An Examination of Egypt’s Gas Flaring Reduction Efforts

An Examination of Egypt’s Gas Flaring Reduction Efforts

By: Mahinaz El Baz

Efforts to reduce gas flaring are slowly gaining support around the world. The practice is coming under criticism due to its waste of valuable resources and negative impact on the environment. Even though reducing flaring is still not a common feature in many petroleum fields, the harmful practice could end worldwide by 2030 if pursued efficiently, as outlined by the World Bank’s “Zero Routine Flaring” initiative.

In Egypt, promoting the elimination of gas flaring would be a prominent asset to the economy, as it would result in considerable savings for the economy during the current scenario of budget restrictions.

Although the country has 53.75 trillion cubic feet (tcf) of natural gas reserves, according to a senior government official, demand for energy resources in the country is on the rise. As capturing flared gas could cover 5% of the country’s energy needs, according to the World Bank, gas flaring reduction is a strategic ally to satisfactorily supply for Egypt’s growing need for energy.

Economic Prospect

While Egypt is a net importer of energy, it flares approximately 5.66 million standard cubic meters per day (mscm/d) of natural gas equivalent for an annual revenue loss of $250 million, according to the World Bank, and is ranked among the top 20 gas-flaring countries in the world.

“Estimates of Global Gas Flaring Reduction [GGFR] Public Private Partnership, compiled primarily from satellite flaring data, revealed that Egypt consistently ranked among the world’s top 20 gas flaring countries during the period from 2007 to 2016, where Egypt was ranked as the 11th country from 2013 to 2016, with flared gas volumes to the tune of around 350 mscf/d” Ahmed Abdul Rahman , Project Manager at ENPPI and author of ‘Sustainability Improvements in Egypt’s Oil & Gas Industry by Implementation of Flare Gas Recovery’ which was published in the Journal of Cleaner Production, highlighted.

Accordingly, the recovery of the flared gas in Egypt would be of great economic and financial value, a research paper published in the Clean Technologies and Environmental Policy Journal argues. It is important to note that the calculations for Egypt were based on existing flaring sites. More precise estimations would be needed to take into account possible gas-flare contributions from newly discovered fields.

“It is a long story, but it is all about integration; technology integration and energy integration,” said Aamer Yahia, Facilities Engineer III at Apache Egypt Operations, commenting on proving the economics of gas processing facilities to preserve Egypt’s natural resources. “Also, the most important factor from my point of view is experience integration, to have a wider perspective while making decision from financial, economical, operations,[and] technical points of view,” he added.

Egypt’s trade balance would improve by $600 million if energy imports were avoided due to better utilization of the country’s existing reserves of natural gas through the reduction of gas flaring and venting, the European Bank for Reconstruction and Development (EBRD) noted in a study.

According to the EBRD, the country will need an additional $4-5 billion in investments in order to eliminate gas flaring completely. Carbon Limits, a climate-change consultancy group, stated that more than $2 billion in capital requirements would be needed to curb routine gas flaring by 2020 if oil production levels stay constant at 700,000 barrels per day (b/d). However, if Egypt’s oil production declines to 500,000 b/d, the necessary investment would decrease to $1 billion. Similarly, investments to reduce gas flaring from new development projects between 2020 and 2030 could rise to almost $3.5 billion, assuming oil-production rates remain unchanged, but these required funds could shrink to $2.5 billion if oil production decreases.

Gas experts believe that curbing flare would boost the profit margins of oil companies that invest in the use of associated petroleum gas (APG) rather than just flaring it. International oil companies (IOCs) could secure a return on their investments to eliminate routine gas flaring if market conditions were amended and improved, Cristian Carraretto, EBRD’s Associate Director for Energy Efficiency and Climate Change told Egypt Oil & Gas.

“APG-utilization plans to achieve zero routine flaring are in place for all new operations and […] they will seek to implement viable flaring reduction investments in their existing operations. […]This entails pricing the APG or its products at suitable levels to ensure a fair return on the flaring reduction investments,” Carraretto noted. “Currently, a number of companies have agreed [to] reasonable prices with the state institutions and, as a consequence, flaring reduction projects have been undertaken. But it is important to recognize a sustainable price given the peculiarity of flaring in Egypt which affects investment costs,” he added.

In Egypt, Carraretto concluded, “There is a relatively positive attitude in the sector [towards curbing gas flaring], with some investments happening already and some under consideration. If more certainty is brought, I feel that many more good projects will happen in the years to come and flaring might be significantly reduced.”

Environmental Concerns

It is not only on Egypt’s economy that gas flaring is taking a toll. The practice has negative effects on the environment and on human health as well. “Gas flaring is a huge contributor to climate change. The health, environmental, and economic costs are so severe that further delay is a luxury that we cannot afford,” Nnimmo Bassey, Director of Health at Mother Earth Foundation (HOMEF), said. Confirming Bassey’s opinion, Yahia explained that the emission of greenhouse gasses “is the main challenge that harms the environment by causing global warming, ocean acidification, and changes in plant nutrition levels.”

