Celebrating successful flare capture projects with independent data-driven evidence
Executive summary
- Gas flaring is a major source of economic and environmental waste, and the world is not yet “on track” to reach zero flaring by 2030. But with COP26 coming up (and the global focus on the energy transition), the moment for action to reduce flaring is now.
- Flaring is frequently avoidable, using proven technology, and can often deliver commercially attractive returns. This article celebrates five successful “flare gas capture” projects, and we congratulate the operators for their leadership. By learning from these examples, the oil and gas industry can improve its performance, reduce emissions, create value and accelerate the energy transition.
- There is no moment to lose. Capterio’s “FlareIntel” tool enables companies to accelerate progress by starting with an independent and daily view of flaring for every asset worldwide. Let’s work together to accelerate the drive to net-zero and make zero flaring a reality.
By John-Henry Charles, Brian Hepp and Mark Davis | 2800 words | Reading time: 9 minutes
To find out more about FlareIntel please visit www.capterio.com/flareintel or email flareintel@capterio.com.
The case for flare reduction initiatives
The latest data from the World Bank highlights that the flaring of natural gas associated with oil and gas production increased in 2019, to 150 BCM per year, the highest it has been in a decade. Progress is therefore at odds with the direction of travel required by the Paris Agreement. As we highlight in our article “why gas flaring needs to be in the spotlight at COP26“, since Paris flaring for those countries that made flare-reducing commitments has even, in aggregate, accelerated. Furthermore, flaring not only results in revenue loss of around $20 billion per year, but also contributes to up to 1.2 billion CO2-equivalent tonnes of emissions per year. That’s the equivalent, in emissions terms, of taking 260 million passenger cars off the road.
Contrary to the views of some, our global datasets confirm that the majority of flaring is not only continuous in nature, but stable in volume and significant in size. Hence perhaps it is not so surprising that flaring can be fixed often using proven technology – and frequently with commercially-attractive returns. At Capterio, we do just that. We are a project developer and we deliver on-the-ground flare capture projects.
We are excited to contribute this article which focusses on five examples of flare reduction projects in USA, Iraq, Egypt and Algeria from operators including Crusoe, Pharos, DNO and Naftogaz. These examples cover gas to pipe, gas to power and gas to innovative solutions. Whilst we don’t cover the details, they likely also deliver attractive returns on investment.
The narratives behind each example below are independently validated by data from our unique near real-time FlareIntel Pro tool, which monitors flaring for every asset, every company and every country worldwide on a daily basis. We use FlareIntel Pro to identify flare capture investment opportunities, to monitor operational upsets and to independently track flare reduction initiatives. We also use FlareIntel Pro to establish a baseline from which we can monitor, verify and even certify reductions – enabling operators to access carbon-based offset markets. We are excited to launch a free, open-access version of the tool, “FlareIntel” next week, at www.capterio.com/flareintel.
We are grateful for discussions with some of the operators in the preparation of this article, but have not used confidential data or insight. Nevertheless, we have very good reason to believe that the data we present is very well calibrated and in accordance with the actual data from the operator.
We congratulate every operator that materially reduces gas flaring and seek to celebrate the leadership. Whilst the world has a long way to go to reduce flaring, this collection of evidence-based example should, we hope, inspire others to act.
Example 1: Naftogaz’s gas to pipe flaring reduction project in Egypt
Naftogaz is a Ukraine-centred oil and gas company with very low rates of gas flaring overall. Yet, according to FlareIntel, flaring had been significant since 2015 – at around 10-15 million scf/day – from its single asset in Egypt’s Western Desert, the Alam El Shawish East oilfield.
From mid-2019 onwards, Naftogaz has successfully implemented an impressive flare reduction project that has greatly reduced their flaring, thereby reducing emissions up to 800,000 CO2-equivalent tonnes per year[1]. The low pressure flared gas has been recovered through compression and is delivered, as commercial gas, into the nearby Abu Sannan – El Amreya pipeline.
Figure 1 illustrates the flare’s timeseries using data from Capterio’s FlareIntel Pro tool. Indeed, we independently verify the company’s actions to reduce emissions – but we also identify opportunities for further improvement. In particular, the data highlights two significant (2 week-long) flaring events that are probably related to short-term operational or maintenance programmes associated with compression and/or gas treatment stations – and FlareIntel Pro can automatically alert operational leaders and executives to these on-the-ground upsets. Despite these limited upset episodes, we congratulate Naftogaz for its success and industry leadership.
Example 2: DNO’s gas for reinjection flare capture project in Kurdistan
DNO operates the DNO / Genel Energy assets (the Peshkabir and Tawke fields) in the Zagros fold belt in northern Kurdistan. The area is of strategic importance to the government of Kurdistan, not least for its significant production (over 100,000 barrels per day) of high-quality crude. The oil is exported through Turkey from a combination of trucking and pipeline operations.
However, the area has historically had a gas flaring problem – in part because the government-regulated power prices are often too low to incentivise operators to capture the gas to produce much-needed electric power. In particular, flaring at the Peshkabir and Tawke fields were, DNO states, the largest single contributor of greenhouse gas emissions within their global portfolio, amounting to 639,200 tonnes of CO2e in 2019.
