Gas Flaring Reduction: OPEC Views

1. Gas Flaring Reduction: OPEC Views OPEC Secretariat

2. Outline of presentation • Energy demand growth forecasts and impact on associated gas volumes and flaring • OPEC gas flaring history and progress and specific examples of gas flaring reduction in OPEC Member Countries • Gas flaring reduction challenges • Joint OPEC/ World Bank workshop on gas flaring and potential role of GGFR in facilitating financing and carbon credits • Concluding remarks

3. World energy demand by fuel type(mtoe)

4. Oil supply outlook, mb/d (reference case)

5. Evolution of gas flaring Source: OPEC

6. OPEC: An impressive reduction in gas flaring Source: OPEC

7. A success story in gas flaring reduction in Abu Dhabi • Gas flaring reduced from 4000 mmscfd in 1977 to <500 mmcfd in the early 1980s, to <300 mmcfd in the mid-1990s • Since 1995 many new projects have been implemented to reduce flaring from 261 mmcfd to 70 mmscfd today - about 1% of the 6000 mmscfd gas production today • Reduced the number of flares • Re-injecting gas into oil reservoirs • Modified plants to recover gas • Zero flaring technology installed in some locations • Flaring will be reduced to 37 mmscfd by 2007 • Goal is zero flaring Source: Mr. Ihab Othman Tarmoon, ADNOC, presentation to the OPEC/WPC Workshop, 9th June 2004.

8. 261 275 250 250 225 192 200 175 156 144 150 132 116 125 100 94 74 75 61 53 38 35 50 25 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Abu Dhabi gas flaring trend 1995 - 2007 261 275 250 250 225 192 200 175 175 156 144 150 150 132 116 125 125 100 100 94 84 75 75 80 70 42 37 50 50 25 25 0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source:Mohamed Al-Mehairy and Ali Al-Habshi, ADNOC presentation to the OPEC/World Bank Workshop, 30th June, 2005

9. Gas flaring reduction challenges • Associated gas is often produced in remote locations and sometimes in small volumes • Two options to reduce gas flaring – re-injection or market the gas • Investment necessary to market the gas may not be economic • Lack of infrastructure • Low domestic demand for gas and/or electricity • Re-injection of associated gas is not always economic due to high cost and low incremental oil reserves • A sudden call on spare oil production capacity may exceed capacities of existing gas handling facilities, resulting in gas flaring • The World Bank Gas Flaring Reduction Initiative was formed to support national governments’ efforts to reduce flaring by providing • Facilitation of local public-private partnerships and co-operation on gas infrastructure and markets • Links with existing World Bank instruments • Assistance on carbon credits • OPEC/World Bank joint workshop held in Vienna, 30th June – 1st July, 2005

10. Workshop objectives • To present an overview of the Global Gas Flaring Reduction Partnership (GGFR), and its activities, with specific focus on CDM and the Voluntary Standard for Global Gas Flaring and Venting Reduction • To discuss the financial resources and mechanisms, including carbon credits, available by or through the World Bank Initiative for gas flaring reduction projects • To present success stories from OPEC Member Countries in flaring reduction

11. Role of GGFR • Work with the CDM Executive Committee to remove barriers to receiving carbon credits for gas flaring reduction projects • Additionality criteria are stringent and inflexible, and can create perverse incentives at times. • Okpai power plant and West Africa Gas Pipeline in Nigeria will be important tests • Build CDM capacity in OPEC Member Countries • Identify and develop CDM projects • Develop institutional capacity to comply with CDM rules • Assist with implementation issues such as carbon ownership and downstream integration • Facilitate collaboration between public and private sectors, and between governments • Help countries obtain World Bank financing and MIGA guarantees • Facilitate access to World Bank carbon funds • Source of additional cash flow • Can make marginal projects economic

12. Conclusions • As oil production increases to meet growing demand, gas flaring reduction efforts will have to be intensified if reductions in actual flared volumes are to be realised • Gas flaring reduction has not only environmental benefits but also social and economic benefits • Financing and carbon credits are often necessary • Huge reductions in gas flaring have been achieved in OPEC Member Countries during the last three decades • OPEC Member Countries could further reduce gas flaring if CDM methodologies could be established for these projects • However, the CDM is a complex mechanism and has been applied to only one gas flaring project to date – there is a need to test the mechanism and possibly modify the rules

13. Thank You