Monday, November 29, 1999

A burning issue in hand

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ONGC has invested heavily in projects to bring down gas flaring at its various oilfields. This could eventually jack up its annual profit by over Rs 500 crore, provided the government revises APM gas prices to match the prices of output from Reliance Industries Ltd's (RIL) D6 block in the Krishna-Godavari (KG) basin. This is a major upside for the ONGC stock, which was trading at Rs 1,045 on Friday.Flared gas accounted for 6% of the company's gas output in 2001-02. Since then, it has come down to 2.88%. In quantity terms, gas savings for the company works out to 2 million metric standard cubic metres per day (mmscmd). ONGC is working on a zero gas-flaring target.According to a World Bank estimate, flared gas accounts for 1% of global greenhouse gas emissions. ONGC's attempt is to become a carbon-neutral company. That is the reason ONGC is investing in reducing gas flaring."ONGC has already achieved the zero-flaring target at its Hazira and Uran assets by inducting latest technology. The company has also undertaken implementation of a similar project at its Neelam Heera field at an estimated investment of Rs 59 crore. The project is expected to be commissioned by April and would lead to savings of 1,24,000 cubic feet gas a day for the company," Sudhir Vasudeva, ONGC's director for offshore operations, told FE.It is not possible to plan for zero-gas flaring while developing an oilfield, as predicting the exact quantum of associated gas that would come out with crude oil remains a challenge for geo-scientists.The exact position would be known only after production begins. If production of associated gas is more than what was planned for, there is no option for the contractor but to burn the excess gas in the air. Even if a company wants to reduce gas flaring, it will have to wait because it normally takes three years to implement a project to contain this.In India, gas flaring is basically an offshore problem where project costs are much higher compared to onland. Besides, there is an additional cost of transporting gas as it is not possible to find customers in the vicinity.ONGC has to flare gas because of isolated locations of onshore fields, gap between exploratory efforts and creation of infrastructure, fluctuations in the consumer's intake of gas and also owing to the lack of consumers for sour gas. However, the company can reduce gas flaring by optimising surface facilities, laying new pipelines and installing additional compression facilities.In offshore fields, associated gas comes out at a very high pressure. ONGC has to install high-quality compressors to reduce the gas pressure to carry it onland. Installation accounts for 70% of the total project cost in offshore fields, but in onshore blocks it is just 30%.Another problem facing ONGC is that its offshore fields are much bigger than onland fields and implementing a gas flaring reduction project without upsetting cost economics of the project can prove to be a big challenge for the company. There is a risk that higher costs could render the project commercially unviable. ONGC encountered such difficulties while executing such projects at Hazira and Uran.But what has come to ONGC's rescue is the fact that such projects are entitled to clean development mechanism (CDM) benefits under the Kyoto Protocol.However, there are serious technological challenges in achieving zero gas flaring as leakages from gas processing plants are difficult to trace. ONGC has to use high-tech optical equipment to trace such gas leakages.ONGC is implementing such projects with the support of the US Environment Protection Agency (USEPA) under the 'methane to markets partnership' programme.The partnership is an international initiative that advances cost-effective, near-term methane recovery and its use as a clean energy source. Its goal is to reduce global methane emissions in order to enhance economic growth, strengthen energy security, improve air quality, improve industrial safety and reduce emissions of greenhouse gases.

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