Gas flaring shows modest improvement – but not in the countries that matter most

Executive summary

• Whilst the latest upstream flaring data from the World Bank highlights that gas flaring is modestly lower in 2021 (by 3.4%), the global “flaring intensity” has dramatically reduced (by 7.7%), suggesting material improvements in operational performance.

• Whilst this development is certainly encouraging, at 139 BCM, flaring accounts for $72 billion of lost revenues (at today’s European gas price, or $2,270 per second) and 940 million CO2-equivalent tonnes of greenhouse gas emissions.  This waste is unacceptable, especially in today’s world of energy insecurity, sky-high energy prices and a global climate crisis.  It also leaves money on the table – when it’s needed.

• There has been some good progress on flare reduction in several countries (Nigeria, Mexico, USA, Libya, Kazakhstan, Oman and Malaysia).  However, disappointingly, the countries that matter the most (Russia, Iraq, Iran, Algeria and Venezuela) have seen no reduction in flaring – and Algeria and Venezuela increased flaring.  These are all countries where National Oil Companies are dominant.

• There remains, therefore, little evidence to suggest that the world is remotely on track to reduce flaring to deliver so-called “zero routine flaring”.  Existing commitments are not being delivered sufficiently quickly, which makes meeting “net zero” ambitions (even just for scope 1) very challenging for many.  This situation is increasingly becoming untenable and will soon undermine the industry’s license to operate. 

• The global industry must pull together to make good commitments – offering a hand to countries in need by mobilising cash, capabilities and already-proven technologies.  COP 28 – led by UAE (itself a low-flaring country) – could be a pivotal moment.

• Acting quickly is important, especially since solving gas flaring is one of the quickest wins to decarbonise our energy system.  Our paper highlights several specific examples where flare reductions are making a real difference (in Egypt, in Iraq, in Kazakhstan) – and in doing so, companies and governments can generate additional revenues, improve energy security, and accelerate the energy transition.  There is not a moment to lose.

The modest global reduction in flaring should be applauded, but it is majorly insufficient and leaves money on the table as economies struggle

The World Bank’s Global Gas Flaring Reduction programme recently published its annual assessment of upstream gas flaring.  Their analysis – like ours – is based on satellite detection of flaring.  This paper – our fourth annual independent analysis of this data – explores the topic in detail[1].  Our insights are based on our extensive conversations with operators, investors and governments, and our insights from FlareIntel Pro, Capterio’s satellite-tracking tool[2].

The headline figure is a reduction in upstream flaring by 3.4% from 143.4 to 138.6 BCM.  Whilst this is promising, perhaps more encouraging is that this reduction came against a backdrop of increasing liquids production (by 4.7%) – meaning that the underlying “flaring intensity”[3] has reduced by 7.7% (see Figure 1).  Since flaring intensity is a proxy for operational performance, this reduction should be celebrated.

Figure 1: global gas flaring (derived by satellite), liquids production and calculated gas “flaring intensity”.  Gas flaring is modestly lower in 2022, driven by a lower “flaring intensity” offset by increased liquids production.

However, despite this seemingly good progress, the world is very off-track to deliver “zero routine flaring” by 2030.  The World Bank’s ZRF initiative[4] has been widely endorsed by 54 oil companies, 35 governments and 15 development institutions, and to meet ZRF by 2030 (and, as an intermediate step, the IEA’s Sustainable Development Scenario), we now need to see more than a 10X increase in flaring reduction – something north of 50% reduction per year by our account.  But not acting in their own self-interest, companies and governments are leaving money on the table – some $72 billion of it per year ($2,270 per second) – which at a time of a global energy security and economic crisis, is inexcusable.

Figure 2 shows the flares against a backdrop of ZRF commitment status (and we note there is a significant overlap with countries that have also signed the Global Methane Pledge).  We urgently need to accelerate the delivery of ZRF for countries that have made commitments, including Russia, Iraq, Algeria, USA, Mexico and Nigeria – plus to dramatically step-up diplomatic efforts in non-committing states, including Iran, Venezuela and Libya.  Multilateral development institutions have a major role in accelerating progress, and move from ambition to action.

Figure 2: global flaring map superimposed on a base map showing commitment (or otherwise) to the World Bank’s “Zero Routine Flaring” initiative.  Whilst the reductions in flaring are welcome, a step-change in reduction of more than 10X is required to meet these commitments (or, as shown, the intermediate step of the IEA’s SDS scenario).  Credit to the FT for reproducing the left chart from our original Op Ed.

However, the global data mask the detail and a very wide performance span between countries.  Figure 3 shows the global league table on an absolute basis (i.e. total flaring, left) and on a relative basis (flaring intensity, right), and is colour-coded to show the change in flaring from 2022 vs 2021.  Disappointingly flaring remains largely unchanged (or has increased) in the top 5 countries.

