The European Commission’s strategy document adopted on October 14th reemphasised the importance of the EU’s aim to be ‘climate neutral,’ or a net zero emitter, and therefore to focus on methane emissions. As earlier noted by insiders, the lack of universal monitoring methods is currently hampering policy initiatives to contain methane emissions in energy sectors. Indeed, estimates can easily vary up to a factor of 2 according to different methodologies. Partly for these reasons, the new strategy primarily focuses on voluntary mechanisms, business-led initiatives, as well as on the international cooperation driven by the EU's soft-power.
With little doubt, the EU’s ambition on methane emissions abatement will impact the discussion on gas flaring. As every oil and gas well contains various gaseous hydrocarbons, usually called associated gases, upstream producers tend to practice gas flaring in view of a better optimisation of the extraction of commercially viable products. Even though gas flaring generates more carbon dioxide than methane, scholarly studies reveal that a large part of upstream methane emissions occur when companies get rid of associated gas. Hence, gas flaring reduction would equate to pro-climate modernisation as the most valid alternative to the current practices across hydrocarbon sectors.
Gas flaring remains difficult to estimate since companies avoid disclosing full volumes of the flared gas, which makes any accurate estimate more uncertain. The most accurate methods rely on observation by stellites. For example, in Russia - the world biggest producer of flared gas - data collected from satellites have oftentimes been twice higher compare to those provided by the national regulator. Yet, data collected by satellites can still provide different estimates of the volumes of flared gas at local levels.
Russian regulation on gas flaring reduction has been rather ambitious. Even despite the penalty mechanisms against the practice, smaller oil producers often prefer to flare rather than to introduce capital-intensive mechanisms for either reutilisation or reinjection of associated gases into the wells. Thus, gas flaring rates revived across the country’s upstream despite national targets to abandon the environmentally harmful practice.
Meanwhile, Russia is not the only country where gas flaring rates have increased. World Bank’s global gas flaring tracking report of 2019 reveals an increase of gas flaring rates across all the biggest oil and gas procurers with a minor exception of Iran. The WB data also reveals a rapid growth in gas flaring in the US throughout the last decade. The associated gas boom that accompanied the US shale oil revolution drove American hub prices to bargain-basement levels. Flaring might come as a more attractive solution for businesses amid low prices.
European gas markets attract Russian and American companies alike. However, gas flaring is usually practiced by smaller companies who would seldom achieve export capacity. If the EU introduce either market incentives or financial penalties, it may still deal with larger players who have a better environmental record. A question will arise: how to move forward with EU market and regulatory mechanisms favouring the cleanest gas suppliers to incentivise gas flaring reduction beyond the European market?
P.S. Comments and opinions are very welcome!