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2. François Régis MOUTON World Bank GGFR Adviser

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4. Yuriy MYROSHNYCHENKO World Bank Operations Officer

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6. Policy and Regulatory Framework: Flaring and Venting in Canada Arden BERG P. Eng. EUB Board Member

7. EndorsersIndependent Agency (IA) and Gov’t Department NEB (IA - federal) C-NLOPB (IA: joint federal & provincial Board) British Columbia (IA) Alberta EUB (IA) Saskatchewan (Dept) Manitoba (Dept)

8. Topics for Discussion • Regulatory framework • Themes for regulatory model success • Roles of independent regulator • CASA process – consultative approach • Canadian Offshore • Other Canadian initiatives

9. Global Review Regulation in 44 Countries • Word Bank studied 44 oil producing countries • Objective: determine how regulations and other factors affected flare and venting volumes • Findings: countries reducing flaring and venting used • Efficient regulation • Incentives (fiscal policies and reform of energy markets)

10. Regulatory Framework Diagram Government sets policy LEGISLATION Government Departments (environmental standards, leasing, ..) Regulators administer policy Public REGULATIONS Industry develops projects

11. Was it always easy? • No – not easy! Wasteful flaring in Turner Valley • "Hell’s Half Acre"; 200 MMCFD for a decade • Challenges through the years • Had far sighted political will and leadership • Created EUB - independent and technical • To be independent of political process / timetables • To conserve / prevent waste of reserves • To reduce impact on environment / society • To enforce regulations, including shut-in oil if necessary

12. Who is the Alberta Independent Agency? (EUB) • 9 Board Members – Government appointed • 4 engineers, 2 lawyers, 1 accountant, 2 public • 800 Staff • engineers, geologists, technicians, accountants, lawyers, 135 field staff • 143,000 producing wells, 373,000 km pipelines • Key to effective independence • "Nobody controls the Regulatory Authority but the Regulatory Authority remains under control"

13. Energy Resources Conservation Act (ERCA) • Section 2 — Purposes of Act • Appraisal of the reserves and productive capacity • Appraisal of the requirements for energy resources • Conservation of, and to prevent the waste… energy • Control pollution and ensure environment conservation • Secure the observance of safe and efficient practices • Recording…timely…useful dissemination of information • Receive information, advice and recommendations

14. Atlantic Accord Implementation Act • Accord Act Section 154 addresses "Waste" and Paragraph (f) deals with gas flaring specifically: the escape or flaring of gas that could be economically recovered and processed or economically injected into an underground reservoir • If, after the hearing , the Oil and Gas Committee is of the opinion that waste as defined in paragraph 154(2)(f) is occurring in the recovery of petroleum from a pool, the Committee may, by order, direct the introduction of a scheme for the collection, processing, disposition or re-injection of any gas produced from such pool • Production and Conservation Regulations: The Chiefs may approve the flaring or venting of gas during a production operation at a rate and volume and for the period set out in the approval where the flaring or venting does not constitute waste or an undue safety hazard • Development Plan Approvals

15. 1996 vs. 2005 (flaring -72%, venting -59%) Issue: 1996 @ 1.8 bcm and not declining 96.3% Percentage utilized Volume flared and vented .67 bcm *bcm = billion cubic metresYear 1996 - baseline for flaringYear 2000 – baseline for venting

16. Best Management Practices • KEY — Build consensus on flaring solutions • Clean Air Strategic Alliance (CASA)1 • industry, environmental NGOs, and Government multistakeholder process • Eventual elimination routine AG gas flaring • Orderly transition .. balances .. stakeholders .. • eliminate, reduce, and improve the efficiency of flares • Regulatory backstop if voluntary failed

17. CASA Flaring Project Team (FPT) • Series of Consensus CASA FPT Recommendations • Decision tree with predetermined input controls • Industry wide flaring reduction targets • Latest Updated Recommendations (EUB updated Directive 60) • Flaring Absolute Cap = 50% 1996 Base Line (0.670 BCM) • Must tie-in if Present Value is > $ -50k • Decision tree extended: gas plant and non-assoc gas flares • Conventional wells—shut in until tied in (72 hour tests) • Fugitive emissions programs and implementing required