Figure 3: global flaring league table on an absolute (BCM) and relative (m3/barrel) basis, colour-coded by the change in flaring in 2022 vs 2022.  The wide span of performance also talks to the opportunity.  Norway’s flaring intensity is dramatically lower than the UK’s, and Saudi/UAE flaring intensity is dramatically lower than Iran or Iraq’s … and in all cases the difference is largely attributable to government commitment, leadership and investment.

Venezuela’s flaring intensity is a massive 154x higher than Norway’s, and whilst the “gassiness” of oils does vary, the difference is mainly attributable to operational practices.  Venezuela, in particular, has a major problem with investment into – and therefore maintenance of – high-pressure compression plants.

More generally, countries with enduring policies, coupled with enforcement by credible and independent regulators (e.g. Saudi Arabia, UAE and Norway) do particularly well on this metric.  Norway has an implicit carbon price embedded in its anti-flaring policy, and for good reason, as flared gas can be put to productive use that creates real economic value (and reduces emissions).  Conversely, countries with very high flaring intensities are not always stable politically and/or often do not adopt strong processes or policies.  Nigeria, for example, has a punitive flaring penalty equivalent to $38 per tonne, however, it is rarely enforced.  Similarly, Algeria’s flaring penalty (some $48 per tonne) is not enforced by the semi-independent regulator ALNAFT.

To understand these trends more deeply, we decompose the 2020-2021 data to explore how the change in flaring is driven by the change in underlying liquids production and the change in flaring intensity (Figure 4).  Flaring intensity is a proxy for underlying operational performance[5].

Figure 4: analysis of the change in flaring in 2021 vs 2022 by country, showing only the countries with changes greater than 0.2 BCM per year.  For each country we have decomposed the change in flaring to a change in flaring intensity and a change in liquids production (its primary driver).  The majority of countries that have reduced flaring have done so, at least in part, by improving their operational performance (flaring intensity).  Those countries with higher flaring have increased their oil production, and Congo has also increased flaring intensity.

The results highlight how changes in country performance is largely controlled by changes in operational practices (or changes in operational mix).  In particular: 

• Apart from Yemen and Libya, all of the countries that have materially reduced their flaring – by more than 0.2 BCM – have done so by reducing their flaring intensity (i.e. improving their operational fundamentals).  Some have also boosted their flaring reduction by also lowering production (e.g. Nigeria, Kazakhstan, Australia and the UK – see Figure 6).   

• Of the countries with increased flaring significantly, each can be explained to a large degree by their increased liquids production.  In Algeria and Venezuela’s cases, oil production increased by more than flaring intensity improved, but in Congo both metrics move in the wrong direction.

• Not shown in Figure 5 are Russia, Iran and Iraq, all of whom maintained flaring almost constant whilst increasing liquids output … by simultaneously improving their flaring intensity/operational performance (see Figure 6).

Figure 6 presents these data differently, in terms of the change in liquids production vs the change in flaring intensity.  Countries fall into various quadrants, and it is particularly notable that several (Saudi, Oman, USA, Angola, Turkmenistan, Egypt and China) have all been able to increase liquids production without increasing flaring (but improving their operational practices).  This should be commended. 

Or put differently – we think that countries should only be encouraged to increase production if they can reduce their flaring intensity by at least the same percentage.

Figure 5: chart showing the change in production (x-axis) vs change in flaring intensity (y-axis) and highlighting the change in flaring (proportional to bubble size). 

Below is some commentary on selection countries, informed with insights from Capterio’s FlareIntel Pro flare tracking tool (which tracks every flare for every operator, in every country, every day).  We are thrilled to have been able – in part with FlareIntel Pro – to have helped our clients to reduce flaring by 20% (in 2022, vs 2021) whilst also reducing emissions by 4.86 million CO2-equivalent tonnes. That’s the equivalent of taking 1.1 million cars off the road!  See our impact statement here.

We have selected the assets in the illustrations below since they are representative of either projects that have significantly increased or decreased flaring in 2022 vs 2021, and thereby offer relevant insights into what actions could be taken to make material progress.  See also our paper (“celebrating successful flare capture projects”).

• Russia (flaring up 0.3%, production up 1.3%, flaring intensity down 1.3%) shows little change.  Given the dramatic reduction in gas exports at first sight this may be surprising, however, most of the flaring is from the oil supply chain (which is largely unchanged, as Russia continues to export oil), and the swing gas fields are largely non-associated gas (within some, but limited, flaring).

• US (flaring down 9.3%, production up 6.2%, flaring intensity down 14.6%): flaring has substantially reduced in the onshore shale regions, especially in the Bakken and Permian.  Here not only has gas gathering infrastructure been developed, gas compression facilities have been installed and facilities been optimised, but also operational best practices pioneered by larger players have become more widely adopted by the industry.  These operational improvements have underpinned the massive expansion in LNG exports over the last few months, with the EU as the dominant destination.
  
