Iraq must be quick to cap gas flaring

Ever since crude production started in earnest in the 19th century, gas flaring was born with it. Companies and even some governments found associated gas a nuisance that had to be flared if continued and increasing crude production was to be achieved.

But the value of gas as a source of energy and its environmental benefits were gradually realised and some governments introduced regulations to curtail gas flaring to the minimum. However, the problem is still with us and the World Bank estimates that in 2017 gas flaring was at a level of 140 billion cubic metres (bcm).

The bank established the Global Gas Flaring Reduction initiative with the aim of reaching “zero routine flaring by 2030”. The initiative was soon supported by “governments, oil companies, and development institutions who recognise the flaring situation described above is unsustainable from a resource management and environmental perspective”.

The Arab countries, with the exception of Iraq, as major crude oil producers, have made great efforts to reduce flaring and use the resulting savings for power generation and feedstock for the fertiliser and petrochemical industry. In 2013, their crude oil production was close to 24 million bpd and gas flaring at 21.8-bcm. By 2017, crude oil production was over 26 million bpd and gas flaring increased to 25.5-bcm.

Almost all the increase in gas flaring came from Iraq where in that period oil production increased from 3- to 4.5 million bpd, while flaring increased from 13.3 to 17.8-bcm. Iraq has to learn from its neighbours to initiate a programme to set flaring on a reduction path if it is to meet its oil minster’s promise to reach zero flaring by 2021, a very optimistic promise not supported by action on the ground.

Wasted resource

The gas processing capacity in 2002 was just over 16bcm and is largely the same now. Between September 2008 and June 2017, Iraq’s average gas statistics point to a production of 19.2-bcm, consumption of 7.3-bcm and flaring of 11.9-bcm. This wasteful flaring was 62 per cent of production and equivalent to 196,000 barrels a day of crude oil.

At $70 (Dh257) a barrel the wasted resource is worth close to $45 billion, which would have been sufficient to build a whole new gas industry. In June, gas production and utilisation had gone up appreciably to 29.4- and 13.8-bcm a year respectively, which means that flaring has also risen to 15.9-bcm which is equivalent to about 260,000 barrels a day or a loss of about $20 million a day.

To rectify the need for gas in power stations, Iraq resorted to imports from Iran rather than increase processing capacity and augment its transmission and distribution network.

The potential of two agreements with Iran may eventually reach over 18-bcm a year at an estimated cost of $10.56 per million BTU, a price much higher than its equivalent in international markets.

As Iraq’s crude oil production is expected to increase, gas production will follow proportionately and if processing and utilisation are not increased, flaring will increase.

But it is always better late than never. The South Gas Company signed a contract with Baker Hughes “for fasttrack solutions to help the recovery of flare gas for Nassiriya and Al Gharraf oilfields”.

The project is for two processing lines of 100 million cubic feet a day (mcfd) each and is expected to be completed by 2021. This is too slow for this kind of undertaking.

Effective use of gas

The Basra Gas Company — a joint venture between Iraq, Shell and Mitsubishi — earlier contracted with Wood Group for a plant with two processing lines of 200-mcfd each. The South Gas Company is also reportedly negotiating with Petrofac for a 300-mcfd processing complex for gas from the Majnoon, W. Qurna, Bin Omar and Artawi oilfields.

Judging by the Baker Hughes completion in 2021, the other two projects may have the same time frame. This means that unless further projects are signed and expedited, Iraq will continue flaring gas. It needs at least an additional processing capacity of some 10-bcm a year considering its expected oil production then.

The effective use of gas in the Arab countries will free additional crude oil for export, improve the environment, create jobs and develop other industries. The case for Iraq is more so.