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Another broken promise to stop gas flaring in Nigeria: Shell pleads poverty and other excuses

Shell World Online: The elusive goal to stop flares

The energy industry must overcome several hurdles to end the flaring of natural gas and greenhouse gases it emits. Progress has been slow so far but there are signs that efforts to curb the practice will pay off.

May 5, 2008
by WENDEL BROERE

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For years the petroleum industry has struggled with how to curb the age-old practice of burning the natural gas that often comes out of the earth along with crude oil. The controversial practice, called flaring, has declined in parts of the world, thanks to the efforts of some companies and oil-producing countries. However, those reductions have been offset by dramatic increases in flaring elsewhere, in places like Russia.

As a result, little progress has been made globally in reducing the overall amount of natural gas burned off at oil wells, according to research by the World Bank’s Global Gas Flaring Reduction Partnership (GGFR). Each year the energy industry flares off the equivalent of almost one third of Europe’s natural gas consumption, sending about 400 million tonnes of carbon dioxide (CO2) into the air – roughly 1.5% of the world’s CO2 emissions.

The lack of overall progress indicates how difficult it will be to stop the practice. Numerous technical and practical hurdles complicate efforts to put the gas to good use. Oil wells are often in remote locations far from pipelines or markets. Gas cannot be as easily stored and shipped as oil can and pumping it back into the ground is not always possible. And as Shell’s experience shows, unexpected disruptions can delay construction of the pipelines and other equipment needed to gather the gas.

Moreover, even if continuous flaring ended, occasional burning of small amounts of gas will still be necessary for safety reasons, such as releasing excess pressure.

“There are many obstacles to gas flaring reduction,” says Bent Svensson, a World Bank economist and programme manager of the GGFR, a consortium of resource-holding countries and major national and international oil companies. “A lot of gas is flared in developing countries where you don’t have any infrastructure to use the gas, or a legal framework to regulate the market. And in several of these countries there is no real gas market.”

An inconvenience

Flaring has been routine since the petroleum industry’s beginnings. The gas that often accompanies oil production was traditionally seen as an inconvenience, rather than a valuable resource. Flaring was the cheapest, easiest way to dispose of gas safely. But the practice has attracted growing criticism. Friends of the Earth and other non-governmental organisations campaign vehemently against flaring.

Releasing natural gas straight into the atmosphere without burning it, however, is not an option. That would cause a safety hazard. Moreover, the main component in natural gas, methane, is 21 times more potent as a greenhouse gas than the CO2 created by burning it, according to the United Nations Framework Convention on Climate Change.

Flares down… and up

Worldwide, flaring has declined in 16 countries, mainly in Latin America and Africa, according to estimates from the GGFR and U.S. National Oceanic and Atmospheric Administration (NOAA) based on satellite photos taken over a 12-year period ending in 2006. Nigeria showed the largest decrease, with a reduction of 10 billion cubic metres of gas per year. At the same time, however, flaring rose in 22 countries. The biggest increase was in Russia, where the amount of gas flared rose by 10 billion cubic metres of gas per year, followed by Kazakhstan and Iraq. Russia is now the world’s largest gas flarer, burning twice as much as Nigeria.

Companies can stop continuous flaring in several different ways. Gas-fired generators can sometimes be installed near oil wells to make electricity to power oil production and for nearby communities. If the volume of gas is substantial and the distance to markets not too great, companies may be able to build pipelines to transport the gas. When there is no nearby market and a pipeline isn’t feasible for cost or technical reasons, gas can sometimes be collected and converted into liquefied natural gas (LNG) for shipment by boat to faraway customers. In certain circumstances, companies can also inject gas back into reservoirs to maintain pressure and help force out more oil.

For instance, in Gabon the government and its partner, Shell, recently added equipment to re-inject gas, reducing CO2 emissions by a total of 1.1 million tonnes. The Rabi oilfield in southern Gabon is a case in point. Flaring of about 0.6 million tonnes of natural gas per year was reduced to 0.02 million tonnes by upgrading existing compressors and installing new ones. The technique doesn’t work everywhere, however. In shallow reservoirs, for example, adding too much pressure can lead to an uncontrolled flow of oil, gas or water.

Funding boost

The Kyoto Protocol’s Clean Development Mechanism (CDM) provides additional incentives to cut flaring by providing credits for carbon reduction that can be sold on the emissions trading market. This encourages oil-producing countries and their energy-company partners to invest in the necessary equipment.

