effect of gas flaring on environmental variables in ... · pdf file101 effect of gas flaring...

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Effect of gas flaring on environmental variables in developing countries

Somayeh Pourhassan

Alireza Taravat

With regard to the increasing need of the human kind to energy resources, the extraction and

exploitation of fossil energies such as oil and gas, has increased. During the extraction phase of

petroleum and oil, a great amount of gas will be lost through flaring. Most of these losses, happens

in developing countries which leads to dispersion of greenhouse gases. In this study, we try to

investigate the long term relationship between the amount of gas flaring, the Oil Price, the amount

of CO2 emissions and the total natural resources rent of the GDP. This study has been conducted in

8 developing countries which are from the most important oil reserves in the world, includes

Algeria, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, Russia and Tunisia. The dataset was collected in

the period between 1994 and 2008. The results demonstrate the significant and meaningful

relationship between the Price of Oil, the CO2 emissions and the total natural resource rent of the

GDP and the amount of the gas flaring in the studied countries.

Introduction

Flaring and venting of natural gas in oil wells is a significant source of greenhouse gas emissions.

Its contribution to greenhouse gases has declined by three-quarters in absolute terms since a peak in

the 1970s of approximately 110 million metric tons/year, and now accounts for 0.5% of all

anthropogenic carbon dioxide emissions (Marland et al., 2008). A gas flare is an elevated vertical

stack found on oil wells, oil rigs, and in refineries, chemical plants and landfills, used for burning

off unwanted gas and liquids released by pressure relief valves during unplanned over-pressuring of

plant equipment (Beychok, 2005, Shore, 2006). On oil production rigs, in refineries and chemical

plants, its primary purpose is to act as a safety device to protect vessels or pipes from over-

pressuring due to unplanned upsets. The released gases and/or liquids are burned as they exit the

flare stacks. The size (~100 m2) and brightness of the resulting flame depends upon how much

flammable material was released. Steam can be injected into the flame to reduce the formation of

black smoke. In more advanced flare tip designs, if the steam used is too wet it can freeze just

below the tip, disrupting operations and causing the formation of large icicles. In order to keep the

flare system functional, a small amount of gas is continuously burned so that the system is always

ready for its primary purpose as an over-pressure safety system. Some flares have been used to burn

flammable “waste” gases or by-products that are not economical to retain. Although safety

considerations are valid, a vast amount of energy resources that could be stocked and reused is

wasted, contributing to the global carbon emission budget (Beychok, 2005).

During the last 150 years off-shore drilling platforms were active in the North Sea, but the attention

to the problematic of gas flaring monitoring dates back to the latest years of the past century (M. F.,

2010). In fact, the commercial extraction of oil on the North Sea dates back to 1851 while natural

gas was found near Hamburg in 1910. In England, the British Petroleum company (BP) discovered

gas in 1938 and in 1939 commercial oil was found in Nottinghamshire (Arino et al., 2005). From

1953 to 1961 the Gainsborough field and other smaller fields were discovered. The Netherlands'

first oil extractions took place at De Mient in 1938 (Arino et al., 2007). The first exploration in the

province of Groningen was carried out in 1952 and in 1959 gas was found in the Rotliegendes. The

seismic exploration started in 1965 and large gas finds followed in 1966. The discovery of the

Forties oilfield occurred in October 1970 and Shell Expro discovered the Brent oilfield in the

northern North Sea in 1971. Oil production from the Argyll field started in 1975. The Danish

International Journal of Business and Management Vol. II (1), 2014

http://www.iises.net ISSN 2336-2197

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explorations of Cenozoic stratigraphy, undertaken in the 1990s, showed petroleum rich reserves in

the northern Danish sector. The largest field discovered in the past 20 years is Buzzard, found in

June 2001(Casadio et al., 2012).

As a major aspect of environmental pollution, gas flaring has become a common phenomenon and

it can have serious biological and economic impacts. In this sense, many of countries, along with

their policies and activities, try to manage and organize the environmental issues for more

extraction of fossil fuels, especially oil and gas in transportation sector.

Oil and Gas, are stored and reserved in 3 - 4 km depth of the ground with the pressure more than

hundreds atmospheres; and because of this fact, the extraction of oil and petroleum is alongside

with the emission of natural gas (Elvidge et al., 2007, Elvidge et al., 2001, Elvidge et al., 2009). The

natural gas extracted from the oil wells is found in two different forms:

1) Solution Gas;

2) The gas which is in contact with the oil but separated from that (Associated Gas).

