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Nowadays, the problem of energy efficiency and energy saving stands in the forefront of the global agenda. Each of us is engaged in the process of conserving resources. We save electricity by installing high-efficient LED lamps, power production companies purchase new generation equipment in order to increase the coefficient of performance of the plants and engineers are continuously working to make fuel consumption in our cars more effective. However, have you ever thought how much of these natural resources is wasted without any use? In this article I will try to cover the problem of associated petroleum gas flaring.

I am sure everyone knows that natural gas is one of the major energy sources. Associated petroleum gas (APG), or associated gas, is a form of natural gas as well. It is found with deposits of petroleum, either dissolved in the oil or as a free “gas cap” above the oil in the reservoir under high pressure reservoir conditions (1). When oil is extracted, the pressure decreases and associated gas separates from the oil. However, traditionally this gas is considered as a waste product and is simply burnt off in gas flares. This process is called flaring and when it occurs this gas is referred to as flare gas. Taking example of Russia, which is one of the largest producer of oil and gas in the world, currently for each tonne of oil produced in Russia about 150 cubic metre of associated gas is released and this value is rising each year (2). This situation can be explained by the fact that oil production in Russia is moving to the east and north of the country. In such regions average gas/oil ratio is higher than in traditional production regions and can reach several hundred cubic meters per tonne of oil.

However, not all amount of APG is flared. Major share, that is 60% approximately, is sent from the oil field to gas processing plants and to other consumers. APG is usually separated to stripped gas (methane, or general natural gas) and NGL (natural gas liquids, which commonly consist of propane, butane and other heavy gas fractions). Further, natural gas can be used for wide range of needs, while NGL is commonly used as a raw material in chemical industry.

In Russia NGL is usually purchased by chemical companies for polyethylene and polypropylene production. 22% Of associated gas is used for oil field’s own needs, that includes utilizing APG for electricity and heat generation in steam or gas turbine power plants, and pumping APG to the reservoir in order to support extraction pressure. Also, associated gas can be used for synthetic fuel production on site via GTL (Gas-To-Liquid) conversion, however, there is almost no experience of this method application in Russia so far. Finally, 17% of APG is flared, and losses accounts for remaining 1% (2).

It should be taken into the consideration, that these figures are average among Russia and regions around it. In some states APG efficient use is almost equal to 100%, while in others it barely exceeds 50% (3). Low APG utilization levels are observed in the oil fields that are situated in remote underpopulated areas with severe climate and weather conditions. In such regions APG transporting from the field is very expensive and does not pay back. The use of associated gas for oil field’s own needs is limited. The main problem is that APG extraction is not constant, its variation is significant during the project lifetime, and coefficient of performance and other parameters of power plants are usually low at part loads. Furthermore, expensive gas pre-treatment facility must be installed in order to purify APG from sulphur, nitrogen and other harmful compounds. Such investment also can be unsustainable for medium and small scale oil production facilities. So, these factors causes flaring of significant APG amount without any use.

It is worth noting, that today efficient associated petroleum gas utilization level is rising every year in the country (2). Nevertheless, Russian Federation still takes the first place in the world in terms of gas flaring according to Worldbank. Each year Russian oil extraction industry flares up to 17 billion cubic meters of APG according to official Russian statistics (2). In order to show you how significant this value is, I would like to note that this can be compared to annual natural gas consumption of a typical European country. However, Worldbank estimates total gas flaring in Russia (what is mainly associated gas flaring) at much higher value: 35 billion cubic meters annually (4).

Associated gas flaring is not only a huge resource waste. It causes water, soil, air, and thermal pollution in the neighbourhood. When APG is utilized at flare facility about 10% of its value is vented directly into the atmosphere. As methane (the major component of APG) has global warming potential (GWP) coefficient 21 times more than CO2 (5), such 10% vented volume accounts for greenhouse gas emissions equivalent to CO2 emissions from remaining 90% of APG burned completely. On the basis of official Russian statistics on APG flaring in 2014, it can be estimated that flaring in Russia accounts for 30 million tonnes of annual CO2 emissions. This value can be compared to the total CO2 emissions generated annually by an entire European country such as Sweden or Norway. Among the emissions, apart from methane leaks and CO2, harmful components such as sulphur, nitrogen oxides, carbon monoxide, soot, benzyl, phosgene, toluene, heavy metals (mercury, arsenic, chrome), sulphuric anhydrite, and others are also present (6).