“In order to understand the magnitude of this practice, it is important to consider the cumulative amounts of normally flared gases within all oil and gas facilities, both upstream and downstream, and onshore as well as offshore,” ENPPI’s Project Manager, Ahmed Abdul Rahman, stated.

Moreover, Abdul Rahman mentioned that global gas flaring reached around 140 billion cubic meters, which equates to roughly three fold of Egypt’s current daily production of natural gas, according to the data compiled by the World Bank’s Global Gas Flaring Reduction (GGFR) Public Private Partnership.

Hence, more gas flaring means more anthropogenic greenhouse gas (GHG) emissions. Egypt’s current level of routine flaring produces about 2% of Egypt’s GHG emissions, according to EBRD’s Associated Petroleum Gas Flaring Study for Egypt. Thus, a reduction in or the recovery of flared gas is a crucial issue. There is a pressing need to measure the composition, distribution and volume of flared gas and to apply a suitable system for flare-gas recovery or disposal.

“Further reduction of gas flaring in Egypt can have not only significant economic benefits but will also contribute to meeting the best international environmental standards,” said Philip Ter Woort, Director of EBRD Operations in Egypt, according to EBRD’s press release.

Torleif Haugland from Carbon Limits explained in a presentation at the March 2016 Cairo Thematic Workshop that, even with modest valuation, GHG benefits [from gas flaring reduction] are substantial compared to the value of recoverable gas. Utilizing APG in the local market, instead of burning it, would increase the value of GHG reduction by 21%. If the APG were linked to the national gas grid for power production, the benefit of GHG reduction would increase by an additional 19%. Moreover, if APG were used for power generation, the currently flared gas could generate seven terawatt per year (TWh/y) or 5% of Egypt’s domestic electricity demand. Using APG instead of diesel to power oil fields would reduce GHG production even more, by as much as 42%, Haugland added.

Meanwhile, Abdul Rahman argued that “the generous energy subsidies that created an untenable financial burden on the government also drove companies away from implementing measures to improve energy consumption and reduce waste, such as flare gas recovery. Hence, implementation of the government plans for phase out of energy subsidies is definitely a step in the right direction towards enticing companies to re-think their operations and start considering flare gas recovery as possible ways to reduce waste, especially for facilities that are supplied by electricity from the national grid.”

After inking the Paris COP21 Agreement, the time is right for Egypt to consider how to incorporate flare reductions into its nationally determined contributions and to further explore opportunities for attracting international climate co-financing for such efforts, according to EBRD’s study.  This review should also consider the monitoring, reporting, and verification (MRV) of the impact of flare reduction and possibly linkage to new regulations –including MRV requirements– for flaring. That Egypt may become a force in establishing a possible regional emissions trading scheme makes this review even more relevant. With the Paris Agreement expected to enter into force in 2020, there is some, but not much, time to prepare, the study emphasized.

Government Reduction Efforts

Flaring volumes in Egypt are equally divided between three regions: the Gulf of Suez and two separate regions in the Western Desert, according to EBRD’s study. As a significant portion of the total flaring in Egypt is produced by a few fields or concessions, significant reductions can be achieved through gas-utilization investments by a relatively small number of operators and joint venture partners, EBRD’s study notes. If expected flare-reduction investments occur, the relative distribution of flared gas will shift from the larger, targeted flare sites.

Scientists have demonstrated that flared gas can instead be utilized in three ways: LPG/condensate production, recycling, or power generation. These alternatives were studied technically, financially, and economically, and the results indicate that the investors’ orientation and vision play a vital role in decision making, especially when a production-sharing agreement is applied, according EBRD’s study.

In addition, a research paper on the technical and financial feasibility of flared gas recovery in Egypt from the perspective of international and national oil companies, argues that recycling flared gas is one of the best ways to utilize APG in Egypt. The dedicated compressor boosts the pressure of the flared gas from roughly atmospheric pressure to the required inlet pressure of the plant, but the main challenge for this option is the high compression ratio/cost.

“In terms of technical solutions to capitalize on the recovered flared gases, a number of uses ranging from electricity generation to CNG are proven and widely available. New innovations for micro LNG and most recently mini GTL applications are now also starting to be commercialized and further reductions in investment costs are expected with the spread of such innovative solutions,” Abdul Rahman disclosed.

The conflict of interest among investors was also tackled in the cited research paper; “[r]esults indicate that the added value itself differs from one investor to another.” In the cases studied, IOCs prefer recycling to achieve a reasonable net present value (NPV) of up to $40 million while national oil companies (NOCs) prefer generating power to achieve a maximum net value added (NVA) of up to $58 million in environmental and social benefits.

