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INDUSTRY: OIL & GAS PUBLISHING DATE: MARCH 2016

COP21 – A turning point for the Oil & Gas Industry

A concerted global effort to reduce emissions and the associated temperature rise is underway and gaining momentum. As a large scale emitter, the Oil & Gas industry needs to move quickly from estimating towards accurately measuring, monitoring, reporting, and ultimately reducing gas emissions.

1. Introduction While this may be safer in the short Gas is flared at oil extraction term, the rising level of CO2in sites all over the world. the earth’s atmosphere is Flaring is used for safety causing global tempera- reasons and as the main tures to rise. method of disposal for Oil & Gas facilities A concerted global that lack the required effort to reduce infrastructure to GHG emissions capture, store, and and the associated sell . temperature rise , the primary is underway and component of natural gaining momentum. gas, is 40 times more The Oil & Gas industry potent as a greenhouse needs to move quickly gas (GHG) than carbon from estimating large- dioxide (CO2). Flaring the scale emissions towards gas converts the methane accurately measuring, moni- and associated noxious gasses toring, reporting, and ultimately into safer substances like CO2. reducing gas emissions. 2. Flaring – worldwide issue gas through flaring operations. From this How much gas is flared? perspective, the USA and Russia are the two A 2015 study1 on global flaring by researchers main gas flaring nations. The USA has by at the National Oceanic and Atmospheric far the highest number of flare sites at 2399, Administration (NOAA) used data collected by while Russia leads in terms of the volume of the National Aeronautics and Space Adminis- gas flared. Russia also has the second largest tration (NASA)/NOAA Visible Infrared Imaging number of flare sites at 1053. Moving down the Radiometer Suite (VIIRS) to build an accurate scale, individual countries’ flare site numbers estimate of global gas flaring. reduce significantly: Canada has 332 flare sites, Nigeria 325, and China 309. VIIRS is well suited for detecting and measuring emissions from gas flares. It collects shortwave Although the USA has the most flare sites, the and near-infrared data at night, recording the country is not a leader in terms of volume of peak radiant emissions from flares, and builds gas flared. Russia flares the most at around 35 a complete BCM, followed picture with by Nigeria at an estimate around 15 accuracy rating BCM, and Iraq of ±9.5%. and Iran both While the study flaring around was released ten BCM. in 2015, the The highest results of the flare gas study reflect volumes are global flaring concentrated in 2012. 7467 in a small individual flare percentage sites were iden- of flare sites, tified, with a and there are total flared gas a significant volume esti- Active flare stacks in the Gulf of Mexico number of flare mate of 143 (±13.6) billion cubic meters (BCM), sites with small flare gas volumes. Half of the corresponding to 3.5% of global production. total flared gas volume is released from less than 400 flares, and 90% occurs at 30% of the The vast majority, 90%, of gas flared occurred sites. in upstream production areas, with a further 8% at refineries and 2% at The largest flare site is in Venezuela, which (LNG) terminals. Of the flare sites identified in flared 1.13 BCM of gas. The smallest flare site the study, 6802 were upstream flares, 628 were is in Oman, which flares 28,431 cubic meters. downstream sites and 37 flares were found at LNG terminals. Are flaring volumes consistent? The top ten flaring nations account for more Who is flaring the most? than 70% of all GHG emissions on the planet, The predominance of gas flaring in a specific and while flaring makes up 1% of total GHG region can be looked at in two ways. Regions emissions, it is an entirely wasteful practice. that have the highest number of individual This has remained consistent despite varia- flare sites, and regions that release the most tions of flare volumes within individual nations. Flaring in the USA increased nearly 50% Governments and oil companies that endorse between 2010 and 2011, and between 2007 the Zero Flaring initiative will publicly report and 2012 flaring tripled. This was largely due their flaring volumes and progress towards the to the dramatic increase in national shale oil Initiative on an annual basis. They also agree production, where the to the World Bank aggregating and reporting in technique used to produce the oil necessitates parallel. multiple, small production centres. In 2011, Russia emitted 1.8 BCM more gas than the In 2015, the World Bank’s initiative aimed at previous year. eliminating gas flaring by 2030 reached 45 endorsements from oil companies, governments Global oil production has steadily increased and others related over the past 17 years, from around 65 million parties, repre- The top ten flaring nations barrels per day in 1996, to around 86 million senting potential account for more than barrels per day in 2012. Despite this increase, CO2savings in the 70% of all GHG emissions gas flaring volumes are falling. In 1996, around hundreds of millions on the planet. 165 BCM of gas was flared, and this reduced of tons every year. to slightly more than 150 BCM by 2002, before Signatory governments and legislators around volumes then jumped to around 175 BCM in the world are now proposing new laws aimed at 2004. reducing gas emissions.

