November 10, 2009 / 8:41 PM / 10 years ago

Putin warns oil firms: cut flaring or pay fines

MOSCOW (Reuters) - Russian oil companies will face heavy fines for missing targets to reduce gas flaring by 2012, Prime Minister Vladimir Putin said at a meeting on Tuesday, reinforcing government plans to reduce the wasteful practice.

Gas flares burn at a Rosneft refinery near the town of Achinsk, some 188 km (117 miles) west of the Siberian city of Krasnoyarsk, February 26, 2008. REUTERS/Ilya Naymushin

Russia, the world’s largest energy producer, flares more gas than most other countries, sending the greenhouse gas carbon dioxide into the atmosphere after burning gas from oilfields that is deemed too difficult or expensive to move to market.

Oil firms, including market leaders Rosneft, LUKOIL and TNK-BP, are investing hundreds of millions of dollars to meet the government’s target of increasing associated gas utilization to 95 percent by 2012.

“Oil companies that do not meet this requirement will pay huge fines,” Putin told executives at the industry meeting.

Russia flares around 20 billion cubic meters of associated gas every year, or approximately one-third of the total amount extracted at the country’s oilfields. Trapping this gas can result in vast emission cuts, as well as increased gas sales.

Some experts rank Russia as the world’s leading flarer, although the country’s own calculations place it second to Nigeria.

Putin also promised preferred access to Russia’s power grid for electricity generated from associated gas, a further incentive to companies to reduce waste.

“Electricity produced from (associated gas) will receive priority access to the country’s energy grid,” he said at the meeting.

INVESTMENT PLANS

The best performer in Russia in terms of flaring gas is Surgutneftegaz, the country’s fourth-largest oil producer, which utilizes practically all of the gas extracted from its Siberian oilfields.

Russia’s three larger oil firms all say they plan to meet the government’s target by 2012.

LUKOIL, the country’s biggest privately owned oil firm, currently utilizes about 80 percent of associated gas at its western Siberian fields, the source of most of its oil, company spokesman Dmitry Dolgov said.

TNK-BP, part-owned by oil major BP, plans to raise associated gas utilization to 84 percent this year and will invest about $700 million in projects that will allow it to meet the 95 percent target by 2012.

State-controlled industry leader Rosneft appears to be lagging its three main competitors, with the latest available data from two years ago showing utilization rates at nearer 60 percent.

Rosneft agreed in February to harness, rather than flare, gas from two fields in southern Siberia.

Writing by Robin Paxton; Editing by Keiron Henderson

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