algeria associated gas u0lizaon study - columbia university
TRANSCRIPT
AlgeriaAssociatedGasU0liza0onStudy
PerrineToledano,PatelKarishmaandShayanBanerjee,withthankstoTomMitroforhisreview.
Toughstanceongasflaringwithastronglegalframeworkmade
oftaxandpenalty
GGFRawardandCCSproject
Increasingflaringduetoagingfieldsandlackofinvestmentin
infrastructure.
SummaryofFindings
S Algeriaappearstohavetakenatoughstanceongasflaringwithinthelastdecade.Ithaslegallyprohibitedflaringsince1966butonlystartedpenalizingitin2005.Itisoneofonlythreecountries(alongwithNigeriaandNorway)thattaxesflaring.ThecurrentlevelofflaringtaxissimilartothatleviedinNorway.
S Un0l2012,thereduc0onofflaringwasdras0c,whichledtotheAlgerianna0onaloilandgascompanySonatrachreceivingtheWorldBanks’sGlobalGasFlaringReduc0on(GGFR)award.Sonatrachwasinpar0cularrewardedforitsuniqueCarbonCaptureandStorage,injec0ngCO2removedduringsweeteningintoasalineforma0on(InSalahGas).
S Sincethen,however,flaringhasbeenonanupwardtrend,inpar0cularfromSonatrachfields,sugges0ngthattheenforcementofthestronglegalframeworkischallengedby1)alackofinvestmentinadequateinfrastructure,whichishamperedbyacombina0onoffuelsubsidiesandlowoilpriceshur0ngthestatefinance;2)theagingofoilfieldsgenera0ngmoreassociatedpetroleumgas(APG);and3)thelackofforeigninvestment.
Thesta0s0csofAPGflaringinAlgeria:Howbadisit?
OverviewstatsonAPGflaring
Flaringtrendover0me
Onthecompaniesinvolved
37.4
14.611.4
9.47.1
5 4.7 4.1 3.7
0
5
10
15
20
25
30
35
40
Gasflared
(bcm
)
Top10GasFlaringCountries2011
S AlgeriaisthethirdlargestoilproducerinAfrica,a_erNigeriaandLibya,andthelargestnaturalgasproducerinAfrica.AccordingtotheEIA,Algeria’scrudeoilproduc0onwillgraduallydeclineatleastintheshortandmediumtermgiventhatthebigoilfieldsarematureandonlysmalloilfieldsareplannedtocomeonline.
S TheAPGcomesfromthefieldsinthesouthernandsoutheasternregionsofthecountry.
S AccordingtotheflaringdatacollectedbyGGFR,Algeriaflared9.1billioncubicmeters(bcm)ofAPGasof2015.
Source:NOAAsatellitees0mates,2011
OverviewstatsonAPGflaring
Flaringtrendover0me
Onthecompaniesinvolved
Source:GGFR,2011
FlaredgasvsGasproducJon
S AlgeriadevelopedastringentprogramthatbroughtdownAPGflaringfrom33%ofthegrossnaturalgasproducedin1995tolessthan2%today,accordingtotheEIA.
S Thisprogramleveragedtheconstruc0onofgaspipelineinfrastructureandliquefiednaturalgas(LNG)infrastructurewhichgaveamarketoutlettotheAPGproduced.
Thesta0s0csofAPGflaringinAlgeria:Howbadisit?
S A_erasharpreduc0oninflaringbetween2009and2012,sanc0onedbytheGGFRawardin2012(seenextslide),Algeria’sflaringisonanupwardtrendagain.
S GGFRdatashows8.1bcmofAPGflaredin2013,8.6bcmin2014and9.1bcmin2015.Thisincreasingtrendismostprobablyexplainedbythedeclineofthebigoilfieldswherethegas/oilra0otypicallyrises,reflec0ngdecliningoverallwellpressure,withthereinjectedgascomingtothesurfaceanddisplacingsomeoftheliquidsbeingproduced;thisleadstomoreAPGbeingproducedandthenflaredifnoaddi0onalmeasureistakentomone0zeit.
S Whilethedomes0cenergyconsump0onhasrisenandAPGcouldservethisdemand,itseemsthatlowoilmarketpricesandfuelsubsidieshavedrainedthestatefinanceandhamperedthedevelopmentofadequateinvestmentininfrastructuretoabsorbthisAPG.
OverviewstatsonAPGflaring
Onthecompaniesinvolved
Flaringtrendover0me
0
2
4
6
8
10
12
2006 2007 2008 2009 2010 2011 2012 2013 2014
millionmetric
tons
CO2EmissionsfromtheFlaringofNaturalGasinAlgeria
Source:Interna0onalEnergyData,2015
Thesta0s0csofAPGflaringinAlgeria:Howbadisit?
