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Mexico Achieves Significant Drop in Flaring Volumes

Mexico has made significant strides in reducing flaring in the last two years, a 66% drop in overall volumes. This is largely the result of an important collaborative effort between the Secretary of Energy, Pemex, the regulators, GGFR and other stakeholders.

During the 1Q of 2012 GGFR was invited to present at two events organized by the National Hydrocarbon Commission (CNH). GGFR spoke at the first forum on hydrocarbon measurement, which included discussions on key challenges of flare and vent measurement; at the second event, GGFR presented lessons learned from international best practices on policy and regulations, delivered within a hearing organized by the CNH, entitled “Moving Towards a Second Generation of Flaring Policy and Regulation in Mexico”.

The 2012 work program has been prepared and discussed with Pemex and CNH, and includes activities to support Pemex identify and assess gas utilization options and practices to help improve flare and vent measurement.

During the meetings, Pemex confirmed its commitment to continue reducing flared gas and mentioned some of the main remaining challenges, including: keeping levels of flaring down while sustaining oil production; planning and prioritization of gas recovery investments; complying and reporting on flare and vent regulations.

GGFR-European Bank Study Assesses Flaring, Venting in 100 Oil Sites

Jointly with the European Bank for Reconstruction and Development (EBRD), GGFR is co-managing a one-million Euro study entitled “Associated Petroleum Gas Flaring Study for Russia, Kazakhstan, Turkmenistan and Azerbaijan”.

Within the framework of this study, consultants have reviewed and analyzed the flaring situation in these countries, and have assessed venting and flaring in about 100 oil sites across the four countries.

The project team plans to meet with representatives of companies identified by the study to seek their co-operation and further understanding of the viability of selected gas utilization projects.

Next steps will include the development of a number of “bankable” projects, and the dissemination of the study’s results through a number of workshops in participating countries.

GGFR Supports Indonesia’s Drafting of Regulation

The GGFR is supporting Indonesia’s Directorate General for Oil and Gas (DG MIGAS) with the drafting of regulations on flare and vent management in upstream oil and gas operations. The conceptual basis for this work will be the recommendations of a GGFR-sponsored study on “International Practices in Flaring and Venting Policy and Regulation and their Adaptation for Indonesia”.

As part of the action plan, a methodology for economic assessment of associated gas utilization projects will be tested on two representative projects with participation of experts from both GGFR and DG MIGAS. The methodology will be used both as a basis for incentivizing gas utilization or for granting temporary flaring permits. This exercise will also serve to fine-tune the methodology for Indonesian application as well as increase the regulator’s technical capacities.

The GGFR is also participating in a Gas Development Master Plan jointly with another World Bank team. This work is being championed by Bappenas.

Kuwait Defines “Technical Limit” to Flaring Reduction

KOC has undertaken a vast program of gas flaring reduction since 2006. They are now reaching a very low level of flaring within their facilities (around 1.5% of the gas produced according to their reporting) and require GGFR support to reduce flaring even further, below 1% of the gas produced if possible, and also to help define a “technical limit” to flaring reduction. A mission was organized in March 2012 to address these questions.

A team, consisting of a GGFR representative and a consultant, spent a week visiting KOC facilities, interviewing management and other staff, and reviewing KOC’s performance in terms of gas flaring reduction. The mission confirmed KOC’s impressive performance in terms of gas flaring reduction, based upon a strong commitment of the management, vast investments in the facilities, and also a policy of increasing staff awareness toward the importance of flaring reduction and gas utilization.

KOC has invested billions of dollars in facilities to collect, treat and compress the gas and make it available to end users (KNPC for refineries, MEW for power generation, Equate for petrochemicals). These investments also aim at avoiding bottlenecks and developing redundancy in case of facilities upset. More of these investments are to come.

The awareness of operational staff to avoiding flaring as much as possible is also a key success factor, as well as close cooperation and communication along the value chain -from the well head to the end user- in order to avoid flaring even in case of facilities breakdowns along the chain.

The team made recommendations to help further reduce flaring and to define a “technical limit” to what is realistically feasible. The GGFR team now plans to meet with Kuwait Gulf Oil Company to discuss the scope of work in the Divided Zone, and start work on gas flaring regulations.

During the March mission, an official ceremony was also organized to celebrate Kuwait’s official signature of the GGFR Agreements which resulted in extensive press coverage.

Nigeria Assesses Small-scale Opportunities for Gas Utilization

The GGFR 2012 work program in Nigeria focuses on the preparation of a Global Environment Facility (GEF)-funded project which will be submitted to the World Bank’s Board for approval early 2013. This includes securing the necessary co-financing and flare gas sources from the IOCs operating in Nigeria, and potentially from other financial sources such as the European Union.

The GEF project is a feasibility study that will identify the technical, financial and market requirements for commercial projects using small volumes of currently flared gas to deliver energy products such as electricity, LPG and CNG to local communities. The project will not only look at power generation, but also at opportunities for supplying cleaner, affordable cooking and transport fuels. The project has three key components: technology identification and technical/commercial feasibility; development of a viable business plan, market assessment and provision of transactional advice; strengthening State government support capabilities for the development of small-scale gas utilization projects.

The outcome of these components will be the project definition, including detailed engineering design and related market assessment demonstrating the commercial viability of a pilot demonstration project. The success of this project will be defined by its ability to facilitate investments by private or other investors in the demonstration facility. Subsequently, it is hoped that other similar projects will be undertaken once the demo facility has proven the viability of the model.

The FGN is in the process of developing the National Gas Supply and Pricing Policy for the domestic market. To implement economic viable gas utilization projects the pricing of the gas has to accommodate also for small-scale projects. The GGFR team will engage in its regulatory and policy work to foster an enabling investment environment by discussing with the government a pricing category for domestic gas utilization which reflects the use of associated gas for small-scale projects.

Furthermore, GGFR will continue to participate in and facilitate the Nigeria Flare Reduction Committee (NFRC), assuming a renewed mandate from the Minister of Petroleum Resources will be forthcoming. A meeting of the NFRC was held on April 4, 2012, to discuss the Terms of Reference to propose to the Minister for continued NFRC activity, and to discuss provision of data on the current status of the operators’ associated gas utilization projects.


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