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Environment
Building Government Capacity to Regulate and Monitor Environmental Impacts

Environmental concerns are important for the development of a sustainable oil and gas sector. Production, transport and use of hydrocarbons can cause serious environmental damage unless these activities are properly managed. The adverse environmental consequences include damage to habitats and biodiversity, greenhouse gas emissions which contribute to global warming, regional air pollution problems such as acid rain and forest degradation, soil and water contamination, and local air pollution which threatens the health of urban dwellers. As a result, environmental protection in the oil and gas sector has attracted increasing attention from governments, oil companies, and the general public at large.

Assistance to governments takes into consideration the need to act on both production operations and on fuel consumption.

  • Production Operations
    Environmental standards exist that are also effectively enforced by the oil industry in industrial countries. By contrast, most developing countries either lack transparent and enforceable environmental regulations, or have a weak institutional capacity to monitor and enforce these regulations. Although the World Bank has proposed environmental standards for most of the industry’s operations, and major oil companies operating in developing countries apply their own in-house norms, the protection these standards and norms have provided is becoming less systematic as many smaller private companies are beginning to operate in the hydrocarbon sector.

  • Use of Hydrocarbons
    The combustion of refined products is a significant source of air pollution. Especially damaging to public health in developing country cities is lead—which retards the intellectual development of children—from vehicles where leaded gasoline is still used, and fine particulate matter which has been linked to premature deaths and respiratory illnesses. A range of options to mitigate air pollution from the combustion of hydrocarbons is available, and they can be tailored to take into account the specific local conditions and priorities.

Reduction of Gas Flaring and Oil Spills

Oil and petroleum products spills, and gas leakage are common and can cause serious damage to the local and global environment. There is an urgent need to develop prevention policies clean up procedures, as part of regulatory regimes.

Emissions of gases associated with the production of oil and with refining operations are a cause of concern at the local and, in particular at the global level. Flaring or venting of associated natural gas, including methane and other light hydrocarbons, is a major contributor to the build up of green house gases directly linked with global warming problems.

With respect to the global impact of the hydrocarbon sector, the Oil, Gas and Chemicals Department of Bank is launching an Gas Flaring Reduction Initiative that will help to mitigate global warming and reduce its impact on human health, water systems, agriculture and fishing. The adverse impacts of global warming are expected to have a particularly marked effect on the poor. The Initiative will explore how the poverty impact of flaring reduction can be maximized through increased gas utilization, which would provide access to clean gas fuels and increased low-cost power generation.  The Initiative will seek to improve incentives to reduce gas flaring and venting in petroleum contracts, and to improve energy policies and institutional arrangements where flaring occurs due to factors such as subsidized competing fuels, tax considerations, or inadequate allocation of responsibility for gas infrastructure investment. Gas flaring and venting, which is undertaken locally but whose main impact is global, has substantial cross-border externalities, which are not at present being taken into account.  It can be reduced substantially and rapidly only through co-operation and collective action by developed and developing countries. The Initiative would allow the parties to act according to its commitment to support international conventions on global issues and to assist developing countries to meet their obligations under such conventions.

Improving Safety

Safety regulations in developing countries are frequently inadequate, and rarely enforced. Spills of refined petroleum products have claimed hundreds of lives through explosion and fire.  Assistance to review the safety regulations together with the technical and environmental regulations a part of the division’s work

Urban Air Pollution  and Indoor Air Pollution

The World Bank is actively involved in providing assistance to governments on how to improve urban air quality. Bank activities have included technical and policy advice, analytical work, and project lending with components for fuel quality improvement, with a special emphasis on coordinating the energy, environment and transport sector policies.

Switching to hydrocarbons is one of the most effective means of addressing another threat to health: indoor air pollution from the use of dirty cooking and heating fuels, such as biomass burned in traditional stoves and coal. Worldwide, indoor air pollution has even greater adverse health impact than urban air pollution, affecting especially rural women and children. Switching to gaseous fuels has been demonstrated to be one of the most effective means of tackling indoor air pollution. The World Bank is providing technical and policy advice to governments on how to accelerate the switch to cleaner household fuels. Considerations include increasing efficiency in the production and distribution of gaseous fuels, fuel taxation, and the impact of the downstream petroleum sector policy framework on the access of the poor to cleaner fuels.

Case Study

Bombay High Gas Flaring Reduction Project

The project was approved by the World Bank in 1991, with the provision of a US$450 million loan to towards the US$3.2 billion Bombay High offshore oil field Gas Flaring Reduction Project. At that time, the oil field was flaring a large amount of natural gas - equivalent of 10,000 tons of oil daily - and this had become a serious environmental, technical and political issue. A key objective of the project was to cut the gas flaring and harness the wasted energy to meet growing energy shortages in India. By 1994, gas flaring from Bombay High had virtually ceased.

Relevant Publications

On Fuel Quality Improvement

Energy/Transport/Environment

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