Press Releases

09 Aug 2016
2016 - Government Drafts Gas Flare Reduction Roadmap

The Ministry of Energy and Mineral Resources is in the process of drafting a gas flare reduction roadmap. Currently, at least 200 mmscfd (million standard cubic feet per day) of natural gas is wasted on gas flaring.

Gas flaring is combusted gas resulting from oil and gas exploration and production or processing activities. Combusted gas cannot be re-absorbed or re-processed by existing production or processing facilities.

The ministry’s Oil and Gas Technical and Environmental Director Djoko Siswanto wants to have a strategy to utilise gas flare. “If it can be utilised, it will create new jobs, a clean environment, and more state revenue,” Djoko said to Katadata, Monday (8/8). (Read: Government Prepares Regulation on Gas Flare Management)

One way is to process gas flare into small-scale compressed natural gas (CNG). It could also be used to power local small-scale power plants, household gas networks, small ceramic industries and the like, or for the contractor’s personal use.

Provisions on gas flare are currently stipulated under Regulation of the Minister of Energy and Mineral Resources No. 6/2016 on Provisions and Procedure for Determining the Allocation and Utilisation of Natural Gas and Natural Prices. Article 17 of the regulation stays that contractors are obliged to propose a plan to optimise the utilisation of gas flare to the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas).

For the next step, the Director General of Oil and Gas, on behalf of the Minister, will set a value for the allocation and price of gas flare for utilisation based on the contractor’s proposal after it has been evaluated by SKK Migas.

Contractors can have two options for utilising gas flare. They can increase the number of upstream facilities, or the gas can be used by a business entity that holds a gas processing and/or commercial license. (Also read: Companies Must have Infrastructure to Obtain Gas Trading License).

Domestic consumer purchasing power and supporting the government initiative to supply gas for transportation, households and small-scale customers must also be considered when setting the gas flare price.

For companies that opt to add more upstream facilities, the price will be determined based on economic calculation on the cost of adding new gas flare utilisation facilities. If the gas flare is the used by another business entity, the price will be determined based on economic value of a facility constructed specifically to utilise gas flare.

Based on these rules, Djoko said there was a possibility that natural gas prices will drop to zero per mmscfd in an effort to utilise gas flare. “The ministerial regulation will be adjusted to consumer purchasing power, so that gas flare can be utilised rather that polluting the environment,” said Joko.

There are several advantages to utilising gas flare, such as creating a clean environment and conserving fuel. Companies that utilise gas flare will also create new jobs. And the state will benefit from additional tax revenue. (Also read: Gas Allocation Regulation Opens Opportunities for Rent Seekers).

Djoko said that two million households will benefit from gas flare utilisation because it will replace kerosene and liquefied petroleum gas (LPG). “If we can utilize gas flare, even at a price of zero, we can all reap benefits,” Djoko said.