Associated gas should be separated from the oil, in order to obtain pure and stable oil. Solved gas in

the oil is the same as the potential energy for the tanks and reserves; so If possible, it should be

prevented from emission. The associated gas is available in the form of different hydrocarbons.

These gases can be treaded and sold as consumable energy or can be used as ingredients in

petrochemical industries. Another alternative is to return these gases to oil wells and reserves.

Return and injection of these gases to oil reserves is done in order to recover and recycle the oil.

Another alternative is to disperse these gases into the atmosphere through flaring and venting

methods. When it is impossible to store or commercially use of the associated gas, it is necessary to

reduce the risk of fire or explosion due to venting, flaring or re-injection of gas into the gas reserves

and tanks. One of the discharge methods of the associated gases, is venting. This method, is some

kind of gas dispersion into the atmosphere directly and without burning or flaring of gas (Marland

et al., 2008). The venting phenomena is not a visible one, because the gas will enter into the

atmosphere without burning or combustion. But with regard to the air pressure and the pressure of

gas fields during this dispersion, this process can make a lot of noises (Farina, 2010).

The Flaring method is another alternative method. The flaring process is controlled burning of

natural gases in oil and gas production process. The flares are high chimneys in which, the gases are

burnt and are from the necessary equipments in oil wells and refineries. The flares can prevent fires,

explosions or hurting workers. Generally, the burning process of the gases in flares has flames and

usually is with heat and noise.

The gas torches on the oil wells, are the symbols of the production and activity in oil and gas

industries. But in reality, these torches reflect this fact that millions tons of gas and national oil

capital are burnt by these flames. The huge amount of gases which are burnt in flare can be used in

other applications such as electricity power generation. So not burning of these torches reflects the

technical design and management and economical and environmental technologic developments

which lead to optimum use of oil and gas and reduction in their losses.

One of the disadvantages of flaring is increase of the environmental pollutions, especially

greenhouse gases. Although the amount of produced greenhouse gases from the flaring process is

less than its amount in the venting process, but usually the combustion is not a complete process in

the flaring and the existence of smokes from the flares supports this fact. In addition, the amount

and the types of produced gases in this process depend on the burnt gases in the flare and the

combustion conditions (Beychok, 2005, Shore, 2006).

Polluting gases which are dispersed from the flaring process into the environment includes some of

greenhouse gases such as CO2, CO, NO and NO2. In addition the noises and the odor results from

the combustion and the light comes from the flaring process are some of dangers which can threaten

the health of personnel and local residents. The flaring and the venting process are the resource of

4% of dispersed Carbon Dioxide in the atmosphere. The acidic rain, global warming, air pollution,

water pollution and destruction of Ozone Layer, are some of environmental results of venting and

flaring processes.



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Annually, about 150 billion square meters of gases are lost through flaring, which this amount is

equal to 5% of natural gas consumption of the world, 30% of the gas consumption in Europe, one

quarter of Unites States gas consumption and the whole consumption of Germany and France

(Arino et al., 2012).

The Flaring process is the least optimum use of natural gas. This process in industrial facilities is

done due to safety tips. Also the reason why flaring is used in industrial facilities and it is preferable

in comparison to venting process is due to less greenhouse gases effects. Because in every gas field,

a unique flaring process with its special specifications is needed, it is not easy to measure to which

extent this process affects the environment. The effects of flaring process are different from place to

place and from field to field. Because of the lack of global and international standards and adequate

information about flaring process, so probably the risks associated to the flaring process is more

than what we have considered up to now.

With regard to this fact that oil and petroleum factories seek to maximize their profits, it is

necessary to minimize the amount of lost gases burnt and dispersed by flaring and venting

processes. Therefore the economical objectives of oil companies are consistent with environmental

protection policies, and these policies are considered by governments and nations.

In the countries which a large amount of gas are produced during the extraction process of oil,

collection and re-use of them is a necessary operation. Nowadays, developing countries such as

Nigeria, Iran, Algeria and Iraq, are account for 85% of flaring and venting processes.

In these countries three main reasons are present which prevent from the accurate and suitable

exploitation of gas resources, which are as follow:

1) Lack of legal and effective frameworks and instructions.