  Both bp[6] and Shell have committed to eliminating routine flaring by 2025 (and Shell has brought forward its global commitment to the same period[7]) using greater electrification and automation and Apache[8] reached this standard in October 2021 (although, notably, not for its international assets). 

• Egypt (flaring down 5.4%, production up 1.2%, flaring intensity down 6.5%): As highlighted in our pre-COP paper “Leadership on flaring in Egypt”, operators have recently delivered several flare capture projects.  Our favourite is Apache’s Kalabsha project, delivered by Aggreko, which has simultaneously reduced diesel consumption (by 85,000 litres per day) and reduced flaring – see Figure).

• Libya (flaring down 9.2%, production down 14.5%, flaring intensity up 6.3%): As mentioned above, the main reason why flaring has reduced has been because of lower production.  Fields such as the Nasser field have seen significantly lower production during the summer of 2022 due to political unrest driving shutdowns[9] (see Figure).

• Kazakhstan (flaring down 31.9%, production down 2.1%, flaring intensity down 30.4%): has seen significantly lower gas flaring, most notably at the Zhanazhol gas/condensate field, which was the largest flare in the country (and, also a top gas producer, delivering 4.8 BCM in 2021[10]) and is operated by CNPC.  Here we believe a gas processing plant has been significantly upgraded.

• Algeria (flaring up 5.6%, production up 7.0%, flaring intensity down 1.3%): has seen a significant rise in flaring, due to increased production, offset by slight operational improvements.  On detailed inspection, many fields show room for improvement, as highlighted below.  The Stah oil field, for example, is quite proximal to the Alrar gas field (which is well-connected to the regional grid), suggesting perhaps a compelling investment case is plausible.  The El Agreb field (close to Hassi Messaoud) also appears to have significant operational challenges.

• Iraq (flaring up 0.6%, production up 9.4%, flaring intensity down 8.1%): whilst flaring has not reduced, flaring intensity has dramatically fallen due to (a) a concerted effort to capture (and monetise) more gas in the Basra region, and (b) several power-related projects in the Kurdistan region.  Our favourite project is in the Sarqala field where Aggreko installed a 165 MW power plant[11] leading to a dramatic reduction in flaring.

Wider implications and opportunities

The economic and environmental impact of gas flaring is substantial.  With gas prices today around $12.5 per mmbtu in Europe, the revenue opportunity resulting from flare reduction is very large, at $72 billion per year.  

The emissions resulting from gas flaring amount to almost 1 billion CO2-equivalent tonnes (see Figure 6).  Note to calculate the CO2-equivalent emissions we have accounted for: (i) the “methane slip” from incomplete combustion (which the IEA estimated in its latest World Energy Outlook at 8%), and: (ii) the enhanced potency of methane as a greenhouse gas (using a “Global Warming Potential of CH4 of 82.5, over a 20-year period[12]).  This issue will be increasingly important to address as the EU moves towards a CBAM model (see our paper “how the EU’s CBAM may affect imported gas”.

Figure 6 brings the flaring data together with that of venting and leaking, using data from the IEA’s 2023 Methane Tracker[13].

Figure 6: overview of the magnitude of volume, revenue and emissions resulting from flared, vented and leaked gas, in context of the consumption.  We augment the 139 BCM of flared gas by an additional 8% (as per the IEA’s World Energy Outlook, 2021) to account for the likely “methane slip” associated with inefficient combustion, plus also the entrained NGL (Natural Gas Liquids).  We calculate the CO2-equivalent emissions by accounting for the combusted gas plus also the uncombusted methane, which we equate to a CO2-equivalent figure using a GWP (Global Warming Potential) of 82.5x CO2 on a mass basin, over a 20-year period.

Bringing these three key sources of supply-chain waste together, we get a sense of the scale of the opportunity not only to reduce waste, lower emissions, but also to create value for economies and society, improve animal and human health, and accelerate the energy transition.  The figures are simply staggering.  In total, the 272 BCM of waste (equivalent to 7% of all gas consumed globally) amounts to 1.7x the gas that Europe imported from Russia in 2021, $122 billion of lost revenue, and the equivalent of the emissions from up to 1.5 billion light passenger vehicles[14]. 

As Capterio outlined in our widely-read paper with Colombia University titled “North Africa can reduce Europe’s dependence on Russian gas by transporting wasted gas through existing infrastructure”, significant volumes of this wasted gas is close to existing markets and can be captured with proven technology, can dramatically reduce greenhouse gas emissions (by up to 72%[15]) and deliver very attractive commercial returns. 