As for reduction efforts, the EBRD signed a Memorandum of Understanding (MoU) with the Egyptian General Petroleum Corporation (EGPC), the Egyptian Natural Gas Holding Company (EGAS), and Ganoub El Wadi Petroleum Holding Company (Ganope) under the auspices of the Ministry of Petroleum and Mineral Resources in 2015. The agreement aims to strengthen cooperation among the parties in order to reduce the level of greenhouse gas emissions and air pollution, help with the implementation of international best practices and standards, increase the competitiveness of the sector, and contribute to energy security in Egypt.

Although there are many flare-reduction efforts in Egypt, some argue that these efforts are not enough.  Yahia, stating that the current efforts are not enough, noted the obstacles these efforts face in the conflict of interests between IOCs and NOCs and in the applied financial schemes.

“Ongoing efforts are not sufficient at all. We do not need gas flare reduction, what is needed is a total stoppage of gas flaring,” stated Bassey. In addition, Bassey stressed the importance of issuing strict regulations that simply ban gas flaring and compel oil companies to either re-inject the associated gas into wells or have the gas utilized for electricity generation. He also encouraged governments to impose fines on gas flaring. On the other hand, Yahia thinks that attracting investors to extract products from these gases is a viable way to reduce gas flaring.

Regulations and Policies

Egypt, unlike many other oil-producing countries, does not have specific laws or regulations for gas flaring and venting, except the general safety and health regulations set out under the laws governing individual and commercial activities, according to a Reuter’s article about Egypt’s oil and gas regulations. This lack of regulation suggests that the economic, social, and environmental benefits are not fully recognized, even if they are considerable and easy to identify.

The statutes relevant to gas flaring and venting in Egypt are the Hydrocarbons Law (Model Concession Agreement), the Environmental Law (Law No. 4 of 1994), and regulations for the Environmental Law (Decree No. 338 of 1995). “This [environmental law] should be included in the upcoming agreements to force the IOCs to comply with any environmental regulations issued by the government. In parallel, the petroleum ministry should exert more efforts to execute flared gas recovery projects, if it is economically viable,” stated Yahia.

Bassey, like Yahia, also pointed to the importance of issuing specific laws to deal with flaring and venting issues, highlighting that most African governments see the extractive sector as the major generator of foreign exchange. To earn the maximum income from extractive activities, governments either do not enforce laws and regulations or they put in place very weak laws. This tendency will persist until communities and citizens insist that they cannot maintain the environmental and health costs of environmental pollution while companies reap unjust profits and governments pile up revenue.

In the same context, Abdul Rahman discussed a success story, explaining that Norwegian major oil company, Statoil, is a global leader and pioneer in flare gas recovery, and has also developed proprietary technology for zero gas flaring. He added that one of the main triggers for such great strides for Statoil is the introduction of a carbon tax (polluter pays principle). Therefore, it is imperative to introduce legislation to encourage companies to shy away from gas flaring. “In addition to a carbon tax, specific limits on carbon dioxide emissions could be introduced within the Environment Law executive regulations,” he informed.

Moreover, Abdul Rahman highlighted that introducing a carbon tax could further improve economics of flare gas recovery projects. He further explained that specific clauses in agreements with IOCs to prohibit normal gas flaring at all stages of oil & gas exploration and production, especially for associated gas, could also be a driving force towards reducing gas flaring.

According to the World Bank, “EGPC grants permission to flare gas that cannot be marketed and that exceeds operational requirements. Permission is given in the context of approval of an Environmental Impact Assessment (EIA) at each operational stage, including well testing. It is understood that as a result of oil sector efforts to minimize both flaring and venting, the EGPC does not perceive them to be a major environmental concern.” Furthermore, the Egyptian Environmental Affairs Authority (EEAA) is responsible for compliance checking, emissions monitoring, and enforcement, although some degree of internal control has been introduced by the requirement that the operator keep a register showing the impact of activity on the environment. Noncompliance with any flaring restrictions may constitute grounds for revoking the operator’s rights.

Where gas flaring is hard to eliminate, pollutant emission levels must not exceed the maximum permitted limits that are set in relation to international standards and approved by EGPC. Generally, operators must ensure that the emission of noxious and harmful smoke, gases, and fumes are within the accepted limits. These limits, according to the World Bank, are 2,500 milligrams per cubic meter (mg/m3) for sulfur dioxide, 300 mg/m3 for nitrogen oxide (NOx), and 200 mg/m3 for particulates.

Flare reduction can make a notable contribution to Egypt’s precarious power supply situation and produce tangible environmental benefits, especially as the government is putting greater emphasis upon climate-change prevention.  As such, some experts conclude that Egypt should expand its efforts to curb gas flaring by creating a legal framework, an investment environment, and supervisory conditions that will discourage gas flaring and encourage the capture of currently flared gas.

Dr. Mahinaz El-Baz 318 Posts

Mahinaz El Baz received her PhD degree in International Economics from Helwan University in 2022. She has +10 years of experience in journalism and economic analysis. She received the "Best Economic Article Award" in 2016 from CFA Society Egypt.


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