But how can we deal with such enormous resource waste? Is there any possibility to avoid loosing precious natural resource?

Firstly, I would like to discuss current situation in oil and gas production in Russia. Today as I already noticed oil and gas production shifts to the north and east of the country, to Western Siberia and Far East, and new exploration fields are mainly medium or small. Traditionally, such oil fields are supplied with energy from diesel generators. However, the fuel is usually very hard to deliver in remote areas. For example, in many regions helicopter is the only one mean of transportation. Hence, diesel fuel cost rises up to several times during the delivery process. This situation calls for the need of reliable energy generation methods using available local fuels. In this respect, APG would be a very attractive source of energy.

If we take into account high gas-oil ratio in new exploration regions, it turns out that electricity production from APG from turbines exceed power consumption value by several times. Such energy excess is hard to utilize in remote areas. Moreover, this methods does not solve the problem of fuel supply for vehicles that are working continuously on the field. Good option could be the use of associated gas partly for electricity production and partly for other needs. After conducting analysis of different APG utilization methods, it was concluded, that GTL conversion plant can be good solution for effective associated gas utilization in remote areas on small and medium scale facilities. What is special about GTL method is the possibility to use heat of the conversion reaction to produce electricity, which covers own needs of the plant and oil field’s as well. Also, significant amount of synthetic liquid hydrocarbons is produced. Part of it can be used for high quality diesel fuel generation which can be further consumed by cars and other vehicles in the oil field. The remaining can be mixed with recovered oil and send to the pipeline. This is very attractive method, don’t you think so? But there has to be catch. Why this solution is not applied at Russian oil fields? The answer is simple: no experience of implementing this technology and high capital and operating investments. Although today modern small scale GTL cost effective technologies have started to appear and surely they will play important role in solving the problem of gas flaring.

I hope that in the future we would utilize finite natural sources more carefully and the term «gas flaring» will remain only as an relic of the past.

 1.               Glossary of Terms Used in Petroleum Reserves/Resources Definitions. – 14 p. – http://www.spe.org/industry/docs/GlossaryPetroleumReserves-ResourcesDefinitions_2005.pdf.

2.               Российский статистический ежегодник 2015. [Russian Statistical Yearbook 2015]. – 728 p. – http://www.gks.ru/free_doc/doc_2015/year/ejegod-15.pdf

3.               Регионы России. Социально-экономические показатели. [Regions of Russia. Socio-economic Indicators]. 1266 p. –  http://www.gks.ru/free_doc/doc_2015/region/reg-pok15.pdf.

4.               Worldbank. Global Gas Flaring Reduction Partnership (GGFR) Top 20 gas flaring countries. –   http://www.worldbank.org/content/dam/Worldbank/Programs/GGFR%20Presentation%20March%202015.pdf

5.               Climate Change 1995, The Science of Climate Change: Summary for Policymakers and Technical Summary of the Working Group I Report.   572 p. https://www.ipcc.ch/ipccreports/sar/wg_I/ipcc_sar_wg_I_full_report.pdf.

6.               Попутный нефтяной газ в России: «Сжигать нельзя, перерабатывать!» [Associated Petroleum Gas in Russia: «Do not Flare, Utilize!»]. 88 p. https://www.wwf.ru/data/pub/oil/wwf_png_net_corrected.pdf.

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Natalia Odnoletkova is a grad student at Gubkin Russian State University of Oil and Gas. She takes deep interest in implementing technology in traditional oil and gas industry for better conservation and efficient use of energy.

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Economy

Creating Perceptions: What is Really Happening with the Indian Economy?

Manak Suri

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Narendra Modi India Economy 2019

In just a little over a year, Indians will take to the polling booths again to decide whether the Narendra Modi led BJP (Bharatiya Janata Party) government’s much anticipated second term as the ruling party will become a reality or not. Even though the present government has always been the favourite to retain its position, a heightened focus on the health of the Indian economy may or may not be in their best interest, and it all depends on which picture Indians choose to accept.

One picture, two different outlooks

IMF (International Monetary Fund) chief Christine Lagarde said earlier in October that “for the medium term, we see a very solid track ahead for the Indian economy”, assuaging some of the disconcertedness that has surrounded the Indian economy post two of the boldest moves ever attempted by any government since independence in the country: demonetisation and a massive rollout of the GST (goods and services tax) earlier in the year. The lingering effects of the disruption caused by these steps resulted in India’s GDP growth slowing down again in the latest quarter to 5.7%, with the country playing second fiddle to China, again. However, Lagarde has lauded the steps taken by the Indian government to digitise the economy and simplify the tax regime, dismissing any surprises in the drop in figures as “a little bit of short-term slowdown” which was to be expected following the government’s “monumental effort”.