The flaring outlook COP21 Since 2004, global flare gas volumes have In 2015 the United Nations Climate Change been decreasing, and since 2006 there has Conference, the 21st annual assembly of the been a sharp decrease in flare gas volume, Conference of the Parties (COP21)) to the from around 170 BCM to just under 140 BCM in 1992 United Nations Framework Convention 2010. Momentum to reduce flaring is levelling on Climate Change (UNFCCC), met in Paris to off, with only 10% of reductions achieved by conclude the four year negotiation of the Paris the top 20 GHG emitters since 2007.2 However, Agreement. The Paris Agreement saw a large there is a significant global effort to continue number of Oil & Gas companies, oil-producing reductions, and the World Bank has estimated countries and other associated organisations that global gas flaring volumes will continue to join existing signatories in a pledge to reduce decline, reaching around 80 BCM in 2030. routine gas flaring to zero by the year 2030. The new influx of endorsers is indicative of the 3. A turning point wider successes of the COP21 talks, which saw Zero Flaring by 2030 a landmark new climate deal agreed by 195 The World Bank Zero Routine Flaring by nations. 2030 initiative, launched in April 2015, brings governments, oil companies, and development The goal of the COP21 Paris Agreement is to institutions together to cooperate on the aim of significantly reduce emissions, and endorsing eliminating routine gas flaring by 2030. Govern- nations have committed to the goal of limiting ments that endorse the Initiative will provide global temperature rise to ‘well below’ two a legal, regulatory, investment, and operating degrees. Despite the success of the talks, environment that is conducive to upstream targets for individual nations are not legally investment and to the development of viable binding until at least 55 countries, which markets for utilisation of extracted gas and the together represent 55 percent of global GHG infrastructure necessary to deliver the gas to emissions, officially sign the agreement and market. adopt the framework into their own domestic law. Whilst the aim is for these targets to become oil fields will implement economically viable binding, there is currently little in the way of solutions to eliminate legacy flaring as soon as available enforcement action for non-com- possible, and no later than 2030. pliance. A $100 billion fund has been set-up to help developing nations decarbonise their To implement the agreement, government energy mix as some of the highest producing finance departments around the world will need nations, including China, India and South Africa, to place decarbonisation at the heart of their are concerned the reduction may hamper their fiscal policies. To date, it has been a secondary economic growth and development. consideration and other economic activity has taken precedent. The outlook Reduction targets, known as Intended National The outlook points to a necessary shift in the Determined Contributions (INDCs), have been philosophy of governments, who will need to submitted by 187 countries, but individual drastically change national strategies to deliver nations will need to exceed their own targets the aims of the COP21 agreement. First steps if temperature levels are to will be new legislation on fall below the two degrees COP21 targets for individual nations the measurement and aimed for. Current targets are not legally binding until at least 55 monitoring of gas volumes, will still fall short of this countries, which together represent so that companies have the decrease by 0.7 degrees. 55% of global GHG emissions, ability to practically manage officially adopt the framework into legally binding, large scale Following COP21 and their own domestic law. reductions. the Zero Flaring Initiative, the ultimate aim is for Oil & Gas companies Can the Zero Flaring Initiative work in practice? to eliminate ongoing flaring within existing Satellite data shows that efforts to reduce operations and to ensure that new oilfield devel- flaring have been paying off. Estimated levels opments incorporate gas utilisation solutions have dropped worldwide by around 20% from that will avoid routine gas flaring or venting. 