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Gas flare Russia

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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

Hungary And Poland To Lose Up To 25% Allocation Of EU Funds

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Hungary and Poland are set to be hit with new cuts in cohesion support after EU commission proposed new radical changes. This came to light after a series of propositions were published recently by the EU executive. Eastern European countries will be hard hit by the propositions, but more impact will be felt in Hungary and Poland.

The changes come in light of the immigration policies that certain countries have chosen to adopt. The two most affected countries will lose nearly 25% in cuts due to their problematic policies. The repercussions of the cuts could be felt very soon especially if the Eastern European countries decide to take on Western Europe.

Even though the commission has maintained that the new changes are not meant to be punishment for inconsistency and criticism, there is a general feeling that the countries will not take the changes well. The commission also argued that there is no need to compare the allocations between EU member states as each country has their own share of prosperity.

The proposed changes will also affect more countries in Eastern Europe including Lithuania, Czech Republic, Slovakia, and Malta. Germany will also get a reduction in the allocation to the tune of 20%. There are some countries however that will get a raise in their allocation including Greece, Romania, Bulgaria, and Italy.

The EU commission, through its commissioner for regional development, Corina Cretu, says that the recent changes have no political bearing behind them.

How the commission arrived at the figures

In previous years, the commission had an established formula for calculating the allocation of funds. This year though, it seems like there was a break from tradition since the calculation method was visibly adjusted. The GDP would be used to determine prosperity in the region during the past, for instance. This criterion seems to have been adjusted in addition to the inclusion of other factors like climate, education levels, employment levels, and of course the attitude of the countries towards immigrants.

It is yet not clear how these changes will affect the forex market in Europe. What is clear though is that the aftermaths of major decisions in recent years have often caused some disturbances in the stocks and forex markets. At times like these, stock and forex traders need to be on the lookout for any major breaking news. Admiralmarkets.pl suggests using the current forex and stock platforms to get market feeds in real-time.

The current feeling from the Eastern European countries is that the commission is finding ways of diverting money from the region to other regions that have faced challenges in recent years. The southern part of Europe has for instance been in the red for a couple of years now. The crisis in Greece and Spain is yet to completely settle.  The sentiments of Eastern Europe do not seem to bother the commission, however. The commission argues that these countries have seen major growth in recent years and that they would even handle stiffer cuts. This, the commission argues, would especially be true if issues like GDP per capita were to be considered.

EU officials have spent much of the time explaining how their recent propositions are in no way related to the crisis in the south. Instead, the commission has used every opportunity to highlight the changes in GDP as the key reasons for the allocation cuts. It is indeed easy to find reason in this rationale when you analyze the economies of Eastern European countries.

Poland has for instance seen a lot of positive growth in the past few years. In 2017, the economy grew by 4.6%. This growth came in the backdrop of a similarly strong growth the previous year where the GDP growth was recorded as having been 3%. The forecasts for this year do not look bad either. The GDP is expected to grow by at least 4.3% as per what the commission has established on its forecasts. The growth pattern in Hungary was also comparable, being 3.3% in 2016, 3.45% in 2017 and with a projected growth of 4% year.

Looking south, the economy of Italy recorded growths of 0.9% and 1.5% in 2016 and 2017 respectively. The forecast does not look any different also as a projected growth of 1.5% is expected. In order to argue their case, the commission argued the case of Portugal, which is still struggling but which got some cuts due to its strong performance recently.

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Hungary Economy: Population, GDP, Inflation, Business, Trade

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The Hungarian economy is ranked as the 55th freest according to 2018 statistics. This economy has undergone a lot of transformation and it has particularly improved in the areas of the judiciary, labor freedom and investment. There are some realms however that have not seen great improvements especially in the areas of business freedom, government integrity, and property rights. In overall, Hungary is below average in most metrics in Europe compared to other peers in the region. The country is also just above the world average on the global scale.

Looking at its recent past, this country has seen a bit of relapse into some laws that were previously abandoned. The country has definitely seen much freer and liberal laws in recent years just before the government began to intervene in the areas of policy. Much of the changes over the years have been instituted to support economic growth and to balance out the budget while steering clear of areas that might cause conflict with the European Union. There are many targets that the government has including reducing public debt. It plans to achieve all of them by taking an active role and instituting sectoral laws.

The history of Hungary is long and colorful. It was once part of the communist realm until 1990 when it became completely independent. The country is currently a member of NATO having been in the organization since 1999. When the EU was formed, Hungary was not among the founding members and only joined the organization in 2004. There have been numerous economic reforms in the last decade and today, the economy is supported by strong local demand as well as exports. In recent years, things have been looking very optimistic for the country. The construction industry has boomed and there is a hands-on approach by the government on economic matters. The unemployment rate in the country is low.

