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Global Standard to Reduce Gas Flaring Unveiled in Algeria


In Washington, DC:
Ludi Joseph

Phone : +1 ( 202) 473 7700

Fax :    +1 (202) 974-4384

Email :
Ljoseph@ifc.org


ALGIERS, ALGERIA, May 11, 2004—The Global Gas Venting and Flaring Reduction Voluntary Standard was unveiled at the second International Gas Flaring Reduction Conference in Algeria on May 10-11 by the Global Gas Flaring Reduction Public-Private Partnership (GGFR). The GGFR includes governments from oil-producing countries, state-owned oil companies, international oil companies, and the World Bank Group.

The global level of venting and flaring is estimated at more than 100 billion cubic meters per year — comparable to the combined annual gas consumption of Germany and France — and has stayed constant over the past 20 years. More than 80 percent of global venting and flaring occurs in fewer than 15 countries, often from oil and associated gas production in remote areas that lack access either to nearby gas markets, or infrastructure to transport and distribute the gas to other markets.


Implementation of the Standard aims to cut venting and flaring significantly within 5 to 10 years in the GGFR partnership, which accounts for some 40 percent of global flaring. Further reductions may be achieved if additional countries, companies, and institutions endorse and implement the Standard.


The Standard will encourage conservation of a finite resource, natural gas, spur the growth of domestic gas markets in less developed countries, reduce barriers to gas market access elsewhere, and reduce greenhouse gas emissions from venting and flaring.  The Standard will thus lead to the deepening of sustainable development practices in the hydrocarbons sector.

 
Individual governments and companies have had successes in reducing flared gas, and significant investments in reduction projects are continuing.  However, two key factors have limited the global impact of these efforts.  An increase in global oil production leads to an increase in (associated) gas production, offsetting efforts to reduce gas venting and flaring.  Moreover, development of gas markets, gas infrastructure, and flaring reduction projects often requires collaborative rather than individual action. The Standard provides such a framework for companies, governments, and other key stakeholders in a country, thereby encouraging complementary and supportive action in the identification and evaluation of economically feasible alternatives to gas venting and flaring.


Stakeholders in a flaring reduction project may include the government, gas producers, large gas customers, owners of gas infrastructure, financial institutions, and representatives of local communities.  Stakeholder consultation and collaborative action will help reduce barriers to associated gas usage, and enable results that go beyond prevailing venting and flaring practices currently applied in many countries.


Founding members of the GGFR partnership are the World Bank Group; the governments and/or national oil companies of Algeria (Sonatrach), Ecuador, and Nigeria; international oil companies BP and Royal Dutch Shell; and donor country, Norway. Other members of the GGFR currently include the governments and/or national oil companies of Angola, Chad, Cameroon (SNH), Equatorial Guinea, and Indonesia; international oil companies ChevronTexaco, Eni, ExxonMobil, NorskHydro, Statoil, and TOTAL; and donor countries Canada (CIDA), and the United States.


BACKGROUND:


1.        The Issue: When crude oil is brought to the surface from several kilometers below, gas associated with such oil extraction usually comes to the surface as well. If oil is produced in areas of the world which lack gas infrastructure or a nearby gas market, a significant portion of this associated gas may be released into the atmosphere, unignited (vented) or ignited (flared).


The World Bank estimates that the annual volume of natural gas being flared and vented is over 100 billion cubic meters, enough to provide the combined annual gas consumption of Germany and France. Flaring in Africa alone could produce 200 Terawatt hours (TWh) of electricity, about 50 percent of the current power consumption of the African continent and more than twice the level of power consumption in Sub-Saharan Africa (excluding South Africa). This is also equivalent to more than 10 percent of committed emission reductions by developed countries under the Kyoto Protocol for the period 2008-2012. About 75 percent of global venting and flaring occurs in 10 countries, with the next 10 countries adding another 15 percent.


2.        History: In 2001, the Global Initiative on Natural Gas Flaring Reduction was initiated by the government of Norway and the World Bank Group to investigate the issue. It found that for the past 20 years, global flaring levels have remained virtually constant (although individual country levels have fluctuated), despite efforts made by individual governments and companies, and despite many successes in reducing flaring. The overall effect of these efforts has been limited due to (1) the increase in global oil production and associated gas production; and (2) major constraints hindering the development of gas markets, gas infrastructure, and flaring reduction projects, which often require a collaborative approach with key stakeholders taking complementary and supportive action.


