Associated petroleum gas in Russia: the road will be mastered by the going

The history of associated petroleum gas (APG) in Russia is gradually changing for the better. The state and the ecological community are steadily demanding and expecting from the oil industry to achieve norms for the rational use of APG. This valuable hydrocarbon raw material confidently enters the market as a unique and increasingly popular product. Many oil companies systematically and responsibly work with associated gas at all stages of its reasonable utilization. However, many are far from all.

Quite recently, associated petroleum gas was not considered a priority for oil and gas companies. Moreover, the industrial fate of APG was unambiguous - associated gas was separated from oil when it was prepared for transport and then flared.

Over the past decade, a lot has been done to rationally use APG, as evidenced by official reports and expert opinions. However, Russia still maintains leadership in the burning of petroleum gas.

How is this problem solved today?


Back in 2007, the problem of APG processing rose to the highest state level. This served as the adoption of the Federal Law, which obliged all oil companies of the country by 2012 to provide 95% of the useful use of associated gas.

But the situation began to change cardinally and irrevocably after the release in 2012 of the RF Government Decree No. 1148 of 08.11.2012 "On the specifics of the calculation of charges for the negative impact on the environment when air pollutants are emitted from flaring and (or) dispersal of associated petroleum gas".


The introduction of the normative indicator of APG flaring in the amount not exceeding 5% of the recoverable gas volume, a significant increase in fines for excess flaring of APG on flares, as well as a gradual increase in the upward coefficients (see table) motivated oil companies to systematically deal with this problem.






 Upward coefficient    





Thus, from 2012 to 2015, the volume of APG flared by flares reduced by more than 60%, with the increase in associated gas extraction over the same period by 9%.


But already in 2016 the Russian APG market was developing unevenly: the growth of production and processing was accompanied by a decrease in the coefficient of useful use and production interruptions of independent producers and operators of production sharing agreements.

For most vertically integrated oil companies (VINK), the APG situation has developed much more positively: production growth in 2016 was 7.8%, and their share in total production reached 80%.

More than half of the total production of oil gas among the vertically integrated oil companies belongs to Rosneft. Here, the average monthly extraction of APG is 2.9 billion m3. LUKOIL and Surgutneftegas are the second and third largest producers of APG.

But at the same time there was a noticeable reduction in APG production among small producers (-8%) and PSA operators (also -8%).

The example of PJSC "NOVATEK" is also ambiguous, which, having doubled the production of associated gas in comparison with 2015, allowed negative environmental consequences - the volume of gas flared on flares sharply increased.


The main negative result of 2016 was the first (starting from 2012) deterioration in the indicators - an increase in the volumes of APG burned and a drop in the coefficient of its useful use. Thus, the volume of burnt gas increased by 18.5% compared to 2015.

And VIOC improved their performance, and the entire growth in the volume of APG that was burned fell on others - small producers and NOVATEK.

The intensive growth of APG extraction at the NOVATEK fields resulted in an increase in the volumes of oil gas burned and, as a result, a sharp drop in the coefficient of its useful use (up to 67.2%). In NOVATEK this situation is considered as temporary and exceptional, actively determining the options for the useful use of valuable hydrocarbon raw materials.

In general, among the VINK, the target line of 95% of the APG productive use was successfully passed by the companies Surgutneftegas, Tatneft, NK RussNeft and NOC (Independent Oil and Gas Company). The best growth rate of this indicator in 2016 was registered in Rosneft (+ 2.6%).

Negative results were shown by Gazprom Neft (-1.6%) and Bashneft (-4.6%). The level of APG utilization in Bashneft fell sharply from 74% to 70% in April 2016. This is explained by the beginning of joint development together with LUKOIL of a new field in the Nenets Autonomous District.


In the end, if the Ministry of Energy of the Russian Federation originally intended to achieve oil companies' target of 95% by 2014, now these expectations are postponed to 2020.

