November 20, 2008
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Home / Issue Archive / 2007 / November #11 / Industry Seeks Ways to Implement Kremlin Directive to End Flaring

№ 11 (November 2007)

Industry Seeks Ways to Implement Kremlin Directive to End Flaring

By Elena Zhuk

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The Kremlin wants to end gas flaring, a wasteful and polluting practice so prevalent across Siberia that it rivals the Great Wall of China as the most obvious man-made feature visible from space. 

In April, President Vladimir Putin highlighted the urgency of the problem when, in his message to the Federal Assembly of the Russian Federation, Putin directed the oil and gas industry to start getting control of the problem by installing equipment to measure how much associated petroleum gas (APG) is being produced.

“A system of measures has proven its effectiveness all over the world,” Putin said in his address. “Appropriate record keeping systems must be put in place immediately – penalties for environmental damage will increase, and license requirements for subsoil users will become more rigorous.”

These requirements were only the start. Putin later issued orders for government organizations to equip fields with meters, to increase fines for environmental damage, and to offer companies incentives to utilize APG by the end of 1st Q 2008.

In response, representatives of government organizations, scientists and industrialists met at an International Conference in Moscow recently to discuss the President’s orders and other issues surrounding the utilization of associated petroleum gas in Russia.

The Conference was at the initiative of the International Bank of Reconstruction and Development (IBRD), the Global Gas Flaring Reduction Partnership and Russia's Ministry of Industry and Energy (MIE). It was also supported by Russia’s Union of Oil and Gas Producers, which arranged the event as part of the Fifth International Forum “Fuel and Energy Resources of Russia – 2007”.

“Fair” Flare?

Conference participants were perplexed by the significant difference in the data presented by Russia's government Statistics Committee, Geological Fund and Central Dispatch Administration of the Fuel and Energy Complex (FEC CDA) on the volume of associated gas flared in Russia in 2005 (13.1; 13.4; and 14.9 bcm respectively). These data were presented by Alexander Savinov, Head of the Department of Regulatory Control, Industrial Safety and Ecology for Oil and Gas Complex at the MIE. 

None of the national figures cited for last year exceeded the 20 bcm that Putin mentioned, even when discrepancies in data from different organizations are accounted for. But PFC Energy, an international consulting company, came up with a much higher for 2006 – 38 bcm. Klaus Roland, the director and permanent representative of the World Bank in Russia, presented satellite acquisition slides from the U.S. National Oceanic and Atmospheric Administration that showed the astounding gas flares that “Yuri Gagarin would see from space today.” The presentation convincingly showed that Russia flared at least 50 bcm of gas in 2006, 24 bcm in the Khanty-Mansiysk Autonomous District (KhMAD, Yugra) alone.

Vitali Troinin, Head of the Engineering Office and Surgutneftegaz’s Deputy Chief Engineer, represents those who support APG flaring. On the World Bank’s data, he commented: “In September, Rostekhnadzor inspected flares at 70 fields in KhMAD and had few criticisms. We supply the Surgut State District Power Station (GRES) with only 12 bcm of associated gas annually, which we are barely able to collect from 48 fields. I bindingly state that we can’t flare that much because such resources are unavailable in Yugra!”

With these words, Troinin tried to alleviate the gloomy picture painted by Anatoli Shatalov, Head of the Administration on Supervision of Facilities of Oil and Gas Production, Processing and Major Pipeline Transport (Rostekhnadzor). Executing the President’s orders, the work group from Rostekhnadzor verified the availability of instruments and metering devices and evaluated the reliability of data on 70 flares in KhMAD, where over half of Russian oil is produced. Shatalov mentioned that “over 300 certificates were issued based on the inspection results.” Elaborating on areas for improvement, noted flaws in the most common control devices, stated that “in LUKOIL, only two well pads out of 26 are equipped with two-phase meters,” and recommended that all producers install multiphase compact meters. After Rostekhnadzor is finished at Yugra, it plans to complete inspections in other regions by spring. “Based on the data we collect, we will make recommendations to the Government for future regulations,” Shatalov commented.

