3515 Sustainability Improvements in Egypt's Oil & Gas Industry by Implementation of Flare Gas Recovery

Ahmed Osama Abdulrahman , Department of Public Administration, Erasmus University Rotterdam, Rotterdam, Netherlands
Don Huisingh , University of Tennessee, Knoxville, TN
Wim Hafkamp , Department of Public Administration, Erasmus University Rotterdam, Rotterdam, Netherlands
Full Papers
  • Sustainability Improvements in Egypt's Oil & Gas Industry by Implementation of Flare Gas Recovery.pdf (379.4 kB)
  • Justification of the paper: Within the global Oil & Gas (O&G) industry, gas flaring is a primary source of anthropogenic Green House Gas (GHG) emissions. During the period 1995 to 2005, estimates of annual global gas flaring volumes were approximately 150 Billion Cubic Meters (BCM), corresponding to about 880 Million Barrels of Oil Equivalent. As a result, some 400 Million Tons of Carbon Dioxide Equivalent (MtCO2e) were released into the atmosphere during the same period, or 1.3 fold higher than all of Egypt’s 2009 GHG releases. According to the Global Gas Flaring Reduction (GGFR) Public Private Partnership, in 2009, Egypt was ranked 20th among the world’s top 20 gas flaring countries with quantities of flared gas estimated at 1.7 BCM (representing lost revenues of around 1 Billion American Dollars). Although gas flaring is unsustainable, it continues to be a common practice within O&G facilities in Egypt and elsewhere. As an alternative to flaring, the gaseous by-products are already being captured by some refineries and are utilised for their energy content. However, viability of flare gas recovery projects is restricted in many countries by energy subsidies, high project development costs and lack of funding. The Clean Development Mechanism (CDM) can play a pivotal role in overcoming barriers facing flare gas recovery projects in developing countries like Egypt. Whilst leading the Middle East and North Africa region in the CDM projects, applications within the O&G industry were absent from Egypt’s CDM portfolio in 2010 and only 2 projects are under validation as of March 2012.

    Purpose: This work sheds light on efforts to improve sustainability of the Egyptian O&G industry by flare gas recovery. The outcomes of research conducted on Egypt’s first refinery flare gas recovery project will be presented. The project was foreseen for implementation under CDM, therefore, the project was analysed from a triple bottom line (TBL) perspective.

    Theoretical framework: The analysis builds upon the capital budgeting theory whereby the objective function considered by the project owner is maximization of investment returns. The Internal Rate of Return (IRR) was the metric chosen to assess the project’s financial gain. IRR analysis was performed with and without CDM and compared against the owner’s current IRR.

    Results: The analysis showed that the project fulfils the CDM criteria, including promoting sustainable development. In addition to annual GHG emission reductions of 153,948 tCO2e, yielding yearly revenues of at least 777,000 American Dollars, the project can contribute to capacity building and employment opportunities in Egypt’s O&G industry. Registering the project under CDM improves its economic feasibility and can provide impetus to overcome the identified project barriers. IRR sensitivity analysis revealed that the project’s IRR is highly sensitive to local prices of gas. 

    Conclusions: Flare gas recovery projects promote Cleaner Production within Egypt’s O&G industry, hence, such projects should be implemented across the country’s O&G facilities. Although Egypt is not yet a member of the GGFR Partnership, the country should join this global initiative. From a future outlook, this project represents a major steppingstone for implementing zero flaring in Egypt.