2) Weak and improper access to local and international energy markets.

3) Financial restriction of projects aimed for reducing the flaring and venting process.

The experiences of developed countries such as Norway, England, Canada and United States in the

field of reducing the amount of flaring process, reflects the determinant and important role of

government in this issues. These countries by regulating the effective rules, reconstruction of oil

fields, construction of proper infrastructures, active involvement of private sector in planning and

implementation of projects and financial incentives, results in proper fields in order to reduce the

losses of associated gases.

It is obvious that there is no unique and consistent pattern in all countries in order to reduce the

flaring process. But according geographical, climatic, political and economic specifications of

developing countries and by using policies such as proper and innovative strategies, the amount of

dispersed associated gas can be reduced. In order to achieve this goal, it is necessary to use the new

technologies and finding primary markets in order to transfer the gas to them and transform the gas

to other desirable products. Using these gases in downstream industries for people who live in oil -

owner regions, can led to gain wealth, welfare and employment.

Methodology

In this study, the relationship between the gas flaring with some variables such as oil price, CO2

emissions and total natural resources rent of GDP is evaluated by a multiple regression model:

In this sense, the gas flaring (Lgas) is independent variable, and Oil price (Lpoil), CO2 emissions

(LCO2) and the total natural resources rent of GDP (LNRR) are dependent variables. It should be

mentioned that Et is the random error and all of the variables are considered in logarithmic form in

the model.

This model is evaluated by a balanced panel pattern for Algeria, Iran, Iraq, Kuwait, Qatar, Russia,

Saudi Arabia and Tunisia and for the dataset collected from 1994 to 2008.

Prob. Statistic Method

0.6616 0.41670 Levin, Lin & Chu t



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The statistics related to Oil Price variable are gathered from BP (British Petroleum). Statistics

related to CO2 Emissions and Total natural resource rent variables are collected from the world

banks (WOI), and at last the statistics associated to gas flaring, are extracted from European Space

Agency (ESA) cat-1 proposal number 13926.

Results and discussion

Unit Root Test

The levin, lin & chu (LLC) test was used before the evaluation of the model, in order to prevention

from biased results and guarantee that the regression is real. The results obtained from the LLC unit

root test reveal that all of the variables are unfixed and after one differentiation step they will

become fixed. Therefore, the present variables are integrated with one degree. These results are

shown in Table 1.

Table 1. Levin, Lin &Cho Unit Root Test of level and Variables Levels First Difference

Variables Statistic Prob Statistic Prob Result

Lgas 0.41670 0.6616 -7.23638 0.0000 I (1)

Lpoil 8.92175 1.0000 -9.14948 0.0000 I (1)

Lco2 1.52212 0.9360 -7.92734 0.0000 I (1)

Ltnrr 0.89103 0.8135 -11.6958 0.0000 I (1)

Co-integration Test

According to the Unit Root Test of variables and the fact that integration degree of all variables are

the same, it is necessary to evaluate the Co-integration of them. The Co-integration of the Panel

Data is investigated by Pedroni Test Method. The Co-integration test presents absence or presence

of the long term relationship between the variables. Perdoni recommended two test statistics for Co-

integration Test of Panel Data. The first type is based on the intra-group approach which includes

four statistics: 1) Panel ADF-statistic, 2) Panel V statistic, 3) Panel rho-statistic, 4) Panel pp-

Statistic. This statistic represent the average statistics tests associated to time period of the

integration of panel data in different sections. The second test of Pedrioni is based on the intra-

group approach and included three different statistics: 1) Group rho-statistic, 2) Group pp-statistic

and 3) Group ADF-statistic. The Pedrioni test is conducted for a model with intercept, trend,

Schwartz Criteria and the lapse length and the results of this test is shown in Table 2.

Table 2. Pedrioni Residual Co-integration Test

variable test statistic Prob

Lgas Panel v-Statistic -0.898293 0.8155

Lpoil Panel rho-Statistic 2.089262 0.9817

Lco2 Panel PP-Statistic -2.470473 0.0067

Ltnrr Panel ADF-Statistic -2.652451 0.0040

Group rho-Statistic 3.300832 0.9995

Group PP-Statistic -3.887599 0.0001

Group ADF-Statistic -2.703863 0.0034

According to the results shown in Table 2, it is obvious that from seven conducted tests, three tests

support the Co-integration between variables of the model. Therefore the long term relationships

between Gas Flaring variable and the Oil Price, CO2 emissions and Total natural resources rent of

GDP is significant.