Find, Measure, Penalize

Rosprirodnadzor’s Deputy Director Vladimir Smolin reported that the charge for flaring APG is currently 40,000 rubles and can only be collected every two years. He highlighted the urgency of developing a scheme of accruing charges. Evgeni Ryabov, the Head of the Department of State Policy in Subsoil Using (MIE), agreed. He stated that one of the enforcement tactics, a milestone on the way toward maximal APG utilization, would be introducing penalties for gas emissions or flaring that exceeded a set standard which “must be established for each year starting from 2008 and reach its maximum value in 2011.” He also cited a list of enforcement measures, including inspection of measuring equipment and industrial gages for emitted or flared associated hydrocarbons; maintaining flare system registers that record location, license area and number, and the presence of required measuring equipment; prohibiting operation of fields that lack devices to record flaring of APG and its products; and establishing a standard APG utilization rate of 95 percent for each license area. 

The Ministry of Natural Resources (MNR) and MIE’s goal of reaching 95 percent APG utilization by 2011–2015 reminded to some attendees of a joke about “the average body temperature in the hospital” – the average might look fine, even if with individuals in dire condition – and raised doubts about the expediency of applying a uniform standard to all fields under development.

Rosneft’s Vice-President Mikhail Stavskiy offered “to establish license agreements on APG utilization rates based on pre-existing levels that are economically feasible according to Field Development and Process Design Programs”. Gennadi Shmal, Chairman of Russia’s Union of Oil and Gas Producers, and Natalia Andreeva, NizhnevartovskNIPIneft’s General Director, also support the “individual approach” to establishing such rates.

Is It Feasible to Achieve 95  Percent APG Utilization?

While journalists were busy spotting differences standards for of gas utilization and taking comments from representatives of the MNR and MIE, Farid Tuktarov, Deputy Minister of Industry and Trade of Tatarstan, quoted instances of high utilization rates (over 90 percent) in his country. Such high utilization rates were largely due to the fact that for 15 years, a significant volume Tatarstan’s APG has been sent through Gazprom’s pipelines to power plants; plus, Tatarstan has its own processing facilities.

Russia can also learn from Norway’s experience. In 1991, Norway introduced a tax on CO2 emissions of 10 cents per ccm and APG flaring dropped from 40 percent in 1975 to 5 percent in 2003.

Sally Cornfield, Advisor of the US Department of Energy, spoke of nearly complete APG utilization (98 percent) in the USA. Common methods include gas re-injection and use in micro-turbines to generate electricity.

Putting Plans into Motion!

Not waiting to get hit with penalties, companies accelerated their efforts to increase APG utilization. According to Valeri Yazev, Chairman of the State Duma’s Committee on Energy, Transport and Communication, Gazprom Neft, which is currently listed among those falling behind, plans to achieve 80 percent APG disposal by 2009 and 95 percent by 2012. Yazev also mentioned that Surgutneftegaz already meets the target standard; clarifying this claim, Troinin noted that the specified utilization rate of 95 percent was only reached at 19 of Surgutneftegaz’s 49 fields.  By 2010, 25 fields will meet the standard, and only by 2011 will this target value be reached at all the company’s fields.

Rosneft plans to spend about 67 billion rubles to achieve a 95 percent utilization rate by 2011. Today, the company flares nearly half of the APG from Yuganskneftegaz’s fields. According to Rosneft’s Vice-President Mikhail Stavskiy, the company is implementing a program to utilize about 700 mcm of APG from the Priobskoye field, the first stage of which will be completed in October. Mikhail Karisalov, Vice-President of SIBUR Holding, reports that the company plans to increasе the capacity of the Yuzhno-Balykskiy Gas Processing Plant (GPP) so it can receive this additional gas.

Rosneft is implementing one more major project, in conjunction with the World Bank: the construction of a booster compression station (BCS) at the Komsomolskoye field, which will allow associated gas to enter the unified gas transmission system and thus partially relieve the Gubkin GPP. In addition, the company plans to construct two power stations to use APG to meet its own energy needs.

BCS construction is becoming urgent for production companies. Such stations will allow gas to enter Gazprom’s main pipelines, which already receive about 16 bcm of APG annually. However, specialists anticipate that quotas allotted to independent suppliers may shrink if the MNR’s plan is implemented.  The plan would ensure priority access to Gazprom’s pipe for companies that supply stripped dry gas made from processed APG. According to Alexander Golomolzin, Deputy Head of the Federal Anti-Monopoly Committee, a detailed procedure on accessing the main pipeline is being developed. The Committee is preparing this procedure to discuss with Gazprom. Later, the procedure will be finalized and submitted for consideration to the RF Government. Concurrently, Matt Seggers of Cambridge Energy Research Associates highlighted in his report the urgency of constructing additional pipelines for utilizing APG from Western Siberia.