In September 2020, DNO and Genel announced a $110 million capital investment project to capture, gather and treat the flared gas at Peshkabir and transport it through an 80 km pipeline routed around a mountain to the Tawke field. At Tawke, the gas is injected to support an Enhanced Oil Recovery (EOR) project, and any recycled gas is used to generate power, thereby reducing diesel consumption[2]. DNO’s executive chairman Bijan Mossavar-Rahmani noted that “gas injection and the associated carbon capture and storage is proven, practical and potentially profitable“.
Capterio’s data from our FlareIntel Pro tool broadly supports the claims made by DNO and Genel. We have monitored flares in the area since 2015. From 2018 onwards, significant volumes (20+ million scf/d) were flared and in the first half of 2020 around 30 million scf/day were routinely flared until around June 4th, 2020. At this time, flaring reduced to around 10 million scf/day (bar a few days of operational issues in June, July, August and November). The recovery of 20 million scf/day equates to a minimum of 478,000 tonnes per year of CO2-equivalent savings[3], although a more realistic figure could be as high as 1.2 million tonnes per year of CO2-equivalent savings[4]. The total captured gas cited by the operator of 2.4 bcf in 2020 is also therefore plausible. We congratulate DNO and Genel on this effort, and note that it also led, in 2020, to 400,000 barrels of reduced field water production (and 200,000 barrels of incremental oil recovery)[5].
Despite the excellent progress (although not shown in Figure 1), we note that our real-time data shows that, since 2 December 2020, gas flaring has increased to 15-30 million scf/day. These may be operational problems, and no-doubt are solutions are actively being worked on, and we are following closely with our subscription tool FlareIntel Pro.
Example 3: Pharoas Energy’s gas to power project in Egypt
Pharos Energy, a UK-based independent oil company, has successfully delivered an exciting flare capture project in Egypt. Their work not only reduces gas flaring (converting it to power), but also reduces diesel consumption (and cost), associated emissions, and provides cooking gas to communities in Egypt’s Western Desert.
Whilst flaring associated with Pharos’ El Fayum Silah and North Silah Deep oilfields was already low (in the order of 1 million scf/day), in 2019, Pharos installed two gas-fired power units, plus accessed grid power, and reduced gas flaring by 30%. Based on our FlareIntel Pro flaring profiles, their activities resulted saving of the order of 40,000 CO2-equivalent tonnes per year (assuming the flare had an initial combustion efficiency of 90% methane slip and a 20-year GWP). The new power generation units enabled the company to reduce diesel consumption by 730,000 litres per year, generating (according to Capterio calculations) additional emissions savings of 2,000 tonnes of CO2 per year (excluding the emissions associated with trucking the diesel to the location). Their innovation also led (we estimate) to lower fuel purchase costs of around $2 million per year and reduced the HSE risks associated with transportation and transfer of fuel on roads in the desert.
Figure 3 highlights how Capterio’s FlareIntel Pro tool independently confirms the operator’s emissions reduction initiatives. We congratulate Pharos and its equipment suppliers (Aggreko and others) for successfully delivering this flare capture project. We however recognise that there are many other similar opportunities to use flared gas as an alternative to burning diesel for oilfield operations. Indeed, one operator in Egypt recently told us that it spends almost $90,000 per day trucking diesel from the coastal refinery to the desert. Hopefully, Pharos’ initiative can demonstrate a viable route and may inspire others to act.
Example 4: Crusoe Energy’s gas to power for high-intensity computing project in the Bakken
In early 2020, a privately-funded E&P company drilled 5 two-mile horizontal wells from a single pad in the Bakken shale in Montana. These 5 wells were completed, but without any takeaway capacity, they flared close to 4 million scf/day of liquids-rich (1500 btu/million scf) gas. Whilst the operator used a liquids recovery unit to reduce the flaring by approximately 20%, a substantial flare remained.
The operator contracted Crusoe Energy Systems to deploy 4 Waukesha generators and 8 modular data centres to consume approximately 1.2 million scf/day of rich Bakken gas and generate up to 6 MW of electricity for consumption, thus substantially reducing the flaring (Figure 5). Flare volatility was mitigated by sizing the equipment installation to receive a constant flare baseload.
Crusoe’s so-called “Digital Flare Mitigation” actively monetises the waste gas in an innovative way: by using the reliable power for energy-intensive computing right at the well site. As one operator put it to us, “if you can’t sell the molecule, and you can’t sell the electron, then you may be able to sell computing services such as cryptocurrency mining or server hosting”. Given that high-intensity computing requires significant cooling, this monetisation option works particularly well in lower temperature operating environments (where the cost for cooling the computing units is lower).
We congratulate Crusoe for its innovative approach to productively using flare gas and believe that this example could and should inspire more creative thinking in other geographies, even or a more temperature nature.
