraq. The other six countries that make up the top 10 flaring countries for 2008 include Algeria, Kazakhstan, Libya, Saudi Arabia, Angola, and Qatar. The reasons for gas flaring are listed in Table 2.
In order to address this wastage, the World Bank Group is supporting
important initiatives that contribute towards reducing CO2 emissions and improving energy efficiency. One of these initiatives is the World Bank-led Global Gas Flaring Reduction (GGFR) partnership. Launched
Gas flaring wastes resources and harms the environment, which is why it is important to step up the efforts to reduce flaring and increase gas utilisation.
at the World Summit on Sustainable Development in August 2002 in Johannesburg, the GGFR public–private partnership brings together representatives of governments from oil-producing countries, state-owned companies and major international oil companies (see Table 3) to share global best practices for reducing
© TOUCH BRIEFINGS 2011
gas flaring by implementing country-specific programmes. The GGFR partnership’s main role is to facilitate the establishment of a common ground with clear targets that do not allow participants to give up on the ultimate objective: to realise the value of currently wasted natural gas by improving energy efficiency, expanding access to energy and contributing to climate change mitigation, hence promoting sustainable development.
Overcoming the Barriers
Although all stakeholders tend to agree that routine flaring and venting is not desirable, countries and companies often face significant barriers to reducing gas flaring and venting. These barriers include:
• limited access to international gas markets as well as incipient local markets in which to commercialise the gas;
• lack of funding to put the necessary infrastructure in place to use the associated gas that comes with oil production; and
• ineffective regulatory and fiscal frameworks for using the associated gas.
The objective of this article is to share lessons learned over the past seven years regarding the critical conditions or factors needed for countries and companies to overcome these barriers, including relevant fiscal and regulatory policies, to achieve faster gas flaring reduction.
GGFR partners have accumulated a wealth of experience, lessons and best practices on gas flaring reduction, so they now better understand what the critical success factors are. These success factors include:
• More accurate data to gauge the magnitude of the practice at country and company levels.
• Governments need to have not only effective regulations but also clear policies with the right incentives for operating companies so that the necessary infrastructure is put in place and markets for gas utilisation 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 governments and private sector companies 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 utilisation technologies need to be nurtured and commercialised to provide additional economic options to flaring.
Thus, realising the value of wasted gas requires a concerted effort by governments and industry, as well as other stakeholders including multilateral financial institutions and technology developers. The following sections briefly look into some of the crucial factors that
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Industry Outlook
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