Thesta0s0csofAPGflaringinAlgeria:Whoisinvolved?
OverviewstatsonAPGflaring
Flaringtrendover0me
Onthecompaniesinvolved
S MostofthemajorsarepresentinAlgeriabuttheyalloperateinjointventurewithSonatrach,theAlgerianna0onaloilandgascompany.
S MostoftheflaringcanbetracedbacktotheaginggiantfieldsthatSonatrachhasoperated:HassiMessaoud,whichtypicallyproducesaround500,000barrels/dayofcrude(40%oftotalAlgeria’soiloutput),andsmalleronessuchasthefieldsofZarzai0ne,HaoudBerkaoui,andAitKheir.
S In2012,SonatrachwontheWorldBankGGFRaward.ThisawardrecognizestheeffortsandresourcesofSonatrachforthereduc0onofgasflaringfortheprotec0onoftheenvironment.Theseprojectsledtotherecoveryof260bcmofAPG.
S Anadarkoisthebiggestinterna0onaloilcompanyopera0nginAlgeria.Itsignedproduc0on-sharingagreementswithSonatrachinthelate1980sandsincethenhasproducedoilfromthreemegaprojectslocatedintheSaharaDesert(Ourhoud,HBNSandElMerk–Blocks404and208).TheElMerkfacility(describedinslide12)minimizesflaringatblock208.
S Interna0onalinvestmenthassaggedsince2002duetoanunfavorableinvestmentclimate.
Whatisthelegalandfiscalframeworkinplacetostopflaringandincen0vizeAPGuse?
Regula0on:Agenciesandanalysis
Regula0on:Legalframeworkandanalysis
GovernmentinsJtuJonsinvolvedinregulaJonofoilproducJon/flaring
DescripJon
MinistryofEnergyandMines Inchargeofdevelopingpolicyandstrategyfortheexplora0on,produc0onandvaloriza0onofpetroleum,miningandenergyresources,andtheirrelatedindustries.
NaJonalAgencyfortheValorizaJonofHydrocarbonReserves(ALNAFT)
CreatedbytheHydrocarbonsLawof2005andeffec0velyinfunc0onsince2008.Promotesinvestmentinhydrocarbonexplora0onandproduc0on.Itmanagesandmonitorsthecontractualaspectsofupstreamac0vi0es,fromthedevelopmentplantothecollec0onofroyal0es.Thisfunc0onincludesthegran0ngofpermitsforexcep0onalflaring,aswellasthecollec0onofpenal0esongasflaring.
HydrocarbonsRegulaJngAuthority(ARH)
CreatedbytheHydrocarbonsLawof2005.Implementsandenforcesregula0onspertainingtohydrocarbonac0vi0es,includingtechnicalandtransporta0ontariffsandfreeaccessregula0on.Italsooverseestheimplementa0onofenvironmentalregula0onsincludingthoserelatedtocarbondioxideemissions.
Sonatrach Na0onalcompanyinchargeoftheexplora0on,exploita0on,transport,processing,andmarke0ngofhydrocarbons.BeforetheestablishmentofALNAFT,Sonatrachwasalsotheregulator.
Whatisthelegalandfiscalframeworkinplacetostopflaringandincen0vizeAPGuse?
S 1966:AlgerianGovernmentprohibitsflaringofgas.
S 2005HydrocarbonLawand2006Ordinance:S Prohibitsflaring,butALNAFT(Na0onalAgencyfortheDevelopmentofHydrocarbon
Resources)may,excep0onallyandforlimitedperiods,grantauthoriza0onforflaringatanoperator’srequest.
S Actually,Execu0veDecree13-400rela0ngtoflaringstatesthatALNAFTmustgranttemporaryauthoriza0oninspecificcircumstancessuchasinthecaseof"theassessmentoftheproduc0vityofwellsduringthepilotphaseforunconven0onalhydrocarbons”orinthecaseof"thefirstexploratoryuseofaproduc0onwell”orformaintenance.
S Anyapplica0onforsuchauthoriza0onmustcontainawellloca0onreportdescribingtheprovisionaldate,dura0onandes0matedvolumestobeflared.Inaddi0on,adetailedtechnicalprogramfortes0ngthewelllayingouttherequiredsafetymeasuresmustbesubmined.
S Authoriza0onstoflarearelimitedtodura0onsnotexceeding90days.S Perminedflaringissubjecttoataxof8,000DZD(~US$110)perthousandnormalcubic
meters,modifiedeachyearatafixedrate;thisisaflaringtaxsimilartothatleviedinNorway.S Forremoteorisolatedareas,wherethegasinfrastructureislimitedorlacking,specificpricing
condi0onsaredetermined.