18. Newfoundland and Labrador Offshore Petroleum Board Hibernia Field Gas Flared Yearly Cumulative Totals And Daily Average Oil Produced Gas Flared Daily Average Oil Produced 1,000,000 35,000 900,000 30,000 Terra Nova Field ) 800,000 3 Gas Flared m 3 25,000 700,000 Yearly Cumulative Totals And Daily Average Oil Produced 600,000 Gas Flared Daily Average Oil Produced 20,000 500,000 (m³/d) Daily Average Oil Production 600,000 25,000 Cumulative Gas Totals (10 15,000 400,000 540,000 300,000 10,000 ) 480,000 20,000 3 m 200,000 3 420,000 5,000 100,000 360,000 15,000 0 0 300,000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 (m³/d) Daily Average Oil Production Year Cumulative Gas Totals (10 240,000 10,000 180,000 120,000 5,000 White Rose Field 60,000 Monthly Cumulative Gas Flared 0 0 And Daily Average Oil Produced 2002 2003 2004 2005 2006 Gas Flared Daily Average Oil Produced Year 60,000 20,000 54,000 18,000 ) 48,000 16,000 3 m 3 42,000 14,000 36,000 12,000 30,000 10,000 Daily Average Oil Production (m³/d) Cumulative Gas Totals (10 24,000 8,000 18,000 6,000 12,000 4,000 6,000 2,000 0 0 Jul-06 Nov-05 Nov-06 Jan-06 Jun-06 Apr-06 Feb-06 Mar-06 Oct-06 Dec-05 Aug-06 Sep-06 Dec-06 May-06 Year

19. Other Strategies - Canadian Jurisdictions • Facilitate discussions with stakeholders and industry • Resolve regulatory barriers and economic barriers • Adopt air quality guidelines, measurement, and modeling • Improve flare design and operations standards • Require utilization unless flaring justified to regulator • Expand public notification and consultation • Use flare hierarchy—eliminate, reduce, improve • Re-licence facilities - deadline or permit cancelled • Amend acts and regulations

20. Conclusions - What Worked • Stakeholder consensus processes • Industry-wide targets but assess each site • Independent regulator—backstop provisions • Clear and consolidated requirements • Good measurement, reporting, monitoring • Regular review of flaring and venting targets • Improved public confidence in process

21. Policy and Regulatory Framework: Flaring and Venting in Canada Arden BERG P. Eng. EUB Board Member

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23. The Norwegian Experience Marta Sophie LINDE MELHUS Norwegian Petroleum Directorate

24. Overview • The Norwegian resource management to flare • The international work

25. Norwegian CS Norwegian energy policy: - Combine the role of being a large energy producer with a pioneering position on environmental issues

26. The petroleum resources on theNorwegian Continental Shelf (status 1.1.2006) • 50 fields in production • Produced reserves: • 27 billion boe • Remaining reserves and resources: • 55 billion boe • Daily production: • 3.0 million boe liquid per day • 8.2 billion SCF gas per day • Share of GDP: 24.7 % • Share of total export: 51.6 %

27. The resource management • Flaring and venting are strictly regulated from a resource management point of view since the early days on the Norwegian Continental Shelf, NCS (1971 → )

28. Historical view of the flaring on the NCS 40 35 30 25 Gas export started 20 15 Gas flaring (m3) per m3 sold o.e. CO2 tax introduced 10 5 0 1975 1979 1983 1987 1991 1995 1999 2003

29. Gas flaring policy • The Petroleum Act; Flaring and venting in excess of the quantities needed for normal operational safety shall not be allowed unless approved by the Ministry” • The Plan for Developement and Operation (PDO) needs an approval from the Norwegian government/Storting • A gas management system for each new field is implied • Annual flare permits and annual production permits are needed • The CO2 Act; CO2 tax has to be payed for all gas to fuel, flare and vented gas (about USD 0.1 per Sm3 gas)