Moreover, during his visit to the US to meet with investors and corporate leaders, Minister of finance Arun Jaitley reflected that there is a “positive mood” about India in the US, adding that Americans have a good understanding of the actions taken by the government and what they will lead to. That may very well be the case, but the picture of the economy within the borders is far less pronounced, and the division of its state among the citizens far more.

Soon after the figures for growth were in for the latest quarter, India’s former minister of finance Yashwant Sinha, who is also a member of BJP, singlehandedly contributed hugely to the already dwindling confidence of the public in the government’s approach when he wrote in a letter in his column on The Indian Express about “the mess the finance minister has made of the economy.” Citing issues ranging from the decline in private investment and distress in the agricultural sector to the loss of jobs across different sectors, he has blamed demonetisation and a poorly implemented GST for the poor state in which the economy finds itself. Consequently, the past month has seen a flurry of editorials and opinion pieces on what the true picture is of India’s economy, where it is headed, and whether the fears of the people are warranted or if these tiny setbacks will finally be followed by the promised prosperity.

The problems are real, but what are they?

Agriculture was one crucial sector of the economy hit badly. The agrarian crisis has worsened due to an unsatisfactory monsoon season after farm loan waivers were granted following massive protests across states. On the other hand, the GST rollout has hit hard the small and medium businesses which were vastly unprepared to cope with the government’s move. While the GST council meet earlier in October may have eased the tax burden on the SMEs, it is still some way to go before they can be pulled out of what Mr Sinha accurately describes an “existential crisis”. An improvement in growth would also require a timely recovery from the supply shock caused by the implementation of the GST, in the absence of which it would be more realistic to expect more quarters of slow growth. Another major problem is the dearth in the investment by the private sector with an increase in stalled projects for the fifth consecutive quarter. This, along with other engines of economic growth including private consumption has shown slowing signs as well. The government may argue that when they inherited the economy it wasn’t in its best shape either, but demonetisation and now GST, no matter how ambitious have created a scare among the people leading to alarms of low confidence ringing across all major sectors, which needs to be addressed.

The biggest concern perhaps for the government is the lack of jobs created. One of the promises made by the Modi government during the elections was the creation of millions of jobs. However, according to the Centre for Monitoring Indian Economy the workforce declined from 406.5 million at the end of last year to 405 million till April this year. Almost every indicator points out to a net loss of jobs for the year 2017. The telecom, construction, and textile industries among others have also laid off a large number of their workforce. A broken promise on this end is unlikely to be forgiven and forgotten that easy.

Where the government is right

As is always the case, the analysis here as well is a two-way street. To the credit of the government, some positive signs have shown with the first tax collection under GST exceeding government’s expectations of Rs. 91,000 crore. Other sources also show a bit of a revival in consumer spending. Moreover, irrespective of the expected duration of the slowdown, PM Modi has recognised the need to tackle some of the most prominent issues that plague the economy in order to get it back on track. It is for that purpose that the Economic Advisory Council to Prime Minister has been set up consisting of experts chosen by Mr Modi himself. “There is a consensus amongst us that there are various reasons that have contributed to a slowdown of growth rate. Our entire thrust would be on implementable decisions”, said the Council’s chairman Bibek Debroy. The EAC or EAC-PM has identified 10 issues to tackle in order to launch the economy towards a higher trajectory of growth. These are inclusive of but not limited to the areas of agriculture, the informal sector in the country, job creation, public expenditure, and monetary policy among others. The need for instituting an Economy Track Monitor has also been realised by the Council to suggest correct courses of actions based on heavy and informed assessments.

Making it right: which path to follow

What can the government do? What should be done? Division exists on the suggested courses of actions as well. One of the solutions to the problem would be an increase in the government spending, a suggestion that has found the support of many policymakers throughout the country. That, however, is not without its problems. The central bank has warned that such a fiscal stimulus may come at the cost of macroeconomic stability and even the EAC seems not to be in favour of it. The government also wants to stick to its fiscal deficit target of 3.2% of the GDP and is unlikely to trade off some of this stability for growth. In the event that it should achieve neither, it would be further behind the starting line, not making for a flattering image before the next general elections.

