15 февраля 2011

`Аssосiаtеd Реtrоlеum Gаs 2011: еvеnt rероrt`

The problem of effective usage of associated gas in Russia is being solved too slowly, that`s why it`s necessary to implement strict unpopular methods to boost up the process.
On Friday, 25 March Creon has held Conference "Associated Petroleum Gas 2011" at the Hotel Baltschug Kempinski. The partner of event was RusGazEngineering, "Delovaya Russia" supported the Forum. The problem of effective usage of associated gas has been existed for decades, but was caught in the spotlight of public attention four years ago after Vladimir Putin speech about requirement of reduction of flaring up volumes to 5% of production by 2012. Creon held the first Conference devoted to associated gas in 2007 to understand the stance of the problem and identify the ways of solution. We decided to gather all interested participants again less than a year before "X date" to identify the occurred changes and the main trend of the industry.
Head of "Globotek" Alexander Lukin noted in his report, that there is no substantial progress in the utilization of associated gas, because the debate often boils down only to the fact that "In Russia everything is bad, but in the U.S. is good". The Russian state (despite the big words and public statements by top officials) has no systematic approach to the problem. The check of Presidential Administration last year in October revealed that the President`s and the Government`s orders are systematically ignored by the officials and by the business. But there is a risk of turning the problem of utilization of associated gas into an instrument of property redistribution, licenses evocation for subsoil users and their involuntary bankruptcy. Hopes for the oil companies themselves are hardly justified because they would rather burn the APG, than to share this resource with someone. "Rostekhnadzor" itself counted 1,841 torches on oil fields in 2008, their number much greater in reality. No one cares about the statistics, so in the annual reports of oil companies only oil is indicated, not the associated gas. So, there is no understanding, how much of APG is burned in Russia. Even official estimates range from 14 to 20 billion cubic meters a year. The measurement units` equipment introduction is slow, and the state control is absent. This gives rise to "independent" estimates of around annually 50-60 billion cubic meters associated gas burning. In means a totally different state of the problem and other economics for the industry. However, project organizations, who work for oil companies, are developing options for associated gas utilization at minimal cost.
Alexei Knizhnikov who is the manager of environmental issues of oil&gas business of WWF and Alexey Rogozhin who is the executive director of GreenLab called the oil companies to think about public and social responsibility which are exceptionally important for their foreign counterparts, investors and shareholders. At the same time the significance of quality indicators, environmental responsibility of business increase with slow down of oil production. Gazprom Neft was noticed among "environmentally irresponsible" companies. Despite of being a subsidiary of Gazprom, company can`t solve the issue of admission to gas pipelines.

