Kyoto Mechanisms

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					Access to Energy, Gas Flaring Reduction, and Domestic Market Development
Presentation by Jacob Broekhuijsen, World Bank Africa Oil & Gas Forum, Houston, November 29-31, 2004
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Map of Global Energy Poverty

1.6 billion people have no access to electricity, 80% of them in South Asia and sub-Saharan Africa
Source: IEA

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Number of People Without Electricity, 1970-2030

Source: IEA

Access to Electricity
•1.6 billion people today have no access to electricity
•About 80% of these people are located in India (580 million) and sub-Saharan Africa (500 million)

•Four out of five people lacking access to electricity live in rural areas •By 2030, in the absence of radical new policies, 1.4 billion will still have no electricity (>600 million in subSaharan Africa)
Source: IEA

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Population Increase in Developing Countries

Source: IEA

Average per Capita Energy Consumption versus Share of Population Living under Poverty Line, 2000

Source: IEA

Energy and Poverty - Traditional Biomass Use
 Today, 2.4 billion people in developing countries rely heavily on traditional biomass for cooking and heating  The use of biomass in traditional and inefficient ways have significant implications:
 Productivity  Health  Gender  Environment

 By 2030, in the absence of radical new policies, over 2.6 billion people in developing countries will continue to rely on biomass (less and less available)
Source: IEA

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Energy Poverty


In the absence of radical new policies, energy poverty will still be a major issue in the next decades Creating conditions to attract investment is the main challenge. Domestic Market reforms are vital Investment requirements for power generation in developing countries amount to US$ 2.1 trillion for the next 30 years





Source: IEA

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Source NOAA: DMSP-OLS Annual Composites of Nigeria and Cameroon
Red = 2003 only. Yellow = 2003 and 2000. Green = 2000 only. Cyan = 2000 and 1992. Blue = 1992 only. White = 2003, 2000 & 1992

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Source NOAA: DMSP-OLS Annual Composites of Angola, Gabon, Congo and DRC

Red = 2003 only. Yellow = 2003 and 2000. Green = 2000 only. Cyan = 2000 and 1992. Blue = 1992 only. White = 2003, 2000 & 1992

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Background of Global Flaring
• Global venting and flaring level over 100 bcm/year, similar to:
 Total world gas consumption for half a month  >10 percent of committed emission reductions by developed countries under the Kyoto Protocol for the period 2008-2012

• Flaring in Africa alone could produce 200 TWh of electricity
 ~ 50% of current power consumption of the
African continent  more than twice the level of power consumption in Sub-Saharan Africa (excluding South Africa)

• Global level has stayed constant for the last 20 years
• 80% of global venting and flaring occurs in fewer than 15 countries (reliability of available data varies widely)
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Why still over 100 BCM / Year ?
• Individual governments and companies have had successes in reducing flared gas, and significant investments in reduction projects are continuing. • However, two key factors limit the global impact of these efforts:
 Global oil production increase leads to associated gas production increase, offsetting efforts to reduce gas flaring  Development of gas markets, gas infrastructure, and flaring reduction projects often requires collaborative rather than individual action

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Typical barriers to gas sector development
• Underdeveloped domestic market for gas and gas products (LPG, CNG, fuel methanol, power etc) • Absence of / limited gas policies • Limited institutional, legal and regulatory framework for gas, including associated gas • Gas terms (or absence thereof) in existing oil development agreements • Fiscal system • Domestic gas and gas product pricing • Infrastructure constraints and access • Funding constraints
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Collaborative Action: GGFR
• Started as an Initiative with Norwegian Government and World Bank in 2001 • GGFR Public-Private Partnership was formed at the World Summit on Sustainable Development in Johannesburg in August 2002
• GGFR includes governments from oil-producing countries, stateowned and international oil companies, OPEC, and the World Bank Group, together accounting for over 70% of global flaring

• Objective is to support national governments and the petroleum industry in their efforts to reduce the flaring and venting of gas associated with the extraction of crude oil • Still open for new members: governments, national oil companies, international oil companies, industry organizations, etc.
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Current GGFR Public and Private Partners
Countries/NOCs
Algeria (Sonatrach) Angola Cameroon (SNH) Chad Ecuador Equatorial Guinea Indonesia Khanty Mansiisk (Russia) Nigeria

