Put out the torches

The President ordered to toughen penalties for flaring associated petroleum gas

The topic of utilization of associated petroleum gas, tens of billions of cubic meters of which are flared in Russia every year, is again in the center of attention of the authorities. For more than a year now, departments have been active in developing state policy measures in this area, but no official instructions from the government or initiatives from ministries have yet appeared. There is no doubt that after Vladimir Putin devoted several proposals to the processing of APG in yesterday’s message to the Federal Assembly, the work is at least being formalized. Moreover, the president’s words also describe approaches to resolving the issue that can be described as repressive. This means that in the near future we can expect a sharp tightening of sanctions for gas flaring, while the situation with economic incentives for the development of processing of this raw material will, as before, develop on its own.

“Another problem. Today, in Russia, oil fields burn, according to the most minimal estimates, more than 20 billion cubic meters of associated gas per year, the Russian President said. - Moreover, a system of measures that has proven its effectiveness has long been known and implemented throughout the world. It is necessary to immediately create an appropriate accounting system, increase environmental fines, and also tighten licensing requirements for subsoil users.”

The president has long been concerned about this topic, says an administration source. “To resolve the issue, all that is required is political will,” the official notes. In his opinion, the problem can be solved in a simple way, “as they do in other countries” - through a sharp increase in environmental fines.

The Ministry of Natural Resources notes that they have been developing a program for the utilization of associated petroleum gas for a long time. According to the Ministry of Natural Resources, about 55-60 billion cubic meters of gas are currently produced in Russia, of which 26% is flared, and another 30% is written off for technical support. Thus, only according to official statistics (according to the readings of meters, which are not installed everywhere), about 15 billion cubic meters of gas flies into the pipe, but experts have reason to suspect that the real picture is much worse, and 10-15 billion cubic meters that supposedly pumped into the reservoir or used to service the field, they also burn out.

“In May, we will gather subsoil users and discuss this (measures to increase the efficiency of associated gas use),” Natural Resources Minister Yuri Trutnev told reporters. “We have a specific program of action.” According to official statistics, in 2005, Sibneft (now Gazprom Neft) and Rosneft had the absolute worst indicators for gas combustion - 65 and 37%, respectively. In physical terms, 3.7 and 3.1 billion cubic meters of gas were burned at their fields, respectively. LUKOIL burned 1.4 billion cubic meters (23%), and the largest APG producers in Russia - Surgutneftegaz and TNK-BP - 1 billion cubic meters (7%) and 2.45 (22%). The impressive performance of Vladimir Bogdanov’s company can be explained simply - in 2002, he managed to buy the Surgut gas processing plant from SIBUR before Gazprom carried out a campaign to return the gas chemical holding to its control.

The rest are conducting long-term negotiations with SIBUR (which owns six gas processing plants in the Tyumen region, built to process gas from oil fields) on the development of cooperation in the processing sector, in particular on the creation of joint ventures for the construction of infrastructure and new capacities. However, to date such a joint venture has been created only with TNK-BP at the Nizhnevartovsk and Belozerny gas processing plants. Similar projects were developed with LUKOIL for Lokosovskoye (partially purchased by Vagit Alekperov’s company), Rosneft for Gubkinskoye and Sibneft for the Muravlenkovsky gas processing plant. SIBUR told Vremya Novostey that negotiations with all companies are continuing. But regardless of their outcome, the holding has already adopted a program to increase APG processing from last year’s 14 to 20 billion cubic meters in 2011.

The Russian President's proposals are definitely to the benefit of SIBUR, since a sharp tightening of sanctions should force oil companies to be more accommodating on the terms of supplies of associated gas to the holding's plants. At one time, SIBUR management lobbied the Duma for the adoption of a law on a complete ban on the flaring of APG under the threat of revocation of subsoil use licenses. However, through joint efforts the oil workers repelled the attack and the project was abandoned.

It should be noted that oil companies actually cannot independently implement investment projects for APG processing. Because after processing, not only liquid raw materials for chemical production (NGL) appear, which can be transported by rail, but also dry gas, which requires access to the Gazprom pipe. And there is no free space in it even for supplies from new natural gas fields that independent producers are going to develop.

“Every year Gazprom accepts a significant volume of associated petroleum gas into its gas transportation system - up to 16 billion cubic meters,” stated the press service of the gas monopolist. However, as the concern explained, petroleum gas has a complex composition, and therefore can be accepted into the gas transportation system “only after appropriate preparation by oil companies.”

As for specific sanctions, they are currently being developed. “In 2003, on our initiative, fines for the utilization of associated gas were already increased more than a hundred times to two kopecks per cubic meter if combustion occurs within the limits of permissible emissions and over nine kopecks if the limits of permissible emissions are exceeded. If permissible emission limits are not approved, the fine reaches 44 kopecks per cubic meter. At that time, this fine was quite serious for oil workers,” said a representative of the Ministry of Natural Resources. The permissible emission limits are established by Rosnekhnadzor for each licensed area separately. According to our interlocutor, these fines are still in effect, but are no longer a serious financial punishment for oil workers. “So now we are negotiating with Rostechnadzor and other interested departments to increase the amount of fines to the levels accepted in developed countries,” explains Trutnev’s department. The option of “a phased introduction of a complete ban on gas flaring, as was done, say, in the USA, Norway or Kazakhstan, where companies were first given a five-year period for technical preparation for disposal,” is also being considered.

Thus, there is still no talk of economic incentives for oil companies to invest in associated gas utilization projects. And if a selective approach is used, Putin’s initiative may well turn into another instrument for the redistribution of property in the field of subsoil use.

Anna GORSHKOVA, Alexey GRIVACHS