The News Flare. Over the past six years, flaring of gas associated. GGFR Partners Mark 10th Anniversary by Scaling up Flaring Reduction Efforts

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Top News Flared in This Issue Mexico: Significant Drop in Flaring Volumes Republic of Congo Joins GGFR Iraq: Following up on INESTA Recommendations Uzbekistan Hosts Regional Conference EBRD-GGFR Study Assesses Flaring, Venting in 100 Oil Sites Azerbaijan s Progress Highlighted in Video Kazakhstan Eyes Gas Utilization at Kyzyl Orda Russia: Yamal-Nenets & GGFR to Sign Agreement for Technical Assistance Uzbekistan Studies Viability of CDM Approach Cameroon Assesses Rio del Rey Potential Gabon Awaits Results of Technical Study Kuwait: Defining Technical Limit Qatar Defines Plan for Further Flaring Reduction GGFR Supports Indonesia s Drafting of Regulation In the Pipeline: Study to Assess Small-scale Opportunities in Nigeria Briefly Vented The News Flare Over the past six years, flaring of gas associated with oil production has dropped worldwide: from 172 billion cubic meters in 2005 to 140 bcm in 2011, according to latest data from satellite estimates. The decrease of almost 20% in global flaring has reduced some 85 million tons of CO2 emissions, roughly the equivalent of taking some 16 million cars off the road. Although important progress has been achieved, some 140 bcm of natural gas are still flared in countries around the world, and the global downward trend in flaring could be reversed for a number of reasons. Issue No. 13 November August 2012 GGFR Partners Mark 10th Anniversary by Scaling up Flaring Reduction Efforts Some of these reasons include: oil production has substantially increased in several countries, and the coming years may see significant additional production. Traditional producing countries like Iraq, for instance, may contribute to further global gas flaring, if no action is taken. New off-shore discoveries in Brazil and other countries, and production methods such as shale gas and shale oil in North America, present important challenges and may also lead to a sharp increase in flaring and venting. The World Bank-led GGFR partnership recently released the 2011 satellite data which show a slight increase of 2 bcm in global flaring volumes, comparing to the previous year. Thus there is a crucial need to sustain, and even scale up, the flaring reduction efforts to make further progress on gas utilization in the next few years. GGFR partners believe this is the best way to mark this year the 10th anniversary of the World Bank-led GGFR partnership, which in October will gather some 250 representatives from major oil-producing countries and companies at a Global Forum in London. Participants will assess progress made over the past decade, but will also look into the way forward. In this context, the GG- FR s Steering Committee recently agreed to step up its flaring reduction efforts by working along the whole gas value chain, including activities to develop gas infrastructure and markets particularly in developing countries. One of the major goals is to increase the utilization of previously flared gas to expand access to electricity and cleaner household fuels. The expansion of this work scope aims to sustain and, if possible, accelerate the downward trend on flaring reduction that we have witnessed over the past few years. With this clear mandate, the GGFR partners are now getting ready for the next phase of work covering the period This phase will focus on a more comprehensive approach to the gas flaring reduction efforts, including both upstream and downstream activities. This broader effort is also consistent with other global development initiatives such as the Sustainable Energy for All program (SEFA), recently launched by the UN. This newsletter is prepared by the GGFR core team in Washington, DC. Any comments, suggestions or contributions from any of the GGFR partners are very welcome and should be sent to Mauricio Rios at: mrios@worldbank.org

2 GGFR s mission to reduce gas flaring then gains a broader meaning and relevancy in light of the global objectives of the UN s SEFA initiative. In fact, GGFR s original goals are already well aligned with two of Country Flare Ups Mexico: 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. Republic of Congo Joins GGFR The GGFR on June 27 officially welcomed the Republic of Congo as the newest partner joining the efforts to reduce gas flaring and increase the utilization of associated gas for more productive uses. The Republic of Congo joins more than 30 government and company partners committed to reducing gas flaring to minimum levels worldwide. Other GGFR partners in Sub-Saharan Africa include Angola, Cameroon, Gabon, and Nigeria. We welcome the Republic of Congo into the GGFR partnership and look forward SEFA s main objectives: supporting access to energy and improving energy efficiency. By supporting the work of the GGFR partnership, and continuing on with the to working with them to further reduce the waste of a valuable energy resource that can be used for more productive purposes, said Sylvie Dossou Kouame, the World Bank s country manager for the Republic of Congo. By joining these global efforts the Republic of Congo is showing strong commitment and leadership to improving energy efficiency and reducing emissions associated with oil production. We are conscious of the important challenge of reducing gas flaring and venting, that s why the Ministry of Hydrocarbons and other agencies have initiated various actions to increase the utilization of associated gas, said Mr. André Loemba, Minister of Hydrocarbons. The Republic of Congo s participation in the GGFR partnership is a key step for enhancing our gas flaring reduction efforts through the international cooperation that the global nature of the flaring problem demands to overcome it. Both the Ministry of Hydrocarbon and the Ministry of Energy had expressed interest in joining the GGFR Partnership. Thus, the GGFR s Steering Committee at its meeting in April unanimously voted to accept the Republic of Congo as its newest member. In 2007, the Government issued a zero gas flaring decree which set a plan for operators to propose solutions to reduce gas flaring over a five-year timeframe and impose penalties for non-compliance. The estimated gas flaring rate in 2010 was approximately 2.0 bcm. GGFR has been monitoring and discussing the implementation of gas utilization projects, such as the Djeno gas to power plant, with the operators Following the formal accession to the Partnership, GGFR and the Republic of Congo will now agree on a framework for cooperation for the rest of 2012 and beyond. Iraq: Following up on INESTA Recommendations GGFR continued its participation in the Iraq National Energy Strategy Technical Assistance (INESTA) study and provided extensive comments on various drafts of global flaring reduction efforts, GGFR partners are also contributing towards the higher-level objective of the international community to achieve sustainable energy for all by the final report. Flare reduction is now recognized as one of the three immediate priorities for Iraq s Energy Policy, together with oil production ramp up and access to electricity. The GGFR team is involved in the INESTA follow-up actions since the study establishes a list of key recommendations and activities. In December 2011, a GGFR representative met with Deputy Minister of Oil, HE A. Al Shamma, members of the office of Deputy Prime Minister for Energy (DPME), and members of the Prime Minister Advisory Committee (PMAC) to discuss GGFR s 2012 work program. HE A. Al Shamma confirmed in writing his request to launch a Gas Pricing Study, and appointed the Ministry of Oil (MoO) Directorate for Planning and Studies as the counterpart for the study. During a mission to Baghdad in March 2012, a GGFR representative met again with counterparts at the MoO, the DPME and the PMAC, and agreed on the Terms of Reference for the Gas Pricing Study. The study has been launched and the procurement process has started. Furthermore, GGFR was asked by Iraqi counterparts to organize a workshop on International Gas Sales and Purchase Page 2

3 Country Flare Ups Agreements. This workshop took place in June in Istanbul. Beyond 2012, GGFR plans to be an active player in Iraq s efforts to reduce or at least contain flaring and help further develop utilization of associated gas for power generation. In this context, the contract signed by South Gas Company, Shell and Mitsubishi is a major milestone. Thus, GGFR s proposed work program in Iraq focuses on institutional reinforcement and capacity building (South and North Gas Company, Gas Task Force) and on the participation in the Gas Master System study. The scope of work is huge and the key to success is to focus on specific actions agreed on with Iraq s government. Uzbekistan Hosts Third ECA Regional Conference More than 80 representatives of oilproducing countries and companies from Europe and Central Asia (ECA), as well as representatives of Norway, Finland, and Australia participated in the GGFR s Third Regional ECA Conference to discuss existing challenges and opportunities for gas flaring reduction, including further collaboration at the regional level. Participants shared information on progress to date; defined joint actions on further improvement of gas flaring reduction efforts; and visited one of the oil fields to see an associated gas utilization project implemented by Uzbekneftegas. The GGFR Regional Coordination Committee for Europe and Central Asia also held its annual conference in Tashkent with representatives of governments and oil companies from