Example 5: An independent operator in Algeria’s flare gas system upgrade
Our chosen case from Algeria’s Hassi Berkine basin is particularly interesting as we can not only independently confirm that the operator reduced emissions of CO2 from flaring, but also reduced emissions from methane from incomplete combustion. Given that methane is a particularly potent greenhouse gas (by a factor of 84 times on a mass basis, or 31 on a volume basis), the operator’s actions are particularly significant.
This particular flare has been consistently high since 2012. Our FlareIntel Pro tool notified us (with an automatic email alert) of a significant drop in flaring (from around 18 million scf/d, to 9 million scf/day), simultaneously associated with a higher flare temperature. We immediately engaged the operator, although they were somewhat surprised and perplexed by our sudden interest. Yet, a deeper discussion with the operatives led to a rich conversation and a keen interest to work with us to validate our findings.
Our subsequent discussions revealed that the operator had recently completed an emissions reduction project that included replacing 200 valves and changing the flare tip. Changing out the valves resulted in less leakage, more product recovery and significantly lower volumes of gas reaching the flare system. Changing the flare tip improved the combustion efficiency of flare, meaning that the so-called “methane slip” (i.e. release of unburnt gas, in the form of methane, CH4) was reduced, resulting in a more efficient and higher-temperature burn.
According to our FlareIntel Pro calculation, these interventions led to a 9 million scf/d reduction in flare volumes and a 10% improvement in combustion efficiency. The operator increased annual revenues by $7 million and save 2 million CO2-equivalent tonnes per year.
We congratulate the operator for its proactivity and their management in exhibiting leadership – and were delighted that our independently verified data was used to demonstrate to the regulator (ALNAFT) and the National Oil Company (Sonatrach) the company’s support to delivering Algeria’s commitments to end routine gas flaring by 2030. The situation is likely to further improve following the installation of a new 7-inch 160 km pipeline across the basin by ENI, enabling other flared gas to be integrated into the regional gas network. Given that Sonatrach is a signatory to the World Bank’s “Zero Routine Flaring” by 2030 initiative, these contributions are particularly important and inspirational.
Flare capture projects also make sound ESG investments
We are excited to have collaborated with the operators in the preparation of this paper and to demonstrate the success of these flare capture projects. More broadly, the knowledge base for successfully delivering these projects is growing. Knowledge is especially important here, as dealing with volatile volumes of low-pressure gas of varying composition with potential contaminants can be complex.
Indeed, in our experience as a project developer, although we cannot publish the metrics for the above projects, flare gas capture projects can often make attractive investments. We have evaluated many opportunities that not only intrinsically attractive (with positive project NPVs), but are also commercially attractive to investors (with investable post-tax IRRs in the range of 20%-60% and significantly negative marginal abatement costs (up to $40 per tonne of CO2).
In addition to generating revenue in their own right, flare capture projects can often qualify for emissions reductions credits on international carbon markets. Please see our article “why flare capture projects make sound ESG investments” for more details on the overall value proposition.
We also hope that the reader is as excited as we are to see that the operators’ claims are supported by the independent and third-party verifiable data provided by Capterio. We hope that Capterio’s FlareIntel Pro tool can be a gamechanger that enables us to celebrate successful projects on the one hand, and on the other hand, hold operators to account.
After all, our industry needs to move quickly to decarbonise. To meet the IEA’s “Sustainable Development Scenario”, for example, a 90% reduction in flaring is required as early as 2030. We are already working with a range of operators worldwide to accelerate flare reduction by delivering on-the-ground solutions (as we outline below).
How Capterio’s FlareIntel Pro can independently validate flare capture projects
Capterio’s FlareIntel Pro tool uses data from satellites that track the thermal anomaly associated with gas flaring daily. We use algorithms and research initially developed by the Colorado School of Mines to process this data to generate the volume of gas flared, and we couple this data with metadata (such as the field operator, the partners, the field name and the distance to infrastructure) and recent visual imagery to deliver a unique and compelling set of dashboards that are available in a secure environment on a phone, tablet or PC.
Figure 6 outlines the benefits and use cases of FlareIntel Pro. Since the tool tracks every flare worldwide every day, it can be used to give an independent view of operated and non-operated flares, detect operational upsets and support benchmarking, calculate emissions and identify investment opportunities. The tool is available by subscription and is already used by operational leaders and environmental groups alike.
Capterio also provides a free and open-access tool called “FlareIntel“. For more information on FlareIntel please visit www.capterio.com/flareintel and see Figure 7.
We are grateful to the Earth Observation Group at Colorado School of Mines for their development of the Nightfire algorithm which underpins this work.
About Capterio’s approach to delivering flare capture projects
In addition to delivering FlareIntel Pro, Capterio is also a project developer that delivers on-the-ground solutions that reduce emissions, create value and accelerate the energy transition. Our approach is to bring together assets, technologies and financing to solve the “market” or “system” failure that drives operators to flare waste gas. We deliver fit-for-purpose solutions to monetise the gas and have a strong bias for deploying proven and scalable solutions. Figure 8 outlines our approach – and covers the solutions explored in each of the case studies above.
We would like to thank several operators, NOCs and governments, plus the World Bank, the EU Commission for inspiring some of our thinking behind this article. Any errors or omissions are, however, our own.