Gas flaring takes place across the oil and gas value chain but is predominant in the upstream sector. It has often been an easier recourse than harnessing the excess gas. Hence, it is natural that the largest exploration and production companies will contribute most towards gas flaring.
Listed below are the key industry trends impacting the gas flaring theme, as identified by GlobalData.
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Economics of gas flaring
Often the amount of excess gas that is flared during oil and gas operations is very minimal. The lack of transportation infrastructure and low natural gas prices makes utilisation of the excess gas uneconomical. In the last decade, natural gas spot prices have varied between $1.5-6 per million Btu.
According to GlobalData, crude oil and condensate production has also grown significantly from 64.8 million barrels per day (bd) in 2010 to 73.0 million bd in 2019 – before the Covid-19 demand slump. Hence, the associated gas generated during oil production has also increased sizeably.
However, it is still unviable to monetise these gases as their production centres are scattered all over. The uneconomical scenario for utilisation of such stranded gases has led to an increase in global gas flaring volumes in the last decade.
Investor pressure
Several investors are pushing oil and gas companies to reduce their gas flaring volumes to combat climate change. This has encouraged growth in investments to build flare capture units in oil and gas operations. For instance, major European oil companies have announced strong steps towards flaring reduction in their bids to mitigate carbon emissions. Investor pressure could also lead to significant changes in the US shale industry where rampant flaring activity is observed.
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By GlobalDataA group of investment firms, managing assets worth more than $2tn, have urged the Railroad Commission of Texas, to ban routine flaring from shale operations. Other financial institutions including the World Bank and the European Investment Bank have pledged to curtail investments in fossil fuels in support of climate goals.
Operational safety
Gas flaring is sometimes necessary measure to maintain operational safety in industrial processes. Pent up gases may lead to explosion, and thus need to be released from the working environment. It is also necessary to regularly inspect the flaring systems for cracks, blockages, and other defects to avoid any mishaps. Moreover, instead of flaring, if gases like H2S are vented, they can dangerously affect the health of on-site workers.
Monetising flaring
Oil and gas players have adopted various technologies to generate value from the associated gas that otherwise might get wasted through flaring. Prominent methods include power generation, gas-to-liquid (GTL) conversion, production of compressed natural gas (CNG) and small-scale liquified petroleum gas (LNG). The associated gas can also be captured and utilised for enhanced oil recovery (EOR) activities in nearby oilfields.
The gas to be flared off can be captured and utilised to generate captive power for sustaining upstream operations. Alternately, the captured gas can be subjected to Fischer-Tropsch synthesis to produce refined products, such as GTL diesel and GTL naphtha. The natural gas can also be compressed into CNG or cooled down into LNG at the site on a smaller scale. These commodities could be sold to nearby markets to generate additional revenues.
Issues in reporting flaring
Often emission levels are set by national regulatory bodies for oil and gas operations. Emission limits are also set through international agreements. There have been instances of companies misreporting gas flaring volumes from operations due to differences in method of measuring these emissions.
Companies may even deliberately under-report its flaring to benefit from higher crude oil production, and therefore profitability, under a flaring slab issued by the regulators. In other cases, under-reporting could result from a shortage of monitoring equipment and limited oversight by regulatory bodies.
Third-party monitoring
Under-reporting of flaring can be tackled by appointing third-party observers. Alternately, governments can use satellite imagery to detect gas flaring. Automated digital systems can collect and analyse flaring data much faster than manual ones.
Improving flaring efficiency
The flaring mechanism installed at an industrial facility should always work at optimum levels to burn off the disposed gases. Flaring equipment should be designed efficiently to work efficiently, at both low and high pressure. The use of flowmeters to monitor gas pressure can also improve flaring efficiency.
Improving methane measurement
Gas volumes must be carefully measured to evaluate the impact of flaring on the environment. The International Energy Agency (IEA) suggests deploying aerial instruments, such as satellites, drones, and planes, along with stationary monitors and ground vehicles to detect flaring.
Various levels of measurement techniques can be used to improve the accuracy of flaring activity, such as Tier 1, Tier 2, and Tier 3 methods. Flow meters are deployed to detect the amount of gas lost to flaring. Thermal mass flow meters must be calibrated for specific gas compositions. Newer flowmeters such as ultrasonic flowmeters, are also being developed to improve the measurement accuracy.
This is an edited extract from the Gas Flaring – Thematic Research report produced by GlobalData Thematic Research.
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