Policy and Targets
Background and the Role of Reductions in Meeting Environmental and Economic Objectives
The volume of gas flared in the Arab Republic of Egypt averaged 2.7 bcm in 2012, rose to 2.8 bcm in 2014–16, and fell to 2.1 bcm in 2021. The flaring intensity did not vary much during the same period. There were 103 individual flare sites in the last flare count, conducted in 2019.
Gas flaring volume and intensity in Egypt, Arab Rep., 2012–21
In June 2017, Egypt submitted its first NDC to the UNFCCC. The NDC does not commit Egypt to targets for limiting GHG emissions but lists adaptation strategies focusing on increasing the resilience of such sectors as agriculture and tourism. It also lists GHG mitigation actions, including flaring and venting reduction. In 2017, the Egyptian government endorsed the World Bank’s Zero Routine Flaring by 2030 initiative (World Bank, n.d.).
According to Egypt’s First Biennial Update Report to the UNFCCC, released in 2018, flaring and venting from oil and gas activities accounted for less than 3 percent of GHG emissions in the country. The report estimates that fuel combustion by industries such as power generation, transportation, and refining accounted for 85 percent of all GHG emissions. These and other activities are grouped under the energy sector, which is collectively responsible for 87 percent of total GHG emissions. To date, GHG mitigation actions have focused primarily on the energy sector. They include the reform of energy subsidies, investment in wind and solar power generation, enhancement of energy efficiency, and replacement of higher-carbon fuels with natural gas or biomass. Egypt has also used the CDM of the UNFCCC.
The government has been promoting the use of natural gas and enacted a new law to open the gas sector to competition. regulated by a new regulator (see Interplay with Midstream and Downstream Regulatory Framework section of this case study). These reforms and government efforts to increase gas use—which would reduce GHG emissions by substituting it for fuels with higher GHG emissions intensity—may create incentives for operators to capture the associated gas they are currently flaring or venting, especially from new upstream projects.
Targets and Limits
No evidence regarding targets and limits could be found in the sources consulted. PSCs call for avoiding the waste of petroleum resources but also for making sure that oil production is not impaired if associated gas cannot be utilized (see the Primary and Secondary Legislation and Regulation, and Flaring or Venting without Prior Approval sections of this case study). Based on data from the Egypt General Petroleum Company (EGPC), flaring from more than two-thirds of the well sites is less than 1 million standard cubic feet (mmscf) a day. The Egyptian Environmental Affairs Agency (EEAA) may impose emissions limits in the EIA (see the Regulatory Mandates and Responsibilities section of this case study), but no specific limits on emissions from flares or vents could be found in the sources consulted.
Legal, Regulatory Framework, and Contractual rights
Primary and Secondary Legislation and Regulation
The Environmental Protection Law 4, 1994 (amended by Law 9, 2009) and the implementing regulations cover emissions from combustion, including flaring (see the Regulatory Authority, and Regulatory Mandates and Responsibilities sections of this case study).
Concession agreements are granted for exploration. The three parties:
- the government as the owner of oil and gas
- a local private company or a foreign company
- one of three state-owned petroleum companies (“national companies” hereafter): EGPC, which directly or indirectly controls shares in dozens of joint ventures and privately held companies; Ganoub El Wadi Petroleum Holding, which oversees petroleum activities mainly in the southern region of Egypt; and thee Egyptian Gas Holding Company (EGAS), which has been a party to all gas concession agreements since 2004.
If there is a commercial discovery of oil and gas, a PSC is negotiated, and a joint venture is established between the contractor and one of the three national companies, the latter of which holds a 50 percent stake. The concession agreements call on operators to follow generally accepted industry methods “to prevent loss and waste of petroleum.” Other clauses of the agreements create potential conflicts (see the Regulatory Mandates and Responsibilities section of this case study).
National laws and regulations govern the flaring and venting of associated gas.
Associated Gas Ownership
The government owns all oil and gas resources. The partner companies in the PSCs are given title to their shares of the produced oil and gas, including associated gas. provided it is used in field operations (for example, for power generation or enhanced oil recovery). They can dispose of their shares of oil and gas extracted per the terms of the PSCs. Priority is given to meeting local gas market requirements, as determined by the participating national company. Other clauses in PSCs govern the pricing and sharing of associated gas under different circumstances and at different times of an asset’s life (see the Development Plans section of this case study).