It is at this point that the industry is waiting for another, more significant than in 2014, a fourfold increase in the raising penalties for excessive gas combustion. It can, of course, be assumed that this will force most oil companies to reach the APG utilization target by 2020.

But this is only partly true, because in this rigorous rule, there are exceptions that arise from the specifics of the legislation and the objective and subjective features of Russian oil and gas production.


To this specificity are various exceptions:

- companies that have recently started development of fields (less than three years from the beginning of operation) and have not yet established technologies for the useful use of gas;

- subsoil users directing associated gas for processing to gas processing plants (GPP) - for the period of repair and maintenance work at the GPP;

- extracting companies - during the implementation of investment projects for the useful use of APG - for an amount not exceeding the costs incurred.

The above-mentioned exceptions are necessary for fair regulation of the industry, however, while torches continue to burn in the fields, and the utilization rate of associated gas slows down in its growth.

For objective reasons, experts refer to the underdevelopment of infrastructure in some areas of oil production, the complexity of access to the gas transportation system and the large investments necessary to implement projects for the productive use of APG. Such investments are especially difficult for small companies that are not part of vertically integrated structures.

For our subjective reasons, one can attribute our eternal aspiration to the simplest and supposedly economical solution of the problem. And if the problem is not pollution pollution, and the penalties imposed by the state, then there are all sorts of tricks for evading supervision supervision and unreasonable for many companies payments for the excessive combustion of APG.

Another subjective reason is the lack of a pronounced desire for mutual assistance among industry players. In some cases it is still possible to hear invitations from large companies to deliver associated gas to the underloaded capacities of the GPP, but more often there is a hard dictate of unfavorable conditions for cooperation. In addition, such joint projects of gas processing are so far single.


Regions of oil production are ill for success. But not all of them do it with the same feedback. So, for example, the Siberian Federal District with a relatively small share of the APG production for several years was the leader in the country for flaring gas. However, now the Siberians are compensating for the lag at an accelerated pace, and now according to the data of 2016 the relay of the worst indicator of the useful use of APG (75%) passed to the North-West Federal District.

The best results were recorded in the Far East (95%), the Urals (93%) and the Southern (95%) federal districts.

But the problem of rational use of APG remains still acute in a number of regions and companies, especially among small independent producers. And despite the established increase in fines in 2020, it is already clear that not everyone will be able to achieve the target target.

Regulator and informal market leader here can and should be the regional authorities who are interested and able to represent and unite the interests of different mining and processing companies for the welfare of their region. Not only fines and controls, but also subsidies and innovative proposals to consolidate efforts to facilitate the implementation of investment projects aimed at the beneficial use of APG.


To understand the direction of the movement in order to increase the APG utilization rate, we will consider the practice of using associated gas and the growth potential.

Today the most common are:

- gas processing at the GPP;

- use of gas for own needs in the field;

- supply of APG to local consumers for heating and power generation;

- reverse injection of gas into the formation to increase in-situ pressure and increase oil yield;

- supply of oil gas to the gas transportation system.

Half of the recovered associated gas enters the GPP, where processing is carried out in dry stripped gas (GHG) and a wide fraction of light hydrocarbons (NGL) for further deep processing in gas fractionating plants (HFCs), where fuel (LPG) and other raw materials are produced for the petrochemical industry.

The volume of Russian gas processing in recent years is growing solely due to an increase in the processing of APG. The share of APG at gas processing plants in 2016 reached 47.1%, and in April 2016 it amounted to a record 51.8%. It is also worth noting that associated gas in many cases is a more valuable raw material for gas chemistry than natural gas, since it is rich in C2 + fractions.

The largest player in the gas processing market is SIBUR Holding. Gas processing facilities are also owned by VINK and Gazprom. Small independent industry participants, for the most part, only look at relatively new on the market small- and medium-tonnage gas processing and gas fractionating plants.

Some NKs (Lukoil, Rosneft, Bashneft) have recently implemented APG compression projects, which simplifies logistics for end users.

In general, we can talk about the planned increase in the supply of associated gas for processing, but, unfortunately, the situation with other types of APG utilization is more complicated.

