Realising the Value of Wasted Natural Gas
non-associated gas. Flaring and venting reduction and non-associated gas development should be integrated into the country’s gas master plan and/or energy sector strategy.
• Finally, a combination of the above measures is essential to achieve a significant reduction in flaring and venting.
Fiscal and Regulatory Frameworks
This section provides guidance on flaring and venting policy in terms of fiscal and regulatory frameworks.
Fiscal Framework
There are two groups of fiscal instruments that could be used by host countries to promote investments in flare and vent reduction projects, namely incentives and penalties. Incentives, or preferential fiscal regimes, can be applied to both upstream operations and downstream investments. Penalties, on the other hand, are imposed on upstream activities, namely flaring and venting of associated gas. In general, incentives prove to be more effective than penalties. What is more important if a penalty-based approach is used to address flaring and venting is that a number of conditions should be met, including the right level of penalties and the presence of a strong and empowered regulatory body.
Regulatory Framework
A regulatory framework is the backbone of flaring policy. Experience from petroleum-producing countries proves that in the absence of an effective upstream regulatory framework, operators may not exploit all associated gas utilisation options or, in other words, reduce flare and vent volumes to minimum levels.
Flaring and Venting Regulation
If regulatory requirements are not in place or are ineffective from an operator’s standpoint, investments in flare and vent reductions will be subject to the following factors:
• the operator’s required rate of return on investments; • the operator’s knowledge of and availability of resources to produce and market commodities that could be derived from associated gas (electricity, natural gas liquids, etc); and
• the operator’s corporate policy with regards to flare and vent reduction.
In practice, one or more of the above factors may discourage flare and vent reduction investments. For instance, an operator may screen all potential investment options by applying the same hurdle rate. As a result, investments in flare and vent reduction are likely to lose competition for the company’s capital and human resources to oil projects.
Regulatory Regimes
A regulatory regime establishes what is regulated and how. The key features of a good flaring and venting regulatory regime include:
• definitions and boundaries; • regulatory approval; • economic evaluation; • measurement and reporting; • monitoring and enforcement; and • public dissemination.
HYDROCARBON WORLD – VOLUME 6 ISSUE 2
Table 3: Global Gas Flaring Reduction Partners Around the World Countries
Algeria Angola
Azerbaijan Caeroon Chad
Ecuador
Equatorial Guinea Gabon
Indonesia Iraq
Kazakhstan
Khanty-Mansijsysk (Russian
Federation) Mexico Nigeria Qatar
United Arab
Emirates (UAE) Uzbekistan
Donors Canada EU
Frace
Norway US
Chevron
ConocoPhillips Eni
ExxonMobil World Bank Group Marathon Oil
Maersk Oil & Gas NNPC Pemex
PertoEcuador Pertamina Shell
Sonatrach Sonangol SOCAR SNH
Statoil Hydro TOTAL
Qatar Petroleum
A regulatory regime should be set forth in secondary legislation, for instance in respective sections of existing regulatory rules and procedures in the upstream oil and gas sector, or, alternatively, as a stand-alone document. The latter option may require more effort, but is likely to provide a greater clarity and coherence, as well as facilitate compliance by operators. Directive 60,1
EU IFC
Oil Companies Organisations BP
Masdar Initiative OPEC Secretariat World Bank
developed in Alberta, Canada, is
an excellent example of a dedicated piece of secondary legislation that covers most of the elements of the province’s flare and vent regulatory regime. Finally, the operator should be required to have a focal point responsible for compliance with flaring and venting regulation and interactions with the regulator on all flaring and venting issues.
Regulatory Agencies
General requirements for flare and vent regulatory bodies are in many respects similar to the ones applied to downstream energy and infrastructure regulators. In particular, the regulator should have administrative independence to guard it against political interference; financial autonomy to have sufficient resources, such as skills, staff and technical tools, to carry out its duties; and legal power to enforce regulation.
Enforcement
Enforcement is perhaps the most important element of a flaring regulatory framework since, regardless of the design of the framework, it is unlikely to bring expected results unless regulatory infringements are spotted and effectively pursued by the regulator. A flaring regulatory regime should therefore be designed in a way that makes enforcement feasible given the regulator’s financial and staffing constraints, as well as the country’s institutional development and regulatory traditions.
It is a good practice to describe the consequences of non-compliance in detail in regulatory documents so that operators are all aware of the regulator’s expectations and enforcement actions. An option would be to list typical non-compliance events under broad categories (such as approval, economic evaluation, measurement, reporting) and establish an enforcement level for each event. The level could range from a notification to licence suspension or even revocation.
Data Measurement and Monitoring
The measurement of associated gas is technically challenging. The key issues include significant variations in gas volumes over a period of
11
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84