3.         The GGFR Partnership: As a result of its findings, the Initiative was transformed into the Global Gas Flaring Reduction Public-Private Partnership (GGFR) at the World Summit on Sustainable Development in 2002 in Johannesburg, to address the issue through collaboration. In addition to the World Bank Group, this public-private partnership currently includes BP, ChevronTexaco, ENI, ExxonMobil, Norsk Hydro, Royal Dutch Shell, Statoil, TOTAL, and the governments or national oil companies of Algeria, Angola, Cameroon, Canada, Chad, Ecuador, Equatorial Guinea, Indonesia, Nigeria, Norway, and the United States, with other companies and countries expected to join. The current partnership covers some 40 percent of venting and flaring globally.

       
4.        Objective and Activities of GGFR: The aim of GGFR is to support national governments and the petroleum industry in their efforts to reduce flaring and venting of gas associated with the extraction of crude oil. A three-year work program was approved beginning in January 2003, coordinated by a small team based at the World Bank. The GGFR work program focuses on four areas of activity to assist the reduction of gas flaring and venting in its partner countries: (1) commercializing associated gas, including domestic market development and access to international markets, (2) developing legal and fiscal regulations for associated gas, (3) implementing the flaring and venting reduction standard that has been developed by the partnership, and (4) capacity building related to carbon credits for flaring and venting reduction projects. Supporting activities include data gathering, stakeholder consultations, and identification and dissemination of best practice (ref.
http://www.worldbank.org/ggfr).

5.        The Global Venting and Flaring Reduction Voluntary Standard: The Standard provides guidance on how to achieve reductions in the venting and flaring of gas associated with crude oil production. Its focus is two-fold: to eliminate routine venting of associated gas, and to eliminate or significantly reduce continuous flaring of associated gas. The Standard encourages prioritization and allocation of resources to operations with the largest potential for venting and flaring reduction globally. Key elements include goals for achieving significant reductions in associated gas venting and flaring in the short term, as well as encouraging improvement over a longer time period.  The Standard also provides guidance on monitoring and transparency, and a recommended timeframe for adoption and implementation of its goals.


6.        How the Standard was Developed: The partnership reviewed barriers to associated gas utilization and existing standards, regulations, policies, and best practices aimed at venting and flaring reduction. It then identified improvements and points of collaboration through extensive consultations with the oil and gas industry and the governments of countries where venting and flaring occur. The approach set forth in the Standard is intended to go beyond the venting and flaring practices that are currently applied in many countries.


7.         Why the Standard will make a Difference: The Standard takes a collaborative approach, which is essential to overcome the constraints hindering viable flare reduction projects in many areas. When oil and gas producers and governments apply the Standard, they will produce implementation plans that support gas utilization. These project- or country-specific plans will be linked through a consultation process with stakeholders, resulting in a coordinated, local partnership approach to associated gas venting and flaring. Key stakeholders include gas producers, major consumers, and the government. For a given project, additional stakeholders may include owners of gas infrastructure, financial institutions, and representatives of local communities.


8.        The Cost of Implementing the Standard: To gather associated gas and transport it to a domestic or international market often requires significant capital expenditure. However, the Standard recommends evaluating alternatives based on economic feasibility, with increasing stakeholder engagement, expansion of project boundaries, and financial incentives, as needed, to arrive at feasible solutions.  In addition, carbon credits for achieved emission reductions may finance part of reduction projects.


9.        Monitoring of Implementation: The Standard is voluntary and does not include any formal penalties, if not adhered to. It does include recommendations for monitoring and transparency, which are intended to provide feedback on implementation and performance to a broad range of stakeholders.  These aim to bring credibility to the Standard while encouraging organizations to self-regulate their flaring and venting activities. Public reporting, in particular, will provide a clear indication of the implementation and effectiveness of the Standard.  Implementation can be monitored by producers and governments, and—through  public reporting—by the press, financial institutions, NGOs, and other interested stakeholders.


10. Example of a Successful Voluntary Approach: The Clean Air Strategic Alliance (CASA) was established in March 1994 as a new way to manage air quality issues in Alberta, Canada. CASA is a non-profit association composed of diverse stakeholders from three sectors—government, industry, and NGOs, such as health and environmental groups. The associated gas flaring management framework, developed in 1998 by CASA and implemented by the industry and Alberta’s energy regulator (the Alberta Energy and Utilities Board), has resulted in a reduction of more than 50 percent in gas flaring within a matter of a few years (ref.
http://www.casahome.org).

11.        The Role of the World Bank Group: As a key participant and sponsor of the Global Gas Flaring Reduction Partnership, the World Bank Group will actively promote and disseminate the Global Gas Flaring and Venting Reduction Standard as a best practice initiative for all oil production operations in which it is involved.

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