Regulatory Governance and Organization
The Ministry of Petroleum and Mineral Resources plays an overarching regulatory role for the oil and gas sector. Although there is no specific reference to flaring or venting in PSCs, contractors and operators are subject to Law 4 and the associated regulations. The ministry often acts through the EGPC, EGAS, and the Ganoub El Wadi Petroleum Holding as joint venture partners with companies investing in Egyptian upstream assets. The EEAA is part of the Ministry of Environment and is the environmental regulator responsible for conducting an EIA for new upstream oil and gas projects and monitoring emissions from combustion.
Regulatory Mandates and Responsibilities
Article 40 of Law 4, the Environmental Protection Law, 1994/2009 requires emissions from combustion for all purposes to be within the limits The limits are detailed in the annexes of Executive Regulations 338, 1995 (amended in 2005). The emissions listed do not include CO2 or methane. Article 40 also states that the responsible parties will “be held to take all precautions necessary to minimize the pollutants in the combustion products.”
Guidelines for the EIA, published in 2001 by the EEAA, do not specifically mention flaring or venting, but they do cover gaseous emissions (Paragraph 3.6.3), which would include emissions from gas flaring, and require monitoring and environmental management plans (Paragraphs 3.9–3.11). Article 43 of Executive Regulations 338, 1995, covers oil and gas operations and calls for best international industry practices to prevent gas leaks and flares and vents. The EGPC is responsible for approving or reviewing EIAs and environmental protection measures consistent with global best practices and ensuring proper implementation.
Monitoring and Enforcement
The EEAA is responsible for checking compliance with environmental regulations and enforcement of the EIA. It has the authority to conduct inspections (see the Measurement and Reporting Requirements section of this case study). The national companies have access to operating facilities as partners in joint ventures and act as liaisons between the partnership operating the field and the EEAA during the EIA process. In accordance with the PSC terms, the national companies approve development plans, which may include associated gas utilization options, and are responsible for ensuring compliance with development plans. Gas utilization may cover flaring and venting.
Flaring or Venting without Prior Approval
PSCs state that if associated gas cannot be used, the national company and “the contractor shall negotiate in good faith on the best way to avoid impairing the production in the interests of the parties.” One implication of this clause is that flaring or venting is not curtailed if doing so is detrimental to the project economics.
Authorized Flaring or Venting
No explicit language on the authorization of flaring or venting could be identified in available official documents. The language in PSCs and Executive Regulations 338, 1995 suggest that as long as flaring and venting were allowed under the development plan and the EIA—both overseen by the national companies in the joint venture—there is no need for a separate permit.
PSCs require development plans. The initial plan describes the development concept for efficient exploitation of oil, gas, and condensate reserves to meet the needs of domestic and external markets. Upon a commercial discovery, the national company and the contractor produce a more detailed development plan, which is then submitted for approval by the minister of petroleum and mineral resources.
A current map of the National Gas Pipeline Grid System is provided in an annex of a typical PSC; it has the same equal force and effect as other provisions of the PSC. The map is referenced in parts of the PSC that address the gas sales agreement; it is used primarily to identify the nearest connection to the pipeline grid.
A recent PSC sets forth various fiscal terms relating to cost recovery, expenses, and production sharing. It allows for allocating gas (and, if gas is processed, LPG) that is not used in operations by the national company and the contractor. The PSC also provides principles and formulas to be used to determine the prices of gas and LPG. The prices for the local market are negotiated by the EGPC or EGAS and the contractor; the export price of gas is calculated as a netback value. These prices are used in the valuation of associated gas in cost-recovery calculations. The PSC provides details on the sales of gas and LPG in local and export markets, pricing and payments associated with such sales, and the rights of the EGPC and EGAS, as defined in the gas sales agreements.
No regulatory requirement to evaluate opportunities to minimize flaring and venting could be identified in available official documents. PSCs offer a structure for facilitating the sale of more associated gas to the EGPC and EGAS—and to other parties once the gas sector is reformed—for the local market.
