KPMG and WWF publish latest data on associated ga... | KPMG | RU

KPMG and WWF publish latest data on associated gas flaring in Russia

KPMG and WWF publish latest data on associated ga...

Russia remains the world’s biggest associated gas flarer, accounting for about 26% of the global total. Russia's volumes are more than double those of second-placed Nigeria.

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Even so, annual global flared volumes fell from 162 bcm to 134 bcm in 2006-2010, and much of this was due to Russian efforts, report KPMG and WWF Russia. In this five-year period, Russia managed to reduce its annual flared volumes by 14.8 bcm, with the biggest decrease (of 11.4 bcm) occurring between 2009 and 2010.

In 2010, the highest associated petroleum gas (APG) volumes were produced by Surgutneftegaz, Rosneft and TNK-BP, while the highest utilization rates were at Surgutneftegaz, Tatneft and TNK-BP. Moreover, only Surgutneftegaz and Tatneft (with 95.9% and 94.7% respectively) have a utilization rate of more or less 95%. The lowest APG utilization figures remain those at Gazprom Neft (55.2%), Rosneft (56.2%) and RussNeft (70%). Despite its very low absolute figures, Gazprom Neft has managed to achieve the greatest improvement in its APG utilization rate in the last five years, increasing it by more than 10 percentage points, whereas Rosneft's APG utilization rate fell by almost 11 percentage points last year.

"In mid-November, a meeting on the associated gas problem was held between leaders of the Federation Council and the Prime Minister," says Alexei Knizhnikov, WWF Russia's Oil & Gas Environmental Policy Officer. "At the meeting, it was decided to make every effort to resolve this glaring problem as quickly as possible. This means both supporting the law On APG utilization, which was submitted to the Duma a year ago but has made no progress, and a range of state support measures to resolve the problem."

Among the state support measures, WWF highlights the issue of the Kyoto Protocol in the run-up to the UNFCCC Conference in Durban.

"Rejection of the second commitment period of the Kyoto Protocol may lead to countries no longer having official global obligations to reduce greenhouse gas emissions, or mechanisms such as Joint Implementation projects, which facilitate the practical implementation of low carbon solutions," worries Mr Knizhnikov.

The initial implementation of Joint Implementation projects in Russia under the Kyoto Protocol has already proved effective and significant in solving APG problems, believes the WWF. At present, 18 projects aimed at reducing APG flaring have been developed, of which eight, offering a total reduction of roughly 18 million tonnes of CO2, have already been approved.

In addition, according to the authors of the KPMG/WWF study, Russia needs to improve its regulatory and legal framework and to develop an infrastructure system to achieve a 95% APG utilization rate, primarily in Eastern Siberia.

"Given the rates of growth of APG production and the lack of processing and transportation facilities when developing fields in new regions, the challenge of rational APG utilization in Eastern Siberia is becoming especially relevant," notes Elena Kutepova, Corporate Governance and Sustainability Consultant at KPMG in Russia and the CIS.

Further information

Government Decree No. 7, of 8 January 2009, "On measures to stimulate the reduction of air pollution from associated gas flaring products" stipulates that from 2012 no more than 5% of APG output should be flared.

In June 2011, at a State Council Presidium meeting on environmental safety, Yuri Trutnev, Russia's Minister of Natural Resources and the Environment, noted that the utilization rate is expected to be about 83% by 2012. According to data from Russia's Federal State Statistics Service, associated petroleum gas production in 2010 was 65.4 bcm, and the flaring volume 15.7 bcm. Russia's regions were grouped into 9 zones to make the analysis of APG production and flaring clearer.

Associated Gas Utilization in Russia: Issues and Prospects

Associated Gas Utilization in Russia: Issues and Prospects

This issue is significant as it shows the results of efforts to reduce associated gas flaring in 2011 and the state of the issue on the eve of 2012.

© 2017 KPMG Audit LLC, the Mongolian member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

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