Key Takeaways:
Flaring and venting of associated gas from oil production is a major environmental problem and colossal waste of money, with an estimated 143 billion cubic meters (bcm) of gas worth an estimated $55 billion squandered globally in 2021 alone
The UK is a major contributor. Over the past 10 years, the UK wasted some 13 bcm of natural gas through flaring and venting, releasing 45 million tonnes of CO2 and exposing oil and gas operators to £2.6 billion in lost gas sales and £1 billion in emissions trading system (ETS) payments
In 2021 alone, the UK wasted 1 bcm of fossil gas or 3% of production, at a cost of over £580 million during a period of rising European gas prices
The North Sea Transition Authority should urgently consider introducing economic disincentives to reduce routine flaring and venting, as the regulator looks to revive declining oil and gas production in the UK Continental Shelf
Routine flaring and venting in the North Sea is a major environmental issue and a waste of resources that accentuates gas shortages
London, 30 February 2023 | The UK has wasted about 13 billion cubic metres (bcm) of indigenous gas reserves through flaring and venting over the past 10 years, exposing oil and gas operators to £2.6 billion in lost gas sales and £1 billion in Emissions Trading System (ETS) payments.
In the current gas price crisis, the practice is accentuating gas shortages, increasing costs for consumers, and polluting the atmosphere. Routine flaring and venting in the UK resulted in 45 million tonnes of CO2 emissions over the same period – more than Scotland’s entire emissions in 2021.
In 2021, the country wasted roughly 3% of gas production, or about 1 bcm of gas, through flaring and venting, equivalent to over £580 million from lost gas sales and ETS payments.
“The amount of gas wasted through flaring and venting in the UK is significant relative to production levels and is a major waste of resources,” said Andrew Reid, an IEEFA guest contributor and partner at North Stone Advisers. “Introducing clear economic disincentives would support the smart use of the UK’s declining reserves and protect UK companies from wasting billions on lost gas sales.”
Despite the North Sea Transition Authority’s (NSTA) target of zero routine flaring and venting by 2030, reductions in flaring and venting in recent years may correlate more with declining oil production output in the UK Continental Shelf than efforts by the regulator to curb the practice.
As the North Sea Transition Authority seeks to revive declining oil and gas production in the North Sea, the Treasury should urgently consider introducing additional taxes for CO2 emissions that can decrease the amount of wasted gas.
Experience from neighbouring Norway shows economic disincentives can lead to significantly lower volumes of wasted gas. In 2021, the UK produced around half the oil of Norway’s 1.8 million barrels of oil equivalent (mboe)/day, yet flared more than five times the amount of natural gas. About 60% of the flaring was routine and could be stopped.
Flaring accounts for 25% of total greenhouse gas emissions from offshore operations in the UK. In Norway, it accounts for only 5%, despite the Nordic country’s higher production.
“The amount of gas flared and vented from UK offshore fields in 2021 could have supplied more than half a million UK households for an entire year,” said Arjun Flora, IEEFA director for Europe. “Failing to tackle this level of wastage undermines ongoing public spending efforts to relieve the cost-of-living crisis. The UK is decades behind neighbouring Norway in implementing rules and regulations to end this practice.”
“It is yet another example where energy measures that should be deployed urgently are still being ignored.”
Read the report: UK Offshore Flaring and Venting
About IEEFA
The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends and policies. IEEFA’s mission isto accelerate the transition to a diverse, sustainable and profitable energy economy. Find out more at www.ieefa.org
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