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Reducing the Gas Burning

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June 20, 2006—Each year about 150 billion cubic meters of natural gas goes up in smoke.

That’s equal to a quarter of all the gas used in the United States in a year, 30 percent of the European Union’s yearly gas consumption, or 75 per cent of Russia’s gas exports.

The burning of natural gas – known as flaring – has traditionally been viewed as a safe and effective way of getting rid of excess natural gas that comes with oil production.

But it’s a practice which the World Bank says adds to the globe’s greenhouse gas emissions and also leads to the wasting of a valuable energy resource.

 As an example of the waste, the World Bank’s Bent Svensson cites the case of Africa.

“If you take the gas which is flared in Africa, which is only around 40 billion cubic meters each year and if you used  that to generate power in efficient modern power plants, you could actually double the power production in Sub-Saharan Africa, excluding South Africa” he says.


Public-Private Partnership

Svensson is the Bank’s Manager of the Global Gas Flaring Reduction Partnership (GGFR) - a public private partnership initiated by the Bank in August 2002 with the aim of assisting governments and companies in their efforts to reduce the amount of gas burnt or flared around the world.

The partnership includes representatives from governments of oil producing countries, as well as all the major international oil companies and state owned enterprises.

chart
Chart: Global Gas Consumption vs Global Gas Flaring

“Reducing gas flaring requires a global and concerted effort by governments and industry, as well as financial institutions and local communities,” says Rashad Kaldany, Director of the Oil, Gas, Mining and Chemicals Department at the World Bank Group and Chairman of the GGFR Steering Committee.

This week, representatives of that partnership will meet in Washington DC with the aim of extending their work beyond this year. The move follows a joint statement by the Group of Eight major industrialized countries at Gleneagles, Scotland, in July 2005, calling for the partnership to continue its work.

“The GGFR Partnership is helping us to promote associated gas as an opportunity rather than a fatality,” says Bernard Legris, technical advisor for the oil company, Total SA. “This is a crucial step to understand that valorizing associated gas requires a change of mind, it means evolving from the age of oil to the age of gas.”

Climate Change Impact

It’s a sign of the consensus which has now emerged around the need to reduce flaring or burning of gas – not the least because of its impact on climate change.

“Historically gas has been burnt off when it’s produced with oil,” Svensson explains. “It’s normal in oil production that you have gas associated with the oil in the oil field. But in recent years, more emphasis has been put on the need to avoid wasting resources and the environment.”

“In terms of climate change, the 150 billion cubic meters of natural gas which is flared each year, has a substantial impact,” he adds.

Svensson says it’s estimated if carbon dioxide emissions from gas flaring were stopped, that would be equal to about 13 percent of the total amount countries have pledged to reduce emissions under the Kyoto Protocol for the period 2008-2012. 

Key Obstacles

But a key obstacle to reduce the amount of gas flared is the lack of infrastructure and available markets for the associated gas.

“Large amounts of oil are produced in remote areas and often it’s offshore far from any potential markets for the gas and infrastructure is the key to utilize this gas. So what we do is we work with the industry, with the governments to facilitate investments in this infrastructure,” Svensson says.

The GGFR partnership aims to create a framework so investments can take place, as the Partnership itself does not have the funds to invest in infrastructure such as pipelines, but instead relies on the private companies to do the investments.

But Svensson says there are several other obstacles.

“First of all there’s often contractual regulatory issues related to the utilization of this gas. In old petroleum contracts, it’s often not clear who owns the gas and therefore who can utilize it.

“Often these can be economically marginal projects so we are working with the industry and the governments to improve the economics of these projects. And the tools that we have been looking into include carbon credit financing in order to help these projects become more viable.” 

In brief, the success and viability of gas flaring reduction projects depend on having the right conditions and incentives such as fiscal incentives, investments in infrastructure, markets availability, appropriate regulations that enable gas utilization, and political will.

Results on the Ground
 
In just under four years, Svensson says the partnership has already achieved results on the ground – starting with the membership of the partnership. 

“If you look around the world today gas flaring is focused in relatively few countries, and   we have most of these few countries as members. We cover more than 50% of the world’s gas flaring in our partnership and the OPEC secretariat is also a partner and through them we get access to another 25 percent of the gas flaring countries.”

And Svensson says members of the partnership have already agreed to a global standard for reducing gas flaring which he says “is probably our biggest single achievement.”

He says 17 demonstration projects have also been set up in partner countries. “These projects are of two kinds. One is commercialization projects where we facilitate stakeholder engagement of various parties in order to make the projects viable.

“The other area is in carbon financing where we try, with the partners, to develop ways for gas flaring reduction projects to make them eligible to obtain carbon credits.”

Svensson says the aim of this week’s Steering Committee meeting will be to evaluate the results achieved so far and plan ahead for the next three years, in a bid to bring in new partners to significantly reduce the amount of gas burned around the world.

For more information on the GGFR Partnership, please visit:  www.worldbank.org/ggfr




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