Despite these improvements, there are still some challenges that face the government. It is for instance not as open as it ought to be and the judiciary is weak and subject to government interference. The policies surrounding land tenure are pretty straightforward and the government keeps updated records. Because of its somewhat domineering government and a weak judiciary, there are always concerns about corruption. The business sector is thus highly affected by the apparent indifference in the government towards corruption. A lot more needs to be done by the government to deal with prominent figures who have been a menace to business.

Moving on to the financial sector, there is a generally fair support by the government to the financial markets. The tax for corporates is maintained at 19% and tax for individuals is at 15%. The stock market is pretty vibrant with the Budapest SE index enjoying some good figures in recent years. Forex traders can do many things in this country even though the market is not as developed especially compared to the West. Forex trading is supported a lot and there are dedicated providers that allow Hungarians to access tens of thousands of markets.

As a country that is still developing many sectors, Hungary has a government that has a direct oversight over some sectors. You will thus often find direct government support for some industries. There are some sectors where there is not enough manpower. The labor regulations are somewhat basic which makes mobility a little difficult. Most of the product prices are market-determined but some goods’ prices are regulated by the government. Some of the areas in which the government has a hand on the prices include the markets of pharmaceuticals, tobacco, digital money, some machinery and electronic appliances and telecommunication products.

The health of the economy is definitely good considering that the trading industry is pretty vibrant. Hungary relies a lot on both exporting and importing goods. The total value of goods that either leave or enter the country comprises of up to 175% of the GDP. There are no strict tariff regulations and there is a general preservation of a 1.6% tariff rate. While there is much more government presence in many areas of the economy, the impact is not too big to disrupt economic activities. The financial sector is still in its formative years and it will take sometime before the banks get the necessary regulatory policy that supports growth.

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Volcker Rule 2.0: First Major Rule Revisions Proposed

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The Volcker Rule, which has been guiding trading and the financial sector for a long time, is set to be revised according to the news. This rule and its changes are however not likely to affect trading activities as the revisions will focus on banking activity and not individual trading entities. There have been several proposed changes over the years even though there has never been a momentous time where the changes were taken seriously until recently. Among the changes proposed in the new revision exercise include:

  • Restructuring banks so that they can have more tiers dedicated to asset and liability compliance
  • Liberalizing what has come to be known as the TOTUS exemption and thereby pave way for trading personnel to have more control over transactions
  • Changing the structure of the risk capital prong to allow foreign banks to operate under similar regulations with local banks
  • Changing the manner in which banks are supposed to reveal the information on financial commitments

The above are just some of the issues that are covered by the long proposal rule. There have been other changes that were made recently but they will not be implemented together with the new proposals if they go through.

The Fundamental Tenets of the Volcker Rule

The Volcker Rule was made to regulate banking entities of all kinds. The details of the rules have been criticized lately for being extraneous and overly complicated. This is what has prompted some of the proposed changes to be made.

The rules were proposed in 2011 and adopted in 2013, but since that time, the opposition to the rules has been gradually increasing. First, national institutions like the Treasury made moves towards analyzing the rules. Afterward, the OCC wanted the public to have comments on the rules as they are. The entry of new officials in the top government institutions has however been the main reason why much more light has been cast on the rules. A recent Treasury Report has many proposed changes already and the Congress has recently passed laws that overlook the Volcker Rule.

Some of the Main Areas the Proposed Rule Will Affect

The proposed new rule will definitely have a significant effect on the current Volcker Rule. Of the many areas that the proposed changes will affect, the following are the most significant:

1.Proprietary trading

The first key area that will change is the proprietary trading regulatory realm. As of now, the rules prohibit this kind of trading for all banking entities. There are many provisions provided by the Volcker rule which all touch on banking entities and dealers. Issues of liquidity management, trading errors and market exemptions are some of those that will be affected by the proposed changes. If the changes go as planned, banking entities will have more control on the market. It will be possible to determine whats new on markets by just relying on financial entities.

2. Private equity funds and hedge funds

Hedging has been widely known as one of the activities that are prohibited by many financial laws in the country. Banking entities are specifically prohibited from having relationships with any clients that either deal with or have some form of hedging funds. The proposed rules will touch on many issues but the most vital will be on the likelihood of changing the prohibitions.

3. Compliance

The Volcker Rule outlines a series of compliance issues that banking entities must follow in case they want to change policy. There is a great detail of compliance categories as specified by the Volcker rules complete with accompanying requirements. The proposed rules seek to change such compliance obligations.

4. Reporting

Metric reporting requirements are also heavily underscored under the new proposed rules. There will be a strong focus on qualitative information schedules and also on how the reporting is done. There are currently discussions on whether a centralized approach will be adopted. In overall, several metrics will be discussed and the new rules will give details on what has been agreed upon.

5. Recent changes in laws

Finally, the recent changes that have been made especially by the Congress will also be looked at. This will be done in order to bring harmony to the proposed rules. Some of the recent changes in the law have been progressive and as such should be retained. There are also several other provisions that the new proposal will cover and the details of the final rule will emerge in due course.

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