IOCs
BP ChevronTexaco ENI ExxonMobil Norsk Hydro Shell Statoil Total

Donors

Canada Norway UK (Foreign Commonwealth Office) USA

Multilateral Organizations
The World Bank OPEC

NGOs

Sahel
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GGFR Work Program
Help each other in associated gas utilization and further reduction of local and global flaring through best practice identification, development & exchange in:

• Commercialization

 Consultations to identify and address associated gas utilization barriers  Remote fields solutions  Small scale gas use

• Regulations for (associated) gas sector development
 Identification and dissemination of regulatory best practice  Contractual issues surrounding associated gas

• Global Gas Flaring Standards
 Common flaring standards and guidelines, including measurement and reporting

• Carbon Credits

 Capacity building including methodology for flaring projects  Representative projects assistance with crediting process 16

Global Gas Flaring and Venting Reduction Voluntary Standard
• GGFR announced the Global Gas Venting and Flaring Reduction Voluntary Standard at the 2nd International Gas Flaring Reduction Conference in Algeria in May 2004, which:
 Provides framework for governments, companies, and other key stakeholders to consult each other and take complementary and supportive action;

 Encourages integrated approach including market and infrastructure development, commercialization, legal and fiscal regulations, carbon credits;
 Aims to achieve global applicability and impact by allowing for flexibility to local conditions and balancing ambitious timescale with realistic constraints.

• Collaborative action of stakeholders will help reduce barriers to associated gas utilization in a country • Implementation of the Standard aims to reduce venting and flaring significantly within 5 to 10 years
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Key Concepts of the Standard
• Voluntary and performance based rather than prescriptive • Initial Goal with focus on large sources that can make a significant difference early • Collaborative action and implementation planning through
 Identification and consultation of key stakeholders;
 Potential expansion of “flare reduction project boundaries” to include other fields / operations / infrastructure / customers in region for consultation;

 Consideration of range of options to enhance the feasibility of associated gas utilization (“tool box”);  Producer driven Associated Gas Recovery Plans and Government driven Country Implementation Plan.

• Ultimate Goal for longer term continuous improvement

• Measurement of remaining flaring and venting, and public reporting • Recommended Timeline for consultation, planning and implementation
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International Best Practice: A collaborative approach to gas flaring reduction - Alberta
•Clean Air Strategic Alliance (CASA)
Multi-stakeholder process, including industry, environmental organizations and government Key is to build consensus on flaring solutions

•Objectives
Eliminate routine gas flaring
Reduce volumes of gas flared

Improve the efficiency of flares
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Alberta - Results
• Evaluation of each flaring site
 

Decision tree works well Economic flare gas utilization identified

• Industry reduction targets
     

38% reduction - year-end 2000 (Target 15%) 53% reduction - year-end 2001 (Target 25%) 62% reduction - year-end 2002 (Target 50%) 70% reduction - year-end 2003 (No target est.) Clear objective for flare reduction actions Improved public confidence in process
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Associated gas utilization and domestic market development:

Recommendations (1)

Establish “local public-private partnership(s)” between relevant government parties and other key stakeholders including local communities, and take the lead in collaborative action (with World Bank / GGFR facilitation if and when required), on some or all of:
 Formulation, implementation and transparency of (associated) gas, gas pricing and flaring reduction policies, incl. implementation of GGFR Standard

 Domestic market development, especially Gas-to-Power reform, consistent with gas sector reform, including pilot projects  LPG production, storage, transportation and distribution, including pilot projects
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Associated gas utilization and domestic market development:

Recommendations (2)

 Establishing project synergies especially between those gas utilization projects that are more difficult / less attractive on individual basis
 Financing solutions for infrastructure projects to expand domestic market (for example, gas trunk-lines and main electricity transmission infrastructure), including Government facilitation of financing (for example, through public-private financing initiatives)

 Small scale gas utilization and power supply, including regional pilot projects (this would require a local collaboration task force), and technical assistance/facilitation/capacity building  Carbon credits for emission reduction projects, including institutional requirements and pilot projects
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Conclusions


Radical new policies are required to reduce energy poverty in sub-Saharan Africa, and domestic market reforms to create conditions that attract investment is vital

• Flaring in Africa alone could produce more than twice the level of current power consumption in Sub-Saharan Africa (excluding South Africa)
•

Local public-private partnerships that collaborate on a combination of policy and projects can be very effective in achieving major change in the medium term
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Thank you for your attention

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