Ahmedabad/New Delhi: In a first attempt of its kind in India, state-owned Oil India Ltd (OIL) plans to start a pilot project in Assam to convert the gas used for flaring into liquefied natural gas (LNG).
Piloting change: A flare stack burns gas at a gas well near Houston, Texas. The World Bank says gas flaring has a global impact on climate change as it adds about 350mt of carbon dioxide in annual emissions.
The pilot project hopes to not only reduce carbon emission levels but, also, help in saving an increasingly scarce commodity: gas. Mulk Raj Pasrija, chairman and managing director confirmed the development but did not elaborate.
Flaring is used to dispose of natural gas liberated during oil production and processing. This is often done in remote areas where there is no infrastructure available on site to make use of the gas.
As per the initial estimates of the project, the cost of liquefaction, transportation and regassification would be around $4-4.5 per million British thermal units (mBtu), compared with price of $16-17 per mbtu of liquified natural gas (LNG) imported in to India. India imports three million tonnes (mt) per annum or 12mscmd of gas bought in spot markets.
During the period of April-December 2007, Indian hydrocarbon companies flared 497mmscmd of gas.
The technology used for the pilot project is called small LNG technology and there are four suppliers from Australia, United States and Europe.
OIL produces 5 mmscmd of natural gas and has a dedicated pipeline network for collection and supply of gas to nearby industries such as refineries, fertilizer and petrochemical plants, power generation plants and 200 tea gardens. At least 90% of the internal needs of oilfield plants and equipment is met by natural gas.
“The first plant is expected to come up near OIL’s Dhuliyajan headquarter in Assam. The pilot project is expected to cost around Rs50 crore, including liquefication, transportation and regassification,” a person familiar with the development who did not wish to be identified said.
OIL registered a net profit of Rs1,640 crore on revenues of Rs6,008 crore in 2006-07.
The initiative will help OIL earn carbon credits. According to the World Bank, gas flaring has a global impact on climate change by adding about 350mt of carbon dioxide in annual emissions.
Analsysts say gas flaring depletes valuable resources and pollutes the planet and, therefore any capture and use of the flared gas can help reduce global carbon emissions.
“If this initiative of OIL succeeds, it will bring immense opportunity in the country because of an abundance of small gas fields in the country. Somebody has to take a risk and it is great that OIL is doing it,” said Ajay Arora, partner at audit and consulting firm Ernst and Young.
For every tonne of carbon dioxide the project will reduce, it will earn one carbon credit or certificate. Developed countries, which have ratified the protocol, are mandated to reduce their emissions by certain targets.
As it is more expensive to change to cleaner technologies in developed countries, these countries buy carbon credits from developing countries, thus reaching their target to combat global warming.
The initiative will also help in saving gas and transporting it to industries such as power and fertilizer. It would help improve the current situation as the country is facing an acute gas shortage to run its power plants and has been forced to use alternative fuel naphtha, which is about 50% more expensive.
As per ministry of petroleum and natural gas estimates, the country presently needs 180 mmscmd of gas, while supplies are around 81mmscmd. The ministry has projected that the supply-demand mismatch will persist till 2012.
According to the World Bank, over 150 billion cubic meters of natural gas is being flared which is equivalent to 25% of the United States’ gas consumption, 30 % of the European Union’s gas consumption, or 75% of Russia’s gas exports.
The gas flared yearly also represents more than the combined gas consumption of Central and South America.
Padmaparna Ghosh in New Delhi contributed to this story.