Study on Possible Reductions of Gas Flaring in Cameroon
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Study on Possible Reductions of Gas Flaring in Cameroon Final Report on O&G Sector in Cameroon and Potential Flare Reduction Projects Commissioned by BGR 24 October 2017 Table of Contents 1. EXECUTIVE SUMMARY ............................................................................................................................1 2. OVERVIEW OF THE CAMEROON O&G SECTOR AND AG FLARING ............................................................3 2.1 LEGAL AND REGULATORY FRAMEWORK FOR GAS DEVELOPMENT AND VALORIZATION ................................................... 3 2.2 STRUCTURE OF THE OIL AND GAS SECTOR .......................................................................................................... 4 2.3 DOMESTIC POWER SECTOR ............................................................................................................................. 7 2.4 STATUS OF OIL AND GAS PROJECTS, INCLUDING LNG ........................................................................................... 8 3. A POTENTIAL GAS FLARE REDUCTION PROJECT: “LIMBE-AG IPP” ............................................................9 3.1 PROJECT CONCEPT ......................................................................................................................................... 9 3.2 GHG IMPACTS .............................................................................................................................................. 9 3.3 FRAMEWORK FOR LIMBE -AG -- THE PHYSICAL PROJECT ..................................................................................... 11 3.4 PROJECT STAKEHOLDERS .......................................................................................................................... 12 4.0 AREAS OF POTENTIAL TECHNICAL ASSISTANCE ..................................................................................... 14 ANNEX 1: NOTES AND ILLUSTRATIONS: ......................................................................................................... 16 ANNEX 2: MAJOR SOURCES .................................................................................................................... 17 1. Executive Summary The present study examines the potentials for German Development Cooperation in the area of gas flaring reduction and associated gas utilization in Cameroon. The aim of the study is to analyze the legislative and regulative framework of gas flaring, as well as the geological and climate aspects in order to demonstrate possible approaches that can support Cameroon in closing potential gaps. Associated gas (AG) is a by-product of crude oil production and often treated as a waste product. Particularly in developing countries, AG is flared (‘gas flaring’) in most cases or, but rarely, directly released into the atmosphere (‘vented’). Even when flared, a portion of the gas in not combusted and enters the atmosphere as methane – with the effect that flaring is a major source of GHG emissions with severe climate-damaging effects. The Oil and Gas situation in the country Cameroon has been strongly impacted by the lower oil price environment, specifically: • Given the decline in oil prices, oil development activities are at a near standstill. One result of that is that oil production in the first four months of 2017 is down by 20% from the same period in 2016. This has directly reduced associated gas (AG) production. • The international LNG industry is in a depressed state. In Cameroon, an onshore LNG scheme is stalled (if not cancelled); and the offshore floating LNG vessel, if installed, will be at the Sanaga non-associated gas (NAG) field, and not to capture flared AG. The result is that aggregate AG production, and thus flaring, will almost certainly decline solely due to the aging of the mature oil fields that dominate the Cameroon oil sector. While natural decline impacts AG flaring, there are no reports about any current physical activities being undertaken to reduce flaring. Such a situation implies continuing major GHG emissions from flaring for the foreseeable future. Approximately 80% of flaring in the country is located offshore Rio del Rey basin in the northern part of the country. The basin contains multiple oil platforms with at least fifteen separate flare points. The individual flares are relatively small and make reinjection of gas challenging on both a technical and cost perspective, such that possible solutions have focused on the capture and marketing of the AG. The distant location and the clustering of the flares in this one basin dictates that a single flaring solution could be optimized via capturing and gathering the gas to a single point and then either by pipeline or LNG move it to market. Based on this, the operator (Perenco) considered setting of a Floating LNG (FLNG) vessel at the field site. From an AG capture perspective, this would have been a good solution, but the operator ultimately decided for economic reasons to site the FLNG at the Sanaga South Gas Field off the town of Kribi where a gas fired Independent Power Plant (IPP) is located. Another option that was considered but not developed was to bring the AG onshore at Limbe and utilize it there. A major reason that the Limbe option has not advanced is the lack of a sufficient gas demand in that region. 1 One of the major results of the mission was to learn that 116 MW extension planned for the Kribi IPP will almost certainly be cancelled due to pricing issues related to the natural gas. This offers the possibility to relocate this planned gas facility to Limbe in the northern part of the country which would then create a market for a significant portion of the AG currently flared. (In essence, the NAG that would have been produced for the Kribi extension is replaced by AG in Limbe). This possible Limbe-AG project would capture a portion of the flared gas, transport it onshore at LImbe where it would be used for power and industrial purposes (see Figure 1). Such a project would result in a major reduction in GHG emissions while improving the sustainable development of the country. Figure 1: Map Illustrating Possible Limbe-AG Project Source: CLN This option allows for gas to be used as a bridging resource to produce significant additional electricity with zero increase in emissions (indeed a reduction in emissions compared to the current flaring of the gas). The GHG reductions occur due to: • Elimination of production and use of NAG for electricity, that would be replaced by an equivalent amount of electricity from AG that would otherwise be flared. • Reduction of methane emissions (a potent GHG gas) that occur in the flaring of gas at the oil fields. • Substitution of low-carbon content electricity from gas for that currently produced by a heavy fuel oil power facility in Limbe. 2 The Limbe-AG project is now at the concept stage, and German technical assistance could be key in bringing it forward for serious consideration – by developing the technical analysis of the project and coordinating stakeholders from the several entities that need to be involved. 2. Overview of the Cameroon O&G Sector and AG Flaring Cameroon ranks 27th on the list of major flaring countries published by the Global Gas Flaring Reduction Partnership (GGFR). Despite this low ranking, flaring increased by one-third in the 2013- 16 period.1 This increase was largely driven by an increase in oil production, spurred by a high level of oil development in mature fields associated with oil prices in the $100/bbl. range. After the collapse of the oil price in mid-2014, ongoing projects resulted in production increase through 2016, but now drilling activity is at very low levels and the oil fields have resumed their long-term natural depletion decline. More than 80% of gas flaring and oil production is in the near offshore in the north of the country in the Rio del Rey basin, distant from the limited domestic gas markets.2 A domestic gas market is being developed in Douala, with the gas sourced from a NAG field in the immediate vicinity of the city. A major gas facility at Kribi, 125 km south of Douala was completed in 2013 and is now operating. Its gas supply comes from the offshore Sanaga NAG field. In the 2010-15 period, the development of LNG was a major focus and several projects were considered for both onshore and offshore. During this period, Perenco put forward an idea to install a floating LNG facility (FLNG) in the Rio del Rey fields. Such an installation would have collected AG from those fields for feedstock thereby significantly reducing flaring. With the downturn in LNG price and increasing global LNG supplies, the implementation of the onshore LNG project was put on hold and the Perenco FLNG redesigned. Now the plan is for the vessel to be moored at the Sanaga NAG field off Kribi. This presumably provides a lower cost gas for LNG feedstock but does nothing to reduce flaring. The installation has been repeatedly postponed but is now scheduled for 1Q18. 2.1 Legal and regulatory framework for gas development and valorization Regulation on gas flaring appears to be minimal, indeed no fine or fee is levied. It should be noted that the Government and the Société Nationale des Hydrocarbures (the state oil company) appear committed to its reduction both by being members of GGFR and by endorsing the Zero Flare Initiative, albeit no firm plans seem to be in place for achieving this target. The basic law for the O&G sector is the 1999 Petroleum Code which came into force on 30 June 20003 with the main objective of