SIBUR Will Prevent Gas Flaring

Perhaps one of the most vital steps toward ensuring APG utilization in Russia will be the increase in SIBUR Holding’s gas processing capacity.  SIBUR mainly produces stripped dry gas and Natural Gas Liquids (NGL), but also natural gasoline and Liquefied Hydrocarbon Gases (LHG). Karisalov mentioned that SIBUR is currently operating at 100 percent capacity and is planning to gradually increase its capacity by 8.36 bcm (from 13.94 bcm, as of 2006) by 2011.

How to Utilize the Remaining APG?

Christie Vegelland, Director of the Norwegian Oil Directorate, shared this instance of successful utilization: APG re-injection to increase oil recovery. Andreeva confirmed this method’s efficiency: “We studied the international use of this method: a total of 200 gas re-injection projects have been implemented worldwide to increase oil recovery. Only two of them were inefficient due to incorrect estimation of reservoir physical parameters, or to injecting gas into fractures – as the saying goes, ‘pumping gas to Gehenna.” NizhnevartovskNIPIneft’s General  Director  also  rebutted one of the speakers’ statements that gas was mainly flared at small remote fields. According to NizhnevartovskNIPIneft’s data, large fields account for major flaring volumes. Gennadi Erokhin, Director of Yugra Research Institute of Information Technologies, presented satellite acquisition conducted by means of optical scanners in January 2006, that showed the largest flare, at the Priobskoye field with a 200-km plume.

Constructing mini-GTL plants to convert associated gas to methanol and synoil may turn out to be a key solution for production companies. Metaprotsess developed and constructed a pilot plant that produces methanol, which prevents hydrating in wells and gas collecting systems under low temperatures. This year, the pilot plant was furnished to Novatek, a leading independent gas producer in Russia.

Gas Techno’s General Director Walter Breidenstein spoke of using mini-GTL for small-scale formalin and methanol production; Alejandro Karkassoni of Total SA spoke on dimethyl ether production.

“Up to 100 percent of APG can be utilized through water and gas stimulation,” stated Valeri Karpov, Head of RITEK’s Scientific and Production Center, which has already implemented this technology at the Sredne-Khulymskoye field. Injection of gas and water led to an increase in oil recovery by 6.8 percent and the production of an additional 175,700 tons of oil.  Associated petroleum gas and crude oil are widely used to power the company’s fields that are remote from energy systems.

“Over the past two years, the cost of jet fuel has nearly doubled,” mentioned Vyacheslav Zaitsev, General Director of InterAviaGaz, which has proposed building helicopters that run on gas, which is three to six times cheaper than jet fuel.

NizhnevartovskNIPIneft Proves Profitability

Although it does not yet implement deep APG processing in its fields, NizhnevartovskNIPIneft debunked myths about the method’s unprofitability, using calculations to show that the market situation is improving each year. Natalia Andreeva commented that Surgutneftegaz is deemed the leader in this field since it is considering creating its own chemical production facilities and manufacturing deep processing products. Surgutneftegaz is thus gradually transforming into an integrated fuel, energy and processing company, with its own power generating capacities, and in the future, chemical production facilities, thus reducing oil production costs on the consolidated balance-sheet.

Stroitransgaz’s representative requested financial support from the government to implement APG utilization projects. On this request, Andreeva commented: “APG utilization is a very good business. The profitability of some of the projects mentioned here is 300 percent.” Perhaps many of the proposed solutions – from electric power generation and gas re-injection to the futuristic-sounding construction of amphibious aerodynamic crafts to transport APG will be realized, even in the near future.

Technologies for Associated Petroleum

Gas (APG) Utilization

Gas treatment and transportation to the consumers:

• Transportation without gas compression;

• Transportation with gas compression;

• Multiphase oil and gas transportation.

Gas utilization for technical needs at the field:

• Thermal energy production;

• Electricity production (including cogeneration);

• Oil heating;

• Radiant infrared heating systems;

• Gas-turbine driven pumps and compressors; 

• APG injection into the formation to enhance oil recovery.

APG processing at the field resulting in the following products:

• Dry stripped gas and natural gas liquids;

• Dry stripped gas, propane-butane technical mixture, and natural gas gasoline.

Advanced processing with application of advanced secondary gas chemical processes:

• Synthetic liquid fuel production (GTL technologies);

• Methanol production;

• Polypropylene production.

Secondary processing of the following products:

• Natural gas liquids with production of propane-butane technical mixture, BTX-fraction, MTBE;

• Natural gas gasoline with production of diesel fuel, unstable gasoline.

  

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