Due to technological reasons, the amount of APG that can be pumped into the GTS can not exceed 5% of the volume of natural gas pumped through the pipeline, and the existing GTS is almost completely loaded.

Injection into the reservoir remains a technologically difficult way of utilization of APG with high capital and operating costs. At the same time not all the associated gas injected into the reservoir is subject to further recovery, and the increase in oil recovery is not noticeable at all stages of field development.

The potential of APG for own needs of the fields is also limited. It happens to reduce fines, oil companies purposefully searched for gas generators with minimum efficiency, and then "illuminated the forest". But even with this option of "rational" savvy, it is not possible to dispose of all the recovered APG from the fields.

Deliveries of gas to local consumers are a non-core business for the oil industry, which they rarely scrutinize and do not give time to.

Gradual development of schemes at the junction of the above two methods of APG utilization: outsourcing of electric power supply to the field and supply of gas and electricity to local producers. An independent company enters into an agreement with a subsoil user to purchase associated gas and undertakes to provide the field with electricity. After that, a block-modular complex for gas preparation and power generation is located nearby.

As a result, the extracting company gets rid of fines for the misuse of APG, shifts capital costs and operational risks to a third party company. In turn, the operating organization receives the customer for electricity and can build the sale of heat and electricity for nearby settlements, and then upgrade the equipment and engage in deep processing of associated gas.


Of course, government agencies, represented by ministries, can traditionally use the "carrot and stick" method. Here, an effective and far-sighted combination is effective. If there is nowhere toughen penalties, then it is necessary to proceed to improve control and identify "deviators".

A motivational "carrot" may be subsidies to gas processors (especially start-ups of small companies), financing of scientific developments in the sphere of APG useful use and a moratorium on new global changes in the state regulation of the oil and gas sector that force extractive companies to "save energy" and postpone investment projects.

Regional authorities are also able to provide subsidies at the local level, but most importantly - they can become a generator that unites oilmen (including among themselves), processors and research institutes. It is important that local authorities, in addition to improving the ecological, industrial and social indicators of the region, receive an inflow of investments in the form of indirect taxes.

It's time for public organizations to change their approach to communicating with market participants from the harsh accusations of cooperation proposals.

It is important for mining companies to become more open. It is not just about including the environmental section in the annual reports, but about the actual provision of data to interested parties on the level of utilization of APG in each field.

Now such information is a commercial secret, but through open access to information, small and medium-sized businesses will be able to offer prospective opportunities and specific technology projects for maximum use of valuable raw materials.

The processors should be more actively invited to the underloaded capacity of the GPP of third-party suppliers, jointly work out the logistics of deliveries and, most importantly, provide fair commercial terms for their services.

The problem of the rational use of APG is difficult and even impossible to solve for a single company. The key to success is the cooperation of professionals and all stakeholders.


With the adoption of the decision of the Ministry of Natural Resources of Russia on raising coefficients of charges for the burning of associated petroleum gas, the level of utilization of APG grew by the largest companies from 76% (in 2012) to 90% (in 2016).

This was announced on October 27, 2017 by the Minister of Natural Resources and Environment of the Russian Federation Sergey Donskoy at a meeting of the Organizing Committee for the V All-Russian Congress on Environmental Protection and the II International Exhibition-Forum ECOTECH.

"In 2012, Russia was included in the anti-rating of countries with a high level of APG combustion. Due to the significant increase in payments for APG combustion initiated by the Ministry of Natural Resources of Russia, there has been a significant increase in investments into processing, "the head of the Ministry of Natural Resources of Russia said.

According to the Minister, during the four years of application of this resolution, leading VICs invested more than 266 billion rubles in APG rational use projects, an average of 27.5% per year on average over 3 years preceding its application.

"We believe that these steps should be an example for polluters that will implement the best available technologies from 2019, providing a significant reduction in discharges and emissions, as well as introducing modern technologies for waste processing," said Minister S. Donskoy.

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