While the Russian government is looking for ways to fulfill the aims of the Paris Climate Accord, further support for the petrochemical industry may help tackle one of Russia’s most pressing ecological issues – flaring of gases associated with oil extraction.
Associated petroleum gas (APG) is a byproduct of oil exploration. When there is no strong commercial case or enough incentives to bring the gas to market, petroleum producers simply flare it, releasing residual methane and toxins into the atmosphere. Flaring is therefore in essence an economic waste that is harmful to the environment.
Large amounts of burned gas cause major ecological harm. Visible from space, flaring produces large amounts of black carbon that can travel thousands of kilometers. Even when located far from populated areas, it still carries risks of increased rates of asthma and various respiratory problems, as well as posing threats to the environment, including accelerated ice melting due to temperature increases.
Although the practice has been in decline since 2004, it is still considered routine throughout oilfields worldwide in the absence of adequate infrastructure to utilize and transport the APG.
Recent data via satellite imaging showed the volume of burned-off gas increased globally by 3% to 145 billion cubic meters between 2017 and 2018, which is equivalent to the annual gas consumption of Central and South America. Despite being a global phenomenon, four nations are alone responsible for almost half of all flared gas. Data from the World Bank show that Russia is responsible for 15%, Iraq and Iran 12%, and the United States 10%.
Last year the United States contributed the biggest share of the increase of gas flaring. Driven by booming oil production in Texas and North Dakota and recovery from the slump of the previous years, gas flaring in the US spiked by more than 7%, marking the largest shift of all other major flaring countries.
Russia, considered the global leader in APG flaring, has contributed to recent declines, marking a shift toward improving energy efficiency and stricter legislation. However, it’s unclear whether it can sustain decreases in the future
Despite efforts to curb gas flaring, the practice continues to tick up. Russia, considered the global leader in APG flaring, has contributed to recent declines, marking a shift toward improving energy efficiency and stricter legislation. However, it’s unclear whether it can sustain decreases in the future.
Blessed with densely forested areas, Russia is able to absorb greenhouse-gas emissions in large volumes and thereby mitigate the impacts of climate change. Nonetheless, in the long term Russia cannot solely rely on nature to mitigate its impact on the environment, particularly given that the country is also considered one of the world’s major exporters of fossil fuels and among the top five global contributors to greenhouse-gas emissions. Gas flaring, arguably, has been the most notorious practice that Russia is known for.
However, Russia has demonstrated positive results in gradually curbing the practice. Stricter legislation, improved energy efficiency and shifts in oil production have facilitated a drop in flaring in recent years.
The legislation in Russia generally goes within the framework of its 2009 Climate Doctrine that supplies strong incentives to decrease carbon emissions and encourages greater energy efficiency. Currently local governments near the oilfields are also encouraged to utilize more APG for power generation, which might be another step toward decreasing electricity costs and volumes of gas waste.
However, so far the most important contribution has come from an increased reliance on the evolving petrochemical industry. While oil producers treat APG as waste, for petrochemical companies the byproducts of oil extraction are a crucial feedstock. Petrochemical companies in essence prevent flaring by buying APG from oil producers and using it to create high-value-added products such as polymers. From an economic perspective, the petrochemical industry is the best way to tackle flaring, as its positive effect is higher than that of power generation thanks to the production of higher-value-added products that are used in every sphere of our lives.
In Russia, the petrochemical industry is on the rise, with companies like Sibur leading the way. According to the company’s data, in 2018, through recycling hydrocarbon byproducts of oil and gas extraction (more than 22.3 billion cubic meters of APG), it helped reduce greenhouse-gas emissions by 71 million metric tons, which is equivalent to the annual carbon-dioxide footprint of a mid-sized European country. A similar process, if only on a smaller scale, can be observed at other petrochemical facilities across the country.
But despite the gains, Russia might struggle to sustain a continuous decrease in gas flaring. Unlike Canada or the US, where gas is transported via ships or pipelines, Russia’s oilfields are mostly in remote areas and lack adequate infrastructure. That makes transportation less cost-effective, while investments in transport infrastructure could hamper development of the new oil and gas production sites.
In this regard, careful geographical positioning is crucial and can be a significant competitive advantage for petrochemical producers. For example, the location of Sibur’s main production facilities in Western Siberia, where much of the country’s oil extraction is situated, gives the company access to a wide feedstock base. Relative proximity to oil producers means the company can rely on pipelines for feedstock delivery instead of railways or ships, which themselves contribute to greenhouse emissions. As a result, the company operates an extensive pipeline network – more than 2,700 kilometers of pipelines – in Western Siberia.
Another strategy that the company is pursuing is designing its future facilities as part of complex joint projects together with oil and gas producers. A good example is Sibur’s prospective facility in the Far East – Amur GCC – which, if the investment decision is made, will be built next to Gazprom’s gas processing plant.
Although positive results are already evident, Russia still has a long way to go in improving its situation with gas flaring. The approach to solving the problem has to be consistent and the actions of all government bodies have to be aligned, so as not to contradict each other. In this regard, the recent discussion in the Finance Ministry on subsidizing oil companies by levying a tax on the production of APG seems to go against all efforts to cut gas flaring and reduce its environmental impact, as it will discourage oil producers from processing, storing and selling the gas to petrochemical companies.
The ultimate solution could be to adopt a national strategy to tackle the issue, which would rely on a mix of stronger environmental legislation, further support for the petrochemical industry, new technologies, and greater use of gas for power generation by local governments.