Solutions to capture the gas range from gas reinjection (for disposal, storage or Enhanced Oil Recovery), gas to pipe, gas to “virtual pipeline” (e.g. as Compressed Natural Gas or Liquefied Natural Gas), gas to power (for local oilfield operations, or for the grid) and as to other “exotic” solutions (such as vertical farming or cryptocurrency mining).  Strikingly, over 54% of all flared volumes are within 20 km of an existing gas pipeline[16].

Indeed, there are several excellent case studies that prove that commercial-viable solutions for assets with a legacy flaring problem can be found (see our case study article “celebrating successful flare capture projects with data-driven evidence”[17].  Much support is also provided to operators by a range of new resources including the World Bank’s “Report on Small-scale Technologies for Utilization of Associated Gas”[18], plus its new book “Financing solutions to reduce natural gas flaring and methane emissions”[19].  IPIECA also recently published a “Flaring Management Guidance” documentation[20] which may guide operators, and the Methane Guiding Principles group has just released a “methane toolkit”[21].

Reducing flaring, however, will inevitably require collaboration across multiple parties in this complex ecosystem which includes politicians, regulators, governments, operators, service companies, equipment manufacturers, consultants, funding bodies and consumers.  It is likely that dramatic reform of political systems (to reduce corruption, remove subsidies, and create incentives, build capacity and leadership) will also be required.  Some of these topics are expanded on in our paper “Accelerating the transition by eliminating flaring: an Algerian roadmap”.

But above all, this challenge requires us to reform how we think about this topic and be creative about innovating quickly and working together across boundaries to share best practices and help out underperforming companies and countries with reform, cash and capabilities as required.

The invasion of Ukraine has created unprecedented energy security concerns.  Coupled with the COVID hangover, climate action understandably looks like a second-order priority.  But we cannot afford to miss quick wins.  One of the lowest-hanging fruit is reducing methane emissions.  And one of the best ways to do that is to tackle gas flaring. 

Now is the time to act.  To find out how Capterio’s flaring solutions can help to improve flaring visibility, to improve operations and to identify, prioritise and deliver on real-world flare capture solutions, please reach out to ceo@capterio.com.  More articles (many of which have been featured in the New York Times, Washington Post, Financial Times and more) are available on www.flareintel.com/insights.

[1] See also our paper “new flaring data shows unacceptable flatlining and boldens the imperative to act”, from May 2022 – our performance report for 2021

[2] FlareIntel Pro incorporates VIIRS data produced by the Earth Observation Group from the Colorado School of Mines

[3] Oil and condensate production is the most significant driver of gas flaring, so normalising flaring to production to calculate a “flaring intensity” metric is a useful indicator of performance.

[4] https://www.worldbank.org/en/programs/zero-routine-flaring-by-2030/endorsers

[5] Strictly, flaring intensity is driven by 3 factors: the “gassiness” of the liquids (its GOR or gas-oil-ratio), the percentage of associated gas that is put to productive use (or captured), and the combustion efficiency of the flare system.  At a country level, the overall flaring intensity can also be influenced by the mix of assets and event without changing operational performance at an asset level.

[6] https://www.bp.com/en_us/united-states/home/news/features-and-highlights/bp-aims-for-zero-routine-flaring-in-us-onshore-operations-by-2025.html

[7] https://www.shell.co.uk/about-us/powering-progress/achieving-net-zero-emissions.html

[8] https://www.globenewswire.com/news-release/2021/10/11/2311768/0/en/APA-Corporation-Achieves-Goal-to-Eliminate-Routine-Flaring-Onshore-US.html

[9] https://www.al-monitor.com/originals/2022/05/libya-grapples-mounting-food-costs-diminishing-oil-revenues

[10] https://iea.blob.core.windows.net/assets/fc84229e-6014-4400-a963-bccea29e0387/Kazakhstan2022.pdf

[11] https://www.aggreko.com/en-gb/news/2022/global-news/january/aggreko-completes-middle-easts-largest-flare-gas-to-power-project-to-date

[12] According to the IPCC AR6 report: https://www.ipcc.ch/assessment-report/ar6/

[13] https://www.iea.org/reports/global-methane-tracker-2022

[14] https://flareintel.com/insights/insights-from-energy-weeks-panel-on-flaring-venting-and-leaking

[15] https://flareintel.com/insights/how-a-focus-on-gas-flaring-at-cop26-can-accelerate-decarbonisation

[16] https://capterio.com/insights/minimising-flaring-near-existing-demand-centres

[17] https://capterio.com/insights/celebrating-successful-flare-capture-projects-with-independent-data-driven-evidence

[18] https://documents1.worldbank.org/curated/en/305891644478108245/pdf/Report-on-Small-scale-Technologies-for-Utilization-of-Associated-Gas.pdf

[19] https://openknowledge.worldbank.org/handle/10986/37177

[20] https://www.ipieca.org/our-work/climate/emissions-management/flaring-management-guidance/

[21] https://methaneguidingprinciples.org/best-practice-guides/flaring/