It should be considered that the Pedrioni Test, shows only presence or absence of the long term

relationship between the variables, but the level and how they relate to each other is not known by

this test.

The coefficients of the long term relationship is measured and evaluated by Panel Data. In this

sense, the Equation 2 is obtained as follow:

Lgasit = Cit + α LPoilit + β LCO2it + γ LTNRRit + εit

Where, i = 1, 2, ..., 8 (Number of the Countries) and t = 1, 2, ..., 15



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The first model (fixed effect model), among the Fixed Effects Model and the Pooled Mode, is

selected with regard to the fact that the probability of statistics of the Test Flimer is less than 0.5.

Then the Random Effects Model was estimated; and in order to select the best model among the

Fixed Effects and the Random Effects Model, the Hausman Test was conducted.

Because the statistics of the χ2 test is greater than 0.05, among the Fixed Effects Model and the

Random Effects Model, the latter one is selected and according to the selected model, the long term

relationship is obtained. These coefficients are shown in Table 3.

Table 3. Long-term relationships

variable coefficient Std.error t-statistic Prob.

c -0.237427 0.726329 -0.326887 0.7443

Lpoil 0.305294 0.093928 3.250306 0.0015

L 0.423753 0.151005 2.806217 0.0059

Ltnrr 0.243798 0.123009 1.981942 0.0499

The Results shown in Table 3 reveal the coefficients of the Oil Price, CO2 Emissions and the Total

Natural Resources Rent of GDP, which are fixed and significant statistics. In the other words, there

is a positive and meaningful relationship between the Oil Price and the Amount of Gas Flaring, in

such a way that in return of one unit increase in the Oil Price, the amount of Gas Flaring increase

0.305 %. Also, positive and meaningful relationship between the CO2 Emissions and the Total

natural resources rent of the GDP was studied (for long term period) in the Oil Reserve Countries of

the world.

With regard to the economic value of the natural gas and the fact that this resource is an

environmental friendly fuel (due to minimum carbon production), there are strong incentives in

order to proper use and exploitation of this natural resource as well as economical use of it, and all

of the attempts should be aimed to reduce the loss of it. Because of the large amount of gas which is

dispersed in developing countries during the oil extraction phases, it is necessary to use some

activities in order to reduce the flaring and venting processes, with regard to the experiences of the

modern and developed countries in this field.

Conclusion

In this study, the relationship between the amount of Gas Flaring, and the Oil Price, CO2 Emissions

and the Total Natural Resources Rent of the GDP was examined. To achieve this goal, a Panel Data

Pattern for the period between 1994 and 2008, in some countries such as Algeria, Iran, Iraq,

Kuwait, Russia, Qatar, Saudi Arabia and Tunisia was used. With regard to the fact that in

developing countries, the governments are oil-based governments, and in these kind of governments

the incomes obtained from selling the oil have an important role in their budget, it is obvious that

when the Oil Price increase, a direct relationship is observable between the Oil Price and the Oil

Extraction. Because during the gas extraction a large amount of natural gas is lost, there is a

significant, meaningful and direct relationship between the Oil Price variable and the amount of Gas

Flaring.

Also according to obtained results, it is shown that there is a meaningful and direct relationship

between the Amount of Gas Flaring and the CO2 Emissions and the Total natural Resources Rent of

the GDP. Because the associated gas is a valuable economical product, so there are strong

incentives in order to proper use and exploitation of this natural resource. Although, there is not a

common and standardized method for achieving this goal in all countries, but undoubtedly, the

involvement of the private and public sector along with the foreign investments in this issues are

necessary. Also regulating effective rules and implementation of the incentive policies in order to

reduce the gas losses, regulating the custom tariffs, construction of the required sub structures,

using the technologies from the developed countries in the oil extraction process, innovativeness

and creativity and easy access to national and international oil markets, are some of the effective

activities as well as accurate and economical use of this natural energy resource.



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Acknowledgments

The authors wish to thank Dr. Stefano Casadio for his valuable cooperation and helpful suggestions.

Data provided by European Space Agency (ESA) on the Cat-1 proposal number 13926.

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