Measurement and Reporting
Measurement and Reporting Requirements
No evidence regarding the measurement and reporting requirements could be found in the sources consulted. However, industry studies suggest that the EGPC, as the joint venture partner, has access to flaring and venting data. The EIA of oil and gas activities requires a monitoring plan, which should outline “monitoring intervals and reporting procedures” of the air emissions covered in an individual EIA. Article 17 of Executive Regulations 338, 1995 requires regulated entities to maintain records. Article 18 empowers the EEAA to conduct inspections and tests to confirm the accuracy of records. Article 43 assigns some responsibilities to the EGPC.
Measurement Frequency and Methods
No evidence regarding specified measurement frequency and methods could be found in the sources consulted.
No evidence regarding engineering estimates could be found in the sources consulted.
Under the EIA, operators must keep a log of emissions from combustion. No reference to flared gas volumes and composition could be identified in the EIA guideline or other official documents. However, PSCs focus on marketing LPG (mostly propane and butanes), suggesting that other hydrocarbons can be flared or vented. The focus on LPG in PSCs also suggests that records on volumes are kept for fiscal purposes, at least for some natural gas liquids.
Data Compilation and Publishing
Industry reporting suggests that the EGPC has flare volume data, but a public report detailing these data could not be found in the sources consulted.
Fines, Penalties, and Sanctions
No evidence regarding monetary penalties could be found in the sources consulted.
No evidence regarding nonmonetary penalties could be found in the sources consulted. PSCs give national companies partnering in joint ventures certain rights over associated gas, which may lead them to take over the gas rights from the partners. However, it is unclear whether such a situation leads to any changes in the volumes of flared or vented gas.
No evidence regarding performance requirements could be found in the sources consulted.
Fiscal and Emission Reduction Incentives
No evidence regarding fiscal or emission-reduction incentives could be found in the sources consulted.
Use of Market-Based Principles
Egypt has implemented two CDM projects. One, registered in 2006, targeted methane venting at a landfill facility. The second project, registered in 2013, targeted flare gas recovery at a large refinery.
Negotiated Agreements between the Public and the Private Sector
Development plans for upstream facilities must be agreed upon by all joint venture partners including the national companies. These negotiated plans provide the main opportunity for incorporating flaring and venting reduction from the beginning of concept development.
Interplay with Midstream and Downstream Regulatory Framework
The government has been promoting the use of more natural gas within the economy. It has a strategy for increasing the use of CNG vehicles. The government provides financial support for converting older gasoline or diesel vehicles into CNG, selling new CNG vehicles, and expanding the CNG filling station network. EGAS is expanding the distribution network to connect more residential buildings to gas supplies. The government enacted a new Gas Market Law (No. 196) in 2017 and established the Gas Regulatory Authority in 2017. The sector’s restructuring is intended to introduce competition in the gas market via third-party access to the pipeline network. This restructuring aims to give consumers or gas-trading companies the ability to procure gas supplies from producers within Egypt or via LNG imports. Previously, EGAS was the single buyer of natural gas and the de facto regulator of the gas sector.
The Cabinet sets the prices of natural gas delivered to different customer classes. As part of gas market reforms, prices were raised for all buyers except residential consumers. Industries such as cement found the reformed gas prices too high and switched to coal. In 2020, the Cabinet lowered gas prices for all industrial users. Given the increased availability of LNG and increased domestic gas production, lower prices may still allow cost recovery to suppliers. As one of the reasons cited for the lack of investment in flaring and venting reduction at oil and gas facilities has been that gas prices are below cost recovery, the market reforms are promising, although the Cabinet’s differentiation of prices by customer class and the risk of frequent readjustments create uncertainty.
These reforms and government efforts to increase gas use may create incentives for operators to capture more of the associated gas they are currently flaring or venting. The strength of the incentive depends on the proximity of the field to processing facilities and pipeline networks, the age of the field, the gas-to-oil ratio, the share of natural gas liquids in produced volumes, and other technical and geological factors. The incentive to reduce routine flaring is probably highest for new developments, especially if the LPG content is high.