S AccordingtoGGFR,gasflaretaxescouldpoten0allycostoperatorsmorethanUS$600millionannually.Wedidn'tfindevidencethatthesewereactuallypaid.
S Sonatrachhadsetobjec0vesofrecovering94%ofassociatedgasby2008-2009and100%by2010,butthesewereseeminglynotachieved.
S SinceSonatrachwasalsotheregulatorforyears,passingontheregulatorypowertoALNAFThastakensome0meandmighthavealsodelayedtheenforcementoftheflaringmeasures.
Regula0on:Agencies
Regula0on:Legalframeworkandanalysis
Powergenera0on
LiquefiedNaturalGas(LNG)
LiquidPetroleumGas(LPG)
Condensates
Reinjec0on
S ItseemsAPGwillnotbeusedforpowergenera0on.
S AccordingtotheIEA,naturalgasalreadyaccountedfor93%ofpowergenera0oninAlgeriain2013andtheAlgeriangovernmentisaimingatreducingthisdependencebyincreasingtheshareofelectricitygeneratedbyrenewableenergy.ThegoaloftheAlgerianEnergyMinistryofEnergyandMinesistogenerate40%ofAlgeria’selectricityfromrenewablesourcesby2030.
S TheAPGcould,however,feedLNGfacili0esandtheliquidpetroleumgas(LPG)expansionprojectasexplainedinthenextslide.
Whatneedscouldtheflaredgassa0sfy?
Powergenera0on
LiquefiedNaturalGas(LNG)
LiquidPetroleumGas(LPG)
Condensates
Reinjec0on
S Algeria’sfavorablegeographicalposi0oningadjacenttotheMediterraneanSeamakesitaprivilegedcandidateforthedevelopmentofLNG.
S Asof2016,AlgeriawastheseventhlargestexporterofLNGintheworld.Currently,Algeriahasfourliquefac0onLNGunitsalongtheMediterraneanSeawithatotaldesigncapacitytoprocess44mt/yearofnaturalgas.
S ThisinfrastructurecouldbeleveragedfromAPGuse.HoweverSonatrachhadplansfortwolargescalefacili0esin2009thathavesincebeenscrapped,andagingtrainsatexis0ngfacili0esmustbeupgraded.
Whatneedscouldtheflaredgassa0sfy?
Powergenera0on
LiquefiedNaturalGas(LNG)
LiquidPetroleumGas(LPG)
Condensates
Reinjec0on
S AlreadythelargestLPGproducerinAfricaandthe9thlargestLPGproducerintheworld,Algeriahasembarkedonanaggressiveplantoswitchfromconven0onalfuelstoLPGindomes0cpassengercarsandlight-dutyvehicles.
S Currentlyonly3%ofvehiclesinAlgeriarunonLPG,butthegovernmenthassetagoaltointegrate100,000LPG-basedvehiclesintothetransporta0onsectorby2030.
S Similarly,thegovernmentaimsat11,000newcompressednaturalgas(CNG)-poweredbusesby2030.Tothisend,aconversioncenterandCNGservicesta0onswillbesetup.
S Themo0va0onistoenhanceenergyefficiencyandreducepollu0on.Roadtransportcons0tutes41%ofallenergyuse,producingabout14milliontonsofCO2annually.By2030,iftheplandescribedaboveisinplace,energyconsump0onisprojectedtodropby9%,bringingana0onalbudgetsavingsof42billiondollarsin2030—whichcouldhelpcompensateforalossinrevenuesbroughtaboutbylowpricesandfuelsubsidies.
S ThisprojectcouldhelpchannelmoreAPGtodomes0cu0liza0on.
Source:Gazeo,2015
Whatneedscouldtheflaredgassa0sfy?
APGusecompanycasestudy:theElMerkfacili0es
PowerGenera0on
LiquefiedNaturalGas(LNG)
LiquidPetroleumGas(LPG)
Condensates
Reinjec0on
S ProjectParJcipants
o OperatedbyGroupementBerkine,ajointventureofSonatrachandtheAnadarkoAssocia0on(comprisingAnadarko,MaerskOilandEni)onbehalfofthemselvesandtheotherElMerkpartnersConocoPhillipsandTalisman(Algeria).
