Flared and Associated Gas Economic Utilization

Flared and Associated Gas Economic Utilization

It is well known that the petroleum industry at first was somewhat indifferent about the environmental impact of the exploration and production processes. As a result of this neglect, there have recently been some incidents related to petroleum activities that have led to great damage in the surrounding environment. Thus, petroleum industry leaders have begun to pay great attention to the environmental impact of petroleum activities.

In the last decade, Egypt witnessed remarkable activities in the production and development of oil and gas fields, which was accompanied by an increase in the amount of gases burned.Burning the associated gas or what is called Associated Petroleum Gas (APG) flaring is considered one of the operations that causes harm to the environment. Hence, the Egyptian Ministry of Petroleum and Mineral Resources gave great attention to environmental issues in general and exploiting associated gas and flaring gases in particular. This is evident in the issuance of a new gas law that regulates the sale and purchase of gas inside Egypt, as well as in changing some provisions of production sharing agreements to allow partners to exploit these gases in development projects that achieve economic feasibility for all parties.

The main constraint for investment in gas flaring reduction is the marginal economics of APG utilisation projects, which is largely due to low gas prices, small and scattered volumes of gas flares, and high capital expenditure requirements for such investments. A key component to successfully achieving gas flaring reductions is the use of incentives for APG utilization beyond any direct regulatory provisions. This includes all factors that may contribute to the favourable economics of such investments. The most obvious incentives are related to gas markets and the ability of contractors to sell at a competitive gas price and to a number of different consumers. Secondary incentives are the creditworthiness of gas buyers, which can lead to pricing and market arrangements of products that use gas as an input.

In Egypt, the Egyptian Natural Gas Company (EGAS) as the single buyer of gas is heavily reliant on offtake volumes from power generators. Upstream contractors will consider these interlinkages when making an APG reduction investment decision.Therefore, it is now possible to exploit these gases in gas-to-liquid (GTL) projects or convert them to other products that are imported from abroad such as liquefied petroleum gas (LPG).

Hany Shaker Hashem

GM for Feasibility Studies and Project Evaluation at the Egyptian General Petroleum Company (EGPC)


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