30. Developement of integrated gas transport systems Driving force to improved oil recovery by gas reinjection Environmental friendly flaring technologies has been developed Realization of smaller oilfields on stream The consequences of the policy

31. Institutional co-operation • Currently 12 projects ongoing with focus on: • Legal, regulatory and contractual framework • Resource assessment, promotion and licensing • Government tools: PDO, Production Plans, Flaring Permits, Abandonment Plans, etc • Gas planning, Environmental Issues, CDM • Supervision and auditing • Data management • Education and Training • Assistance from Petroleum Safety Authority, PETRAD and other Norwegian authorities and companies

32. Institutional co-operation • Exchange of experience, also on issues regarding management of natural gas: • Assistance to develop legal and regulatory framework • Gas planning • Technology transfer • Health, safety and environment isues • Training and other institutional support

33. For more information you are welcome to visit the NPDs web side: www.npd.no

34. The Norwegian Experience Marta Sophie LINDE MELHUS Norwegian Petroleum Directorate

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36. Minimizing Flaring and Ventingin Established Markets J. Michael MELANCON Regional Supervisor Production and Development MMS, Gulf of Mexico OCS Region U.S. Dept. of Interior

37. Oil Production2005 • Oil Production 10 8 6 Million Barrels/Day 4 2 0 Iran Iraq Saudi Brazil China States United Arabia United Gabon Kuwait Russia Nigeria Algeria Guinea Mexico Angola Norway Canada Ecuador Kingdom Venezuela Equatorial Cameroon Source: Energy Information Administration (2004 data)

38. Gas Production2005 • Gas Production 70 60 50 40 30 Billion Cubic Feet/Day 20 10 0 Iran Iraq Brazil China Kuwait Angola Algeria Gabon Russia Nigeria Mexico Norway Ecuador Canada Cameroon Venezuela Saudi Arabia United States United Kingdom Equatorial Guinea Source: Energy Information Administration (2005 data)

39. US Gulf of Mexico 1947 2006

40. GOM Production(Bar height indicates volume)

41. Pipelines • Pipeline Infrastructure

42. Flaring & Venting2004 • Worldwide Flaring & Venting 100 80 60 Percent of Production 40 20 0 Iran Brazil Kuwait Algeria Canada Norway US (GOM) Venezuela Saudi Arabia US (non-GOM) United Kingdom Source: Energy Information Administration (2004 data)

43. Flaring & Venting Categories Continuous generally not allowed offshore U.S. small & uneconomic allowed lease use allowed Intermittent (upsets) equipment failure/maintenance testing/unloading MMS Regulatory Program ALL must be recorded on field records and submitted to MMS monthly

44. How to Minimize Continuous Flaring & Venting Prohibit permanent flaring/venting of associated gas Economic review of facilities that continuously flare/vent over threshold Require capture of gas if equipment is cost neutral over life of facility MMS Regulatory Program (Courtesy of Christopher Richter)

45. OCS Lands Act43 USC 1334(i) US Offshore Law • (No lessee)... shall be permitted to flare natural gas from any well unless the Secretary finds that there is no practicable way to complete production of such gas, or that such flaring is necessary to alleviate a temporary emergency situation or to conduct testing or work-over operations

46. How to Minimize Intermittent Flaring & Venting Properly maintain equipment Install spare compressor capacity Spare VRU on large platforms Only low GOR wells during incidents Shut-in facilities when necessary Monitor compliance Intermittent Flaring

47. Challenges ~87% of gas is vented instead of flared – can’t see it Deepwater facilities can flare/vent huge volumes in short time period Cannot inspect as many facilities in deepwater due to long flight times GOM Challenges

48. Future U.S. Improvements Drafting clearer regulations Require flare/vent meters on major oil production facilities Separate flare vs. vent records Sending regulatory experts offshore with inspectors Infrared video cameras to "see" unauthorized venting Monitor from satellites Future

49. Infrared Video Camera

50. Infrared Video CameraFlare boom Infrared Video Camera Naked Eye