S ProjectDescripJonandMoJvaJon
o TheprojectisdesignedaroundaCentralProcessingFacility(CPF)toprocessandexportreservoirliquidsfromfourprimarysources–theElMerkNorth,ElMerkEastandElKheitEtTessekafieldsinBlock208andtheuni0zedElMerkfieldinBlock208andBlock405a.ItalsoaccommodatesliquidsfromtheSonatrach/AnadarkoandSonatrach/EniAssocia0ononBlock403a/404a,situatedapproximately80kmnorthoftheElMerkdevelopment.
o Theprojectwascompletedin2013.
o ElMerkprocessesanes0mated:o 98,000barrelsofoilperdayo 29,000barrelsofcondensateperdayo 31,000barrelsofLPGperdayo 500millionstandardcubicfeetofresidueandreinjec0ongascompressionando About80,000barrelsperdayofproducedwatertreatmentandreinjec0onfacili0es.
S ProjectLocaJon
o TheElMerkFieldsarelocated300kmsoutheastofHassiMessaoud,aremotedesertloca0onintheBerkineBasin,approximately160kmsoutheastofthetownofHassiMessaoud,closetobothTunisiaandLibya.
o AssociatedGasUse
o TheCPFconsistsofthreetrains–twooil/condensateandoneNGL–toprocess,store,meter,andexportthehydrocarbonliquids.Theexportproductsinclude:Saharablendcrude,lightcondensateandamixedLPGstreamofpropaneandbutanewhichareextractedfromtheAPGofthesefields.
o ThedrycomponentoftheAPGisreinjected.
APGusecompanycasestudy:HassiMessaoud–ZCINAplant
PowerGenera0on
LiquefiedNaturalGas(LNG)
LiquidPetroleumGas(LPG)
Condensates
Reinjec0on
S ProjectParJcipants
o SonatrachandEngineering,ProcurementandConstruc0oncontractorSaipemSpA
S ProjectDescripJonandMoJvaJon
o TheprojectisdesignedaroundtheZCINAprocessingzonesepara0ngLPGandcondensatesfromtheAPGoftheHassiMessaoudNorthfield.
o Itwascompletedin2012.
o TheprojectiscomposedofthreegastreatmentplantsthataremodularanddesignedtoaccommodatefutureAPGincreases.
o Averageproduc0onofLPG:4,600t/dayo Averageproduc0onofoncondensate:300t/day
o ProjectLocaJon
o NearthevillageofHassiMessaoud
o AssociatedGasUse
o TheprojectconsistsofthreeLPGtrainswithacapacityof8millioncubicmeters/dayextendabletofour.
CO2reduc0onprojectatgasfields
PowerGenera0on
LiquefiedNaturalGas(LNG)
LiquidPetroleumGas(LPG)
NaturalGasLiquids(NGL)
Reinjec0on
S TheInSalahfield,locatedintheAlgerianSahara,isrunasajointventurebetweenSonatrach,BPandStatoil.Here,thereisanindustrialscalefacilityforreduc0onofCO2emissionsviareinjec0onintodeepwells.
S InSalahinvolvesthedevelopmentofsevenprovengasfieldsinthesouthernSaharadesert,about1,200kmsouthofAlgiers.Thefirstphaseofdevelopmentstartedin2004andinvolvesaproduc0oncapacityofapproximatelyninebillioncubicmetersofgasperyearatthreefields.ThegasisgatheredatthemainKrechbagastreatmentplant,transportedalonga500kmpipelinetothemajorgascollec0onpointatHassiR’Mel,andthenexportedtomarketsinSpainandItaly.Thesecondphasewillstartin2015.
S ThegasproducedhasaCO2contentofbetween5-10percent,whichmustberemovedtomeetsalesgasexportspecifica0onsof0.3percentCO2.TheKrechbagastreatmentplantremovestheCO2andproducesaCO2streamofover98%purity.
S Sincethestartof2004,3.8milliontonsofCO2gashasbeenstoredbelowgroundintothesamegeologicalsalineforma0onthatholdsthenaturalgas.However,reinjec0onwasstoppedin2011asasafetymeasure.
S AlongsidethisCO2Storageproject,theInSalahCO2AssuranceJointIndustryProjectwassetuptomonitortheCO2storageprocessleveraginggeochemical,geophysicalandproduc0ontechniques,includingsatelliteimaging,wellmonitoring,seismicmonitoring,andmicro-seismicmonitoring.ItissupportedbytheJVpartnersaswellastheUSDepartmentofEnergyandtheEUDirectorateofResearch.
S Currently,themovementsoftheinjectedCO2arebeingstudiedandusedtoassesscurrentreinjec0onstrategy.
Source:GlobalCSSIns0tute
References
S AlgeriaEnergyandBusiness.“SonatrachwinsWorldBankGlobalGasFlaringReduc0onAward.”hnp://algeriaenergy-business.com/Algeria/index.php/mes-ar0cles/231-sonatrach-wins-world-bank-global-gas-flaring-reduc0on-award
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