Azerbaijan, Kazakhstan, Russia, Turkmenistan and Uzbekistan. RCC members updated event participants on their flaring reduction activities, shared best practices, and proposed potential areas for GGFR assistance. Mr. Shavkat Majitov, Deputy Chairman of Uzbekneftegas, was elected as Chairman of the GGFR s RCC for the period EBRD-GGFR 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. Azerbaijan s Progress Highlighted in Video In cooperation with the World Bank s team working in Europe and Central Asia, GGFR prepared a multimedia package on the results of the partnership s cooperation with SOCAR. This package includes a story on the company s activities and progress regarding flaring and venting reduction, a slide show and a short video reflecting different milestones of the GGFR-SOCAR- BP cooperation in Azerbaijan. One of the main achievements of this cooperation was the development of SOCAR s Associated Gas Recovery Plan, and the preparation of individual flared gas utilization projects, including potential CDM projects. This media package was placed on various World Bank sites, as well as the GGFR and SOCAR s websites. GGFR also continued its facilitation of high-level dialogue between BP-Azerbaijan and SOCAR s cooperation on gas flaring reduction, particularly on the potential utilization of flared gas from the offshore Azeri-Chirag-Guneshli oilfield. The joint working group established as a result of this dialogue is assessing potential utilization options. Kazakhstan Eyes Gas Utilization at Kyzyl Orda GGFR participates in the working group on development and implementation of the Kyzyl Orda regional gas utilization program, established by the Ministry of Oil and Gas (MOG) and KazTransGaz. The Kyzyl Orda regional gas utilization program aims to collect and utilize flared gas from multiple oil fields in the region. Per request of MOG, GGFR experts are currently providing technical assistance on economic assessment of different gas utilization options proposed by a local institute. Russia: Yamal-Nenets & GGFR to Sign Agreement for Technical Assistance In cooperation with the Government of Yamal-Nenets Autonomous Okrug (YNAO), GGFR is collecting information to provide technical assistance on development and implementation of the YNAO regional gas utilization program. Subject to the outcomes of this exercise, GGFR and YNAO aim to sign an agreement for Reimbursable Page 3

4 Country Flare Ups Technical Assistance, which will focus on an economic assessment of flared gas utilization options and technologies. GGFR also continues its dialogue with the Government of Nenets Autonomous Okrug (NAO) on potential cooperation on gas flaring reduction. Both parties are working towards the signing of a Memorandum of Understanding (MoU) between NAO and the World Bank s country office. This kind of approach could be expanded to other oil producing regions in Russia. Uzbekistan Studies Viability of CDM Approach Per request of the National Holding Company Uzbekneftegaz (UNG), GGFR carried out a study on the eligibility and suitability of flare reduction investments within the development of a CDM Program of Activities, or other CDM approaches focused on single projects and a standardized baseline. The preliminary results of the study suggest that a regular CDM development process seems most relevant and effective for the South Kemachi Gas Flare Reduction project. The joint GGFR UNG MOE working group recommended proceeding with the fast-track preparation of the identified project so it can be registered by the CDM Executive Board before the deadline of December 31st, The State Committee on Nature Protection also requested GGFR s assistance to further improve the country s legislation for flared gas reduction. GGFR is currently discussing the work scope and resources required for the implementation of this project during Cameroon Assesses Rio del Rey Potential Following the promulgation of the gas flaring reduction law in June 2011, the Société Nationale des Hydrocarbures (SNH) and GGFR continue to review opportunities in the Rio del Rey basin for the potential utilization of flared gas. The government and investors have been progressing with the technical and commercial feasibility studies for development of a single LNG train facility, near Kribi. Reserve certification to underpin the 3.5 million tons per annum LNG project will commence in 3Q Subject to the outcome of the study, the integrated LNG project will provide the necessary synergies for reduction of gas flaring. In April 2012, Cameroon s Government enacted a Gas Code aimed at promoting and regulating the development of the downstream gas sector which comprises transportation, distribution, processing and storage. As part of the Phase 4 work program, GGFR plans an update of a previous study of flared gas from Rio Del Rey area for either (a) substitution of Heavy Fuel Oil (HFO) at Limbe and Douala power plants or to source a new power plant at Bakassi Peninsula and (b) a study on capturing flared gas (8 MMSCFD) from the Kribi offshore fields for utilization at the Kribi power plant. Kuwait: Defining Technical Limit KOC has undertaken a vast program of gas flaring reduction since 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 Page 4

