Gas flaring is the disposal of NG by combustion. This is generally a byproduct of oil production (generally referred to as associated gas) in producing areas where there is no infrastructure to make use of the gas. The combustion process generally has an efficiency of only 60-85% so large amounts of methane and other pollutants (such as sulfur and volatile organic compounds, un-burnt hydrocarbons) associated with this incomplete combustion process are released to the atmosphere. According to estimates by the World Bank annual gas flaring volumes amount to some 160 BCM (or 5.6 TCF). This is equal to 25% of the entire annual natural gas consumption of the U.S. and contributes more than 400 MMTCO2E to the atmosphere every single year.
Through the 1970's and 1980's associated gas was largely seen as a “waste product”. Gas commercial terms in oil concession contracts were largely non-existent and so there was no incentive to conserve or utilize this gas. Today, gas flaring is widely recognized as the waste of a valuable, clean natural resource and a significant source of carbon emissions. In an increasingly large number of countries the flaring of natural gas in petroleum operations is restricted and some countries have moved to implement a “gas flaring tax”.
In 2002 the World Bank launched the Global Gas Flaring Reduction (“GGFR”) public-private partnership. The core purpose of the GGFR is the capture and utilization of flare gas and whilst considerable progress has been made, much remains to be done, particularly so in mature oil producing provinces in developing economies. Numerous obstacles to the commercialization of flare gas remain. Typically these include underdeveloped domestic markets for gas and insufficient market access; limitations in the institutional, legal and regulatory frameworks; inadequate or absence of gas fiscal terms in concession agreements; and funding constraints.