For instance, at the Rang Dong oilfield, 140 kilometres (87 miles) off the south-eastern coast of Vietnam, emission credits helped finance a pipeline to transport gas that would otherwise have been flared. Gas from the field, operated by Japan Vietnam Petroleum Co. Ltd, fuels onshore power plants and provides feedstock to a local fertiliser plant. It also provides other products, such as liquid petroleum gas (LPG) for domestic cooking fuel. The project will eliminate about 6.8 million tonnes of CO2 emissions over a 10-year period, according to an independent assessment of the project by Norwegian consultancy Det Norske Veritas AS.

“At the end of the day it’s about economics,” says Stephen Wilson, a consultant with London-based Economic Consulting Associates. “The additional CDM revenue stream from flaring reduction can help you meet your required return on the investments needed to get the gas to market.”

Delays in Nigeria

Recent experience at Shell illustrates the challenges companies face as they try to put out flares. Shell reduced the amount of gas burned in oilfields by almost 60% between 2001 and 2007 as part of a decade-old commitment to halt the practice of continuous flaring by 2008. Shell, however, has struggled to meet that deadline, mainly due to security issues and funding difficulties with its main partners in Nigeria.

The challenge in Nigeria is to gather gas from more than 1,000 wells scattered over an area larger than Portugal. That means building gas collection facilities at the oilfields and constructing an extensive pipeline network to carry the gas to an industrial facility where it is turned into a liquid for transport. The gas-gathering project is managed by Shell Petroleum Development Company (SPDC), a joint venture operated by Shell and owned 55% by the Nigerian government, 30% by Shell and 15% by two other partners. So far, the joint venture has invested around $3 billion to reduce flaring. However, work has been interrupted by attacks on oil workers and facilities. For example, a project to build gas-gathering equipment at the Forcados Yokri field in the Niger Delta was initially scheduled to be completed in 2006. But increased violence and kidnappings in the area made it unsafe for work crews and the project has been stalled for two years. And now the project is not funded for completion by the Nigerian government.

Indeed, even if the violence subsided, allowing work crews to safely return to the field, funding is another stumbling block. More than an additional $3 billion needs to be spent to complete the programme to build gas gathering facilities and pipelines. Reduced funding from Shell’s government partner has already delayed work on several projects.
 
Outside Nigeria, Shell has largely met its goal of ending continuous flaring. In four locations, however, the practice continues on a limited scale for several reasons. In three fields, measures to end flaring would produce more greenhouse gases than the flares themselves do. “You get to a state of diminishing returns,” says John Barry, Shell Vice President for Unconventionals and Enhanced Oil Recovery.

Take Shell’s North Sea Brent Delta field, which is nearing the end of its life and where production is declining. The CO2 emissions that would be generated by installing and fuelling equipment to capture all of the field’s small volumes of gas and pump it into a pipeline negate the benefits of doing so. Instead, the gas is burnt and the flare is managed to as low a level as reasonably possible. The same is true at Shell’s ageing Barton field in Malaysia and for the Makoko-Abana field in Cameroon.

Safety is the issue at another location. At Shell’s Shearwater field in Britain, flaring is the only safe way to incinerate hydrogen sulphide, a highly toxic gas present in the reservoir that can cause everything from eye damage to death, depending on how concentrated it is if it escapes into the air. Those four locations account for about 0.25% of Shell’s total CO2 emissions.

Industry-wide progress

Even though industry-wide progress to reduce flaring has been slow, there are signs that the practice will decline in the years ahead. More than a dozen countries responsible for 70% of worldwide flaring and 10 of the world’s biggest oil companies, including Shell, have joined the Global Gas Flaring Reduction partnership since it was launched in 2002. Although they face hurdles to reducing flaring, the partnership believes all of its projects now under way that benefit from CDM credits could potentially eliminate about 32 million tonnes of greenhouse gas emissions by 2012, the same as the annual emissions of 20 million passenger cars.

There are 13 projects in eight countries and they use different methods to limit flaring. For example, one project west of Jakarta, Indonesia plans to build pipelines and a gas processing plant. The recovered gas will provide LPG for cooking and gas for generating power to nearby communities and industry. Elsewhere, in the Khanty Mansiysk region, Russia plans to build a gas-fired turbine using gas that would otherwise be flared to generate power at North-Danilovsk oil field.

“With all the investment plans that are currently being implemented in countries like Nigeria and going to be implemented in other countries, we are convinced that we will see a reduction in gas flaring numbers over the next two to four years,” says GGFR programme manager Svensson.

http://www.shell.com/home/content/aboutshell-en/swol/apr_june_2008/flaring_25042008.html

Headline by John Donovan of www.royaldutchshellplc.com

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