172 BCM in 2005 to 140 BCM in 2012. This is Ultrasonic flow meters have a significant part to equivalent to taking about 52 million cars off the play in this, as accurate flow measurement will road. be vital not only in managing flaring reduction and ensuring compliance with any associated In Kazakhstan, a joint venture of Chevron, regulation, but will also help to inform strategy ExxonMobil, Kazmunaigaz and LukArco has and planning once widespread gas capture and eliminated gas flaring emissions in the giant storage solutions are in place. Management is Tengiz oil field by 94%. Azerbaijan has cut crucial to this process, and unless countries can flaring by 50% in two years, Mexico by 66% accurately measure, effective management is and Kuwait now only flares 1% of its gas. Other impossible. countries, including Qatar and the Democratic Republic of the Congo, now use large volumes Implementation of previously wasted gas to generate electricity. Global agreements will give companies the It is the highest gas flaring countries that will confidence and incentive to invest in technology struggle to implement the changes. Many to accurately measure, manage, reduce, and companies currently flaring excess gas simply ultimately eliminate routine gas flaring. New estimate the volume of their emissions based oil operations will incorporate sustainable on factors such as pipe size and pressure extraction techniques, and oil companies that levels. More focus must be given to accurate currently operate routine flaring at existing measurement, using dedicated ultrasonic flow meters, before management and reduction are World Bank’s Global Gas Flaring Reduction a realistic possibility. scheme, and a tightening of regulations in other countries such as the USA, will mean that EU 4. The current situation ETS member states will be encouraged to While still at the early stages of a global implement reductions in uncertainty levels. approach to emissions regulations, flare sites sit in a variety of regulatory environments, and United States of America the required accuracy of the measurement and The Code of Federal Regulations requires all monitoring of gas volumes varies by country. meters to measure all gas flared and vented within ±5% accuracy.3 The European Union (EU) The EU Emissions Trading Scheme (ETS) The Clean Air Act (CAA) and enforcement by includes rules for flare gas metering and the the Environmental Protection Agency (EPA) maximum uncertainty allowed. Depending on means that state governments are required to the company’s total emissions, one of three develop a general plan to attain and maintain tiers applies, with the largest emitters having to the National Ambient Air Quality Standards meet the strictest criterion: (NAAQS) in all areas of the country. States can apply even stricter rules than required in the • Tier 1 – Small installations (< 50kt CO2/ State Implementation Plans (SIPs). year) – Maximum uncertainty: ±17.5 % • Tier 2 – Medium installations (50-500 US regulations vary on state and even district CO2/year) – Maximum uncertainty: ±12.5 % level. States with high flaring activity are more • Tier 3 – Larger installations (> 500 CO2/ likely to discuss regulatory amends. year) – Maximum uncertainty: ±7.5 % In 2014, Colorado implemented a new set of According to the UK Department of Energy & stringent emission rules, including the regula- Climate Change (DECC), at the end of 2012 tion of methane. Other states, such as North most, if not all, installations met the Tier 3 Dakota, follow the idea of the World Bank uncertainty requirements of ±7.5%, though Global Gas Flaring Reduction Partnership in some operators might still have been reporting order to reach a 10% natural rate by to Tier 2 requirements (±12.5). 2020.