If not a fiscal stimulus, then what is the alternative? The answer is policy reforms in those sectors of the economy that have been plagued with poor performance in terms of both employment and growth – textiles, real estate and construction, and leather among others. A report from JP Morgan suggests that the government should focus on fixing the supply chains that were disrupted first due to demonetisation and then the GST by improving the regulatory framework for SMEs. Resolving the problem of non performing assets in banks is another area that the government needs to set its sights on. The EAC, in its next meeting may look at the sale of government stakes for the recapitalisation of banks as the right step to take.

Time prevails over all

“It is a mistake to think that there is some magical, perfect way to run a large-scale complex system like an economy”, says Jitendra Singh, emeritus professor of management at Wharton, on the subject of the growth of the Indian economy. Yashwant Sinha expressed the same sentiment while concluding his letter when he mentioned: “nobody has a magic wand to revive the economy overnight.” The problems that the Indian economy is facing did not start with demonetisation and GST, they were already headed this way. These steps may have accentuated some of the many problems that have slowed growth but it is also true that an excessive and undue amount of attention is being placed on them. The real problems of the economy are the ones that the EAC to PM Modi hope to tackle and only time will tell what the government is able to do. Unfortunately, time is what is most scarce for the government.

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Financial Economists & Analysts Point Out Important 2018 Economic Indicators

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Economic growth in the United States has been on a general upward tick for several years. Many people have long been claiming that a recession – however mild or severe – is long overdue. As time continues to pass, some financial analysts point to the increased likelihood of a downward turn in 2018.

Nevertheless, there are many indicators for 2018 that suggest a mixed bag of news. Whether you are planning on pursuing a career in economics, wanting to safeguard investments, or merely want to shore up your position in the job market, it’s important to know what to expect. Let’s review what financial analysts are saying 2018 has in store for us.

Overall GDP Growth: Steady

One of the biggest forecasting factors – simple GDP growth – isn’t forecast to change all that much in the upcoming year. In the United States, the national economy is expected to grow by between 1.7 and 2.5 percent, putting it right in the middle of both 2016 and 2017’s economic growth numbers.

However, it is worth noting that financial analysts have cut growth figures in recent months; a recent report in July released by the IMF lowered GDP growth by roughly one-quarter of a percentage point over previous estimates. Because GDP growth is broad-based, its effects on the economy can be very encompassing and yet hard to feel in any one industry or niche.

Educational Influences

With each passing year, more and more skilled laborers enter the workforce. 2018 is poised to be a record-setting year in this regard, with online educational institutions fueling the pursuit of degrees in financial economics, chemistry, health-related fields, and dozens of other industries.

According to the Online Learning Consortium, one in four college students are currently enrolled in one or more online classes. Analysts are expecting this number to reach 30% in 2018, as the cost of brick-and-mortar institutions continues to increase rapidly; an online MFE program is much cheaper than a traditional master’s degree.

Inflation and Commodities

Two additionally important factors in economic health are inflation rates and commodities prices.

Even in an economy that is growing, high inflation rates can completely wipe out the benefits normally earned through such conditions. Fortunately, inflation has been under control in the US for some time and will continue to remain that way in 2018. As the Federal Reserve plans to increase interest rates toward the end of the year, a small increase in inflation may occur, but it is expected to remain within the two-percent ball park for 2018.

Commodities, on the other hand, have been clearly on a downward trend thanks to a recovering economy. Items such as oil and gold will in all likelihood remain reasonably priced in 2018, according to leading financial analysts. According to those with masters in financial economics and those working for top-tier firms, these items tend to decline when the economy is in strong shape. This is yet another good indicator for a stable economic climate heading into 2018.

All in all, 2018’s economic forecast according to analysts and economists appears to be on the right track. This dynamic will help provide further stability to markets and ensure that everything from job hunts to the stock market remains in a solid position for the next year.

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Africa, The New Industrial Eldorado

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Cape town

With saturated markets in Europe and North America, industrial firms are turning to other parts of the world to bring their craft and technology, and to maintain their growth. And right in the middle of their scope lies Africa. The size and magnitude of industrial and infrastructural project in Africa have been on the steady rise over the past years, enough to turn the continent into a new business hunting ground.