5 Country Flare Ups 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. Gabon Awaits Results of Technical Study A GGFR consultant, Mott MacDonald Ltd, is finalizing a study of the operator s gas flaring reduction plan and assessing the extent to which gas flaring reduction plans are consistent with the concept of As Low as Reasonably Practicable and whether the project implementation timeframe and cost estimates are realistic. The study undertakes a brief and highlevel review of the alternative technical options for gas utilization and aims to identify obstacles to the execution of gas monetization projects, including technical, regulatory, and fiscal and market-access barriers, among others. At the request of the Ministry of Petroleum, Energy and Water Resources, Mott MacDonald conducted three site visits of the Operator s facilities and acquired data/information from the various stakeholders to finalize the study. A brief outline of the findings and recommendations of the study was presented to the newly elected Minister of Petroleum, Energy and Water Resources (H.E. Mr. Ngoubou) in May The draft final report is currently being reviewed within the GGFR before submission to the Government at the end of August. A formal presentation to the Ministry is being arranged for October. Subsequent to the meeting in May 2012, H.E. Mr. Ngoubou submitted a formal request for additional support from GGFR to conduct a review of gas sector legislation/ regulatory requirement to facilitate the development of an effective gas market in Gabon. The Minister also supported the proposed GGFR work program for Gabon over the next 3 years, and committed to making financial contributions towards the GGFR Trust Fund. Qatar Defines Plan for Further Flaring Reduction During a visit to Qatar in March, QP was appreciative of its cooperation with GGFR, and shared some of their key objectives for the near future. These action areas include: identification and preparation of a pilot flare reduction project; completion of a flares database; review of the operators flare reduction plans; completion of the country s flare regulation. The GGFR team proposed to assess a pilot gas utilization project in Halul Island. The proposal is under consideration with QP. GGFR has also reviewed a number of draft regulations prepared by QP, and provided some recommendations. Future co-operation with Qatar is pending confirmation on QP s participation in the 2012 work program. 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. In the Pipeline Nigeria: Study to Assess Small-scale Opportunities 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 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 smallscale gas utilization projects. Page 5

6 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. Briefly Vented The GGFR Manager participated in the World Gas Conference in Kuala Lumpur in June 2012, where he presented a paper on global gas flaring reduction. To mark the 10-year anniversary of the GGFR partnership, several magazines distributed at the conference, including International Gas, featured articles on the efforts to reduce gas flaring over the past 10 years. A GGFR advisor participated in the Iraq Petroleum 2012 conference in London from June 18-20th. GGFR presented on its activities to help reduce gas flaring in Iraq, and participated in a panel discussion on gas utilization in the country. Wärtsilä Hamworthy, a GGFR associate partner, has won a contract from Petrobras to supply its flare gas recovery packages to four FPSO units under construction, according to Offshore magazine. Each unit will be able to handle 150,000 b/d, and will be deployed on the presalt fields, in the Santos basin, offshore Brazil. GGFR Web Stats June July 2012, Top 10 Visitor Countries Country Visitors Percent 1. United States 3, % 2. United Kingdom 1, % 3. Canada % 4. Germany % 5. Norway % 6. France % 7. Russian Federation % 8. Nigeria % 9. Kazakhstan % 10. India % For updates on the upcoming Gas Flaring Forum in London, Oct 24-25, visit: Partners Algeria (Sonatrach), Angola, Azerbaijan, Cameroon, Ecuador, France, Gabon, Indonesia, Kazakhstan, Khanty-Mansiysk (Russia), Kuwait Mexico (Sener), Nigeria, Norway, Qatar, United States, BP, Chevron, ConocoPhillips, Eni, ExxonMobil, Maersk Oil & Gas, Marathon, Pemex, Shell, Statoil, Total, European Union, European Bank for Reconstruction and Development (EBRD), World Bank Group, Associated Partner: Wärtsilä Page 6