Some countries already apply stricter uncer- In the South Coast Air Quality Management tainty requirements, and it is likely that this, the District, the installed flare meters have to achieve an accuracy of ±20% over the velocity range of 0.1-1 ft/s, and ±5% over the velocity range of 1-250 ft/s. The data must be recorded over one minute averages and the recording instrument capable of storing or transferring all data for later retrieval. An annual verification of accuracy is required, and shall be specified by the manufacturer.

The Bay Area Air Quality Management District requires measurement devices to have a manu- facturer’s specified accuracy of ±5% over the Active flare stack at a chemical plant range of 1 to 275 feet per second. Canada ness of the negative impact of emissions on Based on recommendations of the CASA health and environment, flaring has not been (Clean Air Strategic Alliance), the Energy significantly reduced and investments in new oil Resources Conservation Board (ERCB) production facilities take priority over investment developed Directive 060, which provides the in advanced (APG) requirements for all flaring, incinerating, and utilisation in more mature regions. venting activities carried out in Alberta by all upstream wells and facilities. In addition to this, a lack of transparency, reli- The monitoring and reporting requirements are able statistics, and measuring methodologies further specified in Directive 017, which states makes it difficult to quantify the impact of the that “…for facilities flaring more than 500 m3/ measures taken. day (and all flaring from sour gas wells, regard- less of volume), the operator must meter the Norway volume to ±5% uncertainty on a single point, Norway joined EU ETS in 2008, but applies and a maximum uncertainty of ±20% over a stricter regulations than stated in the EU ETS monthly period.” and takes a leading role in worldwide regulatory standards. Measurement uncertainty requirements spec- ified in the Flaring and Venting Reduction For flare gas metering, the Petroleum Act sets Guideline in the the uncertainty target at ±5% and requires Flare sites sit in a variety of British Columbia the sensors to be checked every six months. regulatory environments, Energy Plan, Ultrasonic transit-time flowmeters have to be and the required accuracy apply for flare, installed as the primary measurement device in of the measurement and incinerator all flare lines.4 monitoring of gas volumes or vent gas. varies by country. They stipulate Mexico a maximum The Comisión Nacional de Hidrocarburos uncertainty of monthly volume of ±20%, and a (CNH), an independent regulator covering the single point measurement uncertainty of ±5%. exploration and production of , has issued guidelines for the avoidance and This uncertainty is applicable when the reported reduction of flaring and venting. monthly volume is not determined solely from metered volumes. If a monthly volume is Both the Mexican government and Petróleos determined solely from a metered volume(s), Mexicanos (Pemex) are working towards then the single point measurement uncertainty reducing flaring, which in 2009 accounted for requirement applies to that monthly volume. 64% of emissions. The specific project goal is to Alberta and British Columbia have implemented increase flaring efficiency to at least 98%. regulations that are similar to US and EU regu- Mexico has to undertake drastic measures to hit lations. reduction targets.

Russia Nigeria Russia is the highest gas flaring nation. It Although regulations exist and Nigeria has follows an approach of both negative and also signed several international protocols, positive enforcement by penalising excessive regulations are not enforced and a lack of infra- flaring and granting dry stripped gas derived structure makes flaring still the cheapest option. from associated gas priority access to the gas The outstanding balance due to unpaid penal- transportation system. Despite growing aware- ties (lost tax revenue) was estimated to be $58 million in 2012, with an estimated total of been traumatic for the Oil & Gas Industry with $166.582 million in lost revenues (royalties, prices reducing by more than 60%. In an era of taxes, entitlements). cheap oil, producers will need to get creative to maintain revenue generation and management. 5. Conclusion The agreement reached at COP21 will be a If oil companies invest in new technologies to significant turning point for global flare gas measure, monitor, and capture excess gas, reduction, if countries can agree targets and and monetise gas flaring operations, they will are consistent in meeting them. Undoubtedly, in be well positioned to meet changes in the time, the targets will be met with serious fiscal global regulatory landscape. By making flare management from governments around the gas capture more economical, companies can world, and increased regulations, scrutiny, and increase their revenues and maximise their punitive taxes will be applied to oil companies profitability, while at the same time significantly and other leading polluter institutions to help reducing their impact on the environment. nations meet their international obligations. High volume flaring nations need to look to countries that have already seriously reduced flaring for best practice in measurement, moni- Sources toring, and reduction. 1 Methods for Global Survey of Natural Gas Flaring from Visible Infrared Imaging Radiometer Suite Data, Energies While the compliance environment is poised 2016, 9(1), 14: accessed: http://www.mdpi.com/1996- 1073/9/1/14/htm to become tighter, and even more complex, oil 2 World Bank, 2012 companies are looking to the strategic business 3 30 CFR § 250.1160 to 1164 benefits of gas capture. The last two years have 4 NORSOK I-104

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