The Planning Commission and the Oil and Gas Regulatory Authority (Ogra) have strongly opposed the grant of compressed natural gas (CNG) licences based on flare gas, terming it a risk to public safety.
The regulator has also pointed out that the illegal use of flare gas has resulted in several incidents due to poor quality and moisture content in the gas.
During a meeting of the committee on flare gas, the member energy (Planning Commission) opposed the use of flare gas in CNG stations and transport sector, stating that the use of natural gas in the transport sector was being discouraged and no new CNG investment should be promoted.
Ogra stated that pipeline-quality gas could be used in CNG stations for compression, storage and in automobiles.
The regulator recalled that many accidents had occurred in the past due to the illegal use of flare gas in the automotive sector as the poor quality gas contained sulphur content, H2S and moisture beyond approved limits. Due to this, the quality of CNG cylinders will be compromised, thus risking public safety.
Officials said that all incidents in the transport sector in Sindh had occurred due to the use of low quality flare gas. They added that flare gas was transported through containers that had not been approved so far.
The officials added that the gas was without meters and it should be made a pipeline-quality gas to avoid incidents.
The government is likely to allow Ogra to grant CNG licences based on flare gas.
Flare gas is a form of natural gas that is produced along with crude oil and is typically separated from oil at the wellhead. The flaring of such associated natural gas has increasingly become unacceptable around the globe due to environmental concerns.
The Petroleum Concession Agreement (PCA), signed with exploration and production companies, has a standard clause, stating that the flaring of gas shall not be allowed and such gas shall be used commercially.
If such a commercial arrangement is not possible, the government will allow flaring till the time the government or any of its designated entity is able to take the gas to downstream flaring of gas/ oil separation facility.
The federal government issued the “Utilisation of Flare Gas Guidelines 2016” on February 17, 2017. The guidelines provide that the producers will be required to sell gas to either of the gas utilities depending on specifications of the gas.
In case, such an option is not feasible due to techno-economic constraints, lease holders are free to sell gas to third parties at negotiated prices either through a pipeline or a virtual pipeline system or another means subject to meeting the standard requirements.
The guidelines also provide for the constitution of a committee to oversee implementation of the guidelines, which include representatives of the Petroleum Division and provinces.
Flare and Unutilised Gas Processors’ Association has stressed that flare gas can be best utilised in the transport sector in addition to textile, food processing, glass manufacturing, power generation among others and that such gas reserves were located in remote areas where industrial units were not established in close proximity.
Gas can be effectively utilised in the transport sector and produced from reserves found in remote areas. The use of such gas will save foreign exchange and can act as a substitute to liquefied natural gas (LNG) imports to a certain extent.
There is a moratorium on setting up new CNG stations due to demand-supply imbalance in Sui companies’ system back in 2008, based on which Ogra had stopped granting new licences for CNG stations. This has now been relaxed only in case of re-gasified LNG supply.
The Petroleum Division has sought permission for the grant of new CNG licences based on flare gas consumption. Ogra will incorporate the terms and conditions of flare gas-based CNG licences, which may say the licences are only for flare gas-based CNG stations and the licensee cannot claim for its conversion into indigenous gas/RLNG.
Any change will require a new policy and such CNG stations will bear all risks and costs associated with the supply of such gas as well as sale of CNG for vehicular use.
Published in The Express Tribune, January 3rd, 2021.
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