Both because of the cliché of African poverty and because of higher-economic profile countries such as China or Brazil, uninformed readers may believe that Africa’s growth is sluggish, or even dormant. Nothing could be further from the truth, with some African countries posting growth rates neighboring 10%, far beyond the champions of Asia or Latin America. In fact, even when factoring in the sluggish or war-ridden areas of the continent, Sub-Saharan Africa is the fastest developing area in the world. Some of this growth is due to post-conflict reconstruction, some due to renewed political governance. But with the vastest natural resources in a ever-hungrier world, the road is open for Africa to maintain its steady growth and attract increasing attention from foreign investors. Economic expert Krispinana Shirima Krispinana explains (1): “Although concerns exist regarding the negative effects of foreign capital inflows, including Foreign Direct Investment (FDI) and portfolio equity and debt flows, a variety of empirical studies have demonstrated that the inflows stimulate economic growth with the transfer of new technologies and innovations, human capital formation, and integration in global markets.”

With wanting areas of development, and stabilized conditions foreign investors will be the key to unlocking projects. The Ethiopian Herald reports the effectiveness of foreign funds investment (2): “Ethiopia has continued becoming investors’ choice. It is attracting more Foreign Direct Investment (FDI) from time to time. Particularly, textile and garment manufacturing industries, as the sectors are labour intensive, they create millions of job opportunities, and help transfer technology.” Even with the period of peace and stability, little or nothing will happen without FDIs, due to lack of available native funds from the African private sector. A playground is a necessary condition to play, but not sufficient to launch the game.

Business day highlighted this dilemma (3) in its February 2017 analysis : “Between 2010-2016, Africa recorded $22.7billion in private equity transactions, reports the Financial Times (FT), representing only about 1% of global PE investments despite a contribution of roughly 3% to global GDP. Furthermore, the majority of the transaction capital came from a few big investment firms targeting a limited number of deals.” This entails that a vast majority of investments are injected by the public sector, with often reduced efficiency, exposure to graft and dependence upon international aid.

Africa has succeeded in turning its difficulties into opportunities. With less than half the continent electrified, save Northern Africa, lack of access to reliable power has plagued economic development for years. Today, numerous projects are coming out of the ground with off-grid powering solutions. Expansion of water networks or transportation networks, which suffer years of belated maintenance, is currently picking up. “A doubling of Ethiopia’s road network in two decades, has allowed more farmers to bring their produce to market”, the Overseas development Institute published in a recent report (4), stressing the impact on the general economy of the country “On average, Ethiopia’s economy is growing at 10% a year and it is expected to double within the next seven years. This means that by 2025, it will have grown to a middle-income nation. This is as reported by World Bank.” In fact, off-grid power solutions are on the rise in Europe also, where households seek to take part in environmental progress by producing their own power; so, Africa may prove to be the test lab and launching pad of the nascent technology, which Europe will then absorb with its high purchasing power.

Moreover, an increasing number of reforming and corruption-fighting leaders are at work in Africa and getting traction, according to many experts. Patrick Couzinet, director of Veolia Water Technology for Africa, gives great importance to the link between governance and economic perspectives: “In terms of development, economics and politics are one. And we are at the beginning of a new phase of stability, development and growth, with projects ready for every industry to strive on; from communications to transport, and from energy to tourism”. Throughout African 20th century, there has been many examples of development eras snapped short by revolts and instability sparked off by one political group. And when stability was assured, it has often been the silver lining of locked political interests, with a high cost to economic development. The political layer within countries often has more nuisance power than added value: it is difficult for the political establishment to develop by itself, but it can hamper development by itself. According to Patrick Couzinet, this threat is slowly drifting away from Africa, through reforms and structuration.

If anything is to confirm that the African continent is sizzling, it is the increase in foreign investments from China and from Western countries. Several post-crisis reconstruction phases are currently in progress, which yield high growth rates, just as the post-war reconstruction efforts pushed Germany and Japan to the top of the world’s economic ranking. And because the project under way are basic infrastructural equipment, it is very likely that it will bear further economic growth. There will therefore be many business opportunities for British and European businesses, due to Africa’s need for technological transfer.

(1) http://allafrica.com/stories/201702150099.html
(2) http://allafrica.com/stories/201702180276.html
(3)https://www.businessdayonline.com/corporate-data-access-africa-sparking-private-sector-investment-greater-transparency/
(4) https://www.africanexponent.com/post/the-6-fastest-growing-economies-in-africa-36

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