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Implementation of the Global Standard to Reduce Gas Flaring in Nigeria


In Washington, DC:
Ludi Joseph

Phone : +1 ( 202) 473 7700

Fax :    +1 (202) 974-4384

Email :
Ljoseph@ifc.org


ABUJA, NIGERIA, NOV. 18, 2004 — The first GGFR Standard Roll-Out Workshop, launching the implementation of the Voluntary Standard for the Reduction of Global Venting and Flaring of Associated Gas, in Nigeria was held November 9-10 in Abuja. The 2-day workshop was jointly hosted by the Government of Nigeria, the Nigerian National Petroleum Company and the World Bank on behalf of the Global Gas Flaring Reduction Public-Private Partnership (GGFR).

GGFR is a forum of governments of oil-producing countries, state owned oil companies, international oil companies, as well as other key stakeholders, led by the World Bank Group, which supports the efforts of the petroleum sector worldwide to progressively reduce emissions related to crude oil production.

 
GGFR developed the Voluntary Standard for Global Flaring and Venting Reduction after extensive consultations with the oil and gas industry, and the governments of countries where flaring occurs.


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 Italy 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. Nigeria has made great strides in bringing down the flaring ratio, but with flaring levels at 15-20bcm, Nigeria remains the largest known flaring country.


The Nigerian government has set a target to end all flaring by 2008, and has endorsed the Voluntary Standard for Global Flaring and Venting Reduction (the Standard) developed by GGFR.


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.


The GGFR Standard Roll out Workshop was a dedicated attempt to catalyze the local stakeholder engagement process to achieve flaring reduction. The Workshop brought together relevant stakeholders in the oil and gas sector in Nigeria in order to identify residual barriers and potential solutions to associated gas utilization. The invitees included high level representatives from petroleum and environment ministries, state owned petroleum companies, international oil companies, infrastructure owners and sector organizations, as well as global experts.


The Workshop was aimed at supporting Nigeria to reach the national target of zero flaring by 2008, using the Standard as a tool, and generating understanding and acceptance of the Standard among local stakeholders. Group discussions were held to identify potential areas/project categories for associated gas use (with special attention to the gas to power sector and the export market).


Recommendations from the workshop included establishment of a dedicated collaboration vehicle between relevant government parties (incl. The Presidency, DPR, ministries of power/environment, NNPC, NEPA) and other key stakeholders including the private sector and affected/local communities, with the government taking the lead in collaborative action.


Areas for collaboration would include policy formulation (particularly domestic market development and flare reduction); integration of operator plans regarding flaring reduction to explore synergies between projects that are less attractive on individual basis; gas-to-power sector reform; project financing; small scale access to gas and power to local communities, and using the Clean Development Mechanisms (CDM) to obtain carbon credits for flare reduction projects.


The collaboration would also cover capacity building for CDM, which is now a pressing matter as the Minister of Environment, Hon Col. Bala Mande, announced Nigerian ratification of the Kyoto Protocol at the workshop.


Collaboration in the areas mentioned above would include several pilot projects, in parallel with policy development, to make a difference on the ground, as quickly as possible.


Implementing the Standard and following up on the conclusions of the workshop will encourage utilization of associated natural gas, spur the growth of domestic gas markets, and reduce barriers to gas market access, as well as bring down greenhouse gas emissions from venting and flaring.  The implementation of the Standard will thus lead to the deepening of sustainable development practices in the hydrocarbons sector.



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 GGFR partnership, with the inclusion of OPEC, now has access to over 70 percent of global flaring resources.
       
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.