Deputy Director Department of Energy analysis of the Siberian Scientific Analytical Center Arthur Mullin told the participants about the prospects for utilization of associated gas in Yamal. There are many explored, but not used oil and gas fields. The main obstacle to their development is the lack of infrastructure. By the year 2018 according to the plans of oil companies, oil and gas condensate production in the Yamal Peninsula will triple (to 115 million tons). The use of additional volumes of associated gas requires five compressor stations with a capacity of 5 billion cubic meters, and also 600 km of pipelines. But what to do with the main product of associated gas - LPG? It is unclear. "Sibur" is ready to take additional amounts to the Tobolsk Petrochemical Complex, which can be expanded, but there is no understanding, how to use its processing products. The report of the Head of petroleum products markets, "Petromarket" Alexandra Zubacheva examined the Russian market of LPGs trends, which are increasingly being exported and used as automotive fuel, but not used as raw materials for the Russian petrochemical industry. The protracted conflict of interests of suppliers and processors of raw materials led to the fact, that Russia has no petrochemical projects, which would be focused on these potential resources. Only injections back into the oil fields or the use for the needs of local energy are the alternatives to APG processing in case of burning prohibition. In 2015 the problem of using APG in the region will dramatically worsen without immediate investments.
Due to the fact that hope for oil companies honesty and officials` impartially are small, the assessment of incineration of associated gas with satellite techniques is in favor. Alexey Kucheiko, who is the deputy of CEO of Scanex told the audience about them. The company uses weather satellites and military satellites, which are equipped with thermal imaging cameras for observation of light and hot spots from torches. It`s possible to estimate approximate volumes of flaring gas according to intensity of the heat. The orders on researches from domestic companies and state authorities are not received while the interest of authorities to detect illegal oil extraction and flaring of associated gas is eager in Kazakhstan and USA. Contrary to Mr Knizhnikov`s view, ecological responsibility of even western business is extremely low in Russia. While the satellite monitoring of oil spills is ordered and its results are published regularly in other countries, these same companies consider there is no need to do it in Russia. Irina Makukha, administration representative of Khanty-Mansi Autonomous Area, stressed in her speech that despite the fact that the situation with associated gas processing in the area was favorable because of six major gas processing plants, the trouble with its flaring was actual. GIS of associated gas using to separate licensing areas was developed but there are no license obligations for associated gas usage as well as its account at the subsoil is still there.
Senior researcher of IMEMO Nazip Baykov told the participants about the American and Canadian experiences of APG processing. According to him, up to 80% of GPP are in the U.S. and Canada, but their capacity utilization is low and the capacities are excessive: in U.S. the capacities utilization of GPP is 62%, in Canada - 47%. The individual subsoil built a large number of small GPP in 1950-60`s, household gas (which is shipped in tanks) is their primary product. Even the capacity of GPP in 1-2 billion cubic meters is small in U.S. now. Large plants associated with gas-chemical complexes are the basis of the industry. Gas flaring is prohibited in the U.S. and Canada, in Texas the ban was introduced in 1946. APG is completely pumped back into the reservoir in places with no processing facilities (in Alaska, for example).
Denis Solomatin who is CEO of Sibur East told about associated gas market in Russia and current state and prospects of largest gas processing business at the country. Sibur realized the number of investment projects for five years and now it is going to process 18 billion cubic meters of associated gas in 2011. It is four billion more than five years ago. At the same time Nyagan, Yuzhnobalyksky and the Noyabrsky GPP are staying not fully utilized. The main investment projects in gas processing are expanding of South Balyk, Nizhnevartovsk GPP and Nyagan GPP which has entered into a joint venture with TNK-BP in 2011 and besides, the Vyngapur GPP construction on the basis of compressor station of the same name. Because of volumes of gas processing increasing , the volumes of associated gas flaring decreased significantly in Khanty-Mansi Autonomous Area, but increased at the contrary in the other areas. There are the projects of Barabinsky GPP with a huge number of participants in the Novosibirsk region. The project of a major Polar GPP on 5 billion cubic meters is discussed. Rosneft and Salym Petroleum realize its own gas processing projects which allow using up to 1 billion cubic meters of gas. As for Sibur, although the company expects to get free volumes of associated gas which are flared now, the focus will shift from volume to a depth of processing. The company plans to do projects in area of gas condensate stabilization and natural gas processing and rely on state support in creation of appropriate infrastructure.
At the same time, a small gas processing in Russia is actively developing (in addition to traditional large-scale gas processing). It is designed to solve the problem of utilization of associated gas for small and remote oilfields. Henrikh Siebert, director of STD RusGazEngineering described the experience of working in the market of gas processing factories. Design, production equipment, its installation and commissioning of production occupy one and half year, and at block delivery - 6 months. A local pipelines of the polyethylene pipes art laid up to 50 km from the plant. A block of hydrogen sulfide extraction can be added in compressors with water and dried gas glycols (depending on the sulfur dioxide). The factory`s capacity is 50 thousand cubic meters of gas per day, the project pays off after a year and a half. Project manager of "Grasis" Anatoly Shiryaev spoke of the dehydration APG membrane technology with the allocation of valuable hydrocarbons. This technology plant`s output is up to 200 million cubic meters of gas a year, but their cost is high enough. Chairman of the board "NefteGasTop" Boris Rachevsky explained that the standard small separation plant costs only 3 million euros, but it is unclear how to use dry gas. This is possible to process it into methanol, liquid intermediates, synthetic fuels, and even in the protein-vitamin complexes, but is economically feasible to do this with the volume of production for more than 20 million cubic meters.
Vladislav Tenenbaum who is a chairman of directors` board of Globotek told about problems and prospects of local usage of associated gas. This is preferable for oil companies which refuse to sell gas. However, power equipment is designed to work on not associated gas but a pure natural gas and that`s why is failed quickly. However, separate valuable fractions which are needed by processors of natural gas are fallen out for gas compression on the way to the gas processing plant. These fractions are burned. But the technical conditions even in some GPP, for example, Otradnensky and Neftegorsk in the Samara region don`t allow process all "fat" gas and the part of the valuable fractions go to the torch at the plants, not at the fields. At the same time with correct equipment it`s possible to direct from 5.7 to 12 million cubic meters of associated gas depending on its composition per year to the energy needs. Such plants operate on fields where the gas-oil ratio reaches to 400 cubic meters per ton. GTL technologies are meaningless economically if the price of oil is less than 200 dollars per barrel but it can help the oil companies to avoid higher fines for burning raw materials.

Head of CEMI RAS laboratory Sergei Chernavskii believes, that the source of the problem of associated gas utilization is wrong institutional environment and lack of cooperative behavior of industry participants. APG is processed at the oil companies` GPP almost everywhere in the world, but Russia is an exception because of the privatization heritage. This makes Sibur and the oil companies to conflict with each other because of the purchase prices for APG. For example, in Azerbaijan and some other countries APG is Government-owned, so, the Government regulates this resource`s prices. In Russia the price depends on the ratio of the various industry players lobbying efforts. The output is a transition to net-back pricing, when the price of associated gas depends on quotations for its processing products (natural gas and petrochemical raw materials). State regulation should be stimulatory: in case of the low associated gas refiners capacities utilization the price should raise, but at a high - to decline. This stimulates the oil companies and the GPP to invest in gas collection infrastructure permanently. At the same time today`s purchase prices for APG, announced in the debate, are 535 rubles per cubic meter (20 USD). This is even lower than the regulated prices for natural gas, so, it is unacceptable for the oil companies.

According to Fares Kilzie, the head of Creon, development of all the domestic petro-gas-chemicals industry in coming decade depends on how problems of gas processing on the Yamal will be solved in the next few years. The main volumes of the free associated gas are concentrated on the Yamal. It`s necessary to shift away from the definition of associated gas disposal and consider it as a commercial resource that should be used. Around this resource own engineering business has built up and is ready to participate actively in the problem solution. The State should not show excessive flexibility and not to delay the transition to fines for associated gas flaring and non-admission of dry gas to pipelines. This must teach the market players to cooperate with each other.

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