Country
Assessment
Federal Law No. 7-FZ on Environmental Protection, 2001 requires that an environmental impact declaration (Article 31) and an EIA (Article 32) be carried out on economic or other activities that may directly or indirectly affect the environment.
Article 46 of Federal Law No. 7-FZ on Environmental Protection, 2001 requires oil and gas facilities to be designed and operated in a manner that is not harmful to the environment. Article 3 of Federal Law No. 2395-1 on Subsoil, 1992 gives the Federal Agency for Mineral Resources the powers to review and approve development plans and PSCs. These powers allow the agency to influence the use of associated gas in future oil production.
No evidence regarding economic evaluations could be found in the sources consulted.
Article 22 of Federal Law No. 2395-1 on Subsoil, 1992 requires the oil and gas producer to submit to the Federal Geological Information Fund reliable information on volumes explored and produced. To ensure the uniformity of measurements, meters must meet the metrological and technical requirements as defined by a normative guideline issued by the Federal Ministry of Energy. Section 3 of Federal Decree No. 1148, 2012 requires oil producers to report their “flaring rate”—the percentage of associated gas that is flared and vented (see the Monetary Penalties section of this case study).
Article 16 of Federal Law No. 7-FZ on Environmental Protection, 2001 specifies the procedures for calculating associated gas flaring or venting fees. Sections 1– 7 of Federal Decree No. 1148, 2012 defines the key principles applicable to calculating these fees: The maximum admissible limit value for flaring and venting combined should be no more than 5 percent of the total associated gas volume, calculated by the flaring rate (Z), Z = S/V x 100%, where S is the amount of associated gas flared and vented and V is the volume of associated gas produced. Volumes flared during scheduled shutdowns are excluded from the calculations. Below the maximum admissible limit value, the fee calculation (using emission pollutants and environmental factors) as quoted in Federal Decree No. 913, 2016 applies without any additional multiplier uplift. Above the maximum admissible limit value, a multiplier (k-factor) of 25 applies to the calculated fee, up from the previous k-factor of 12, which was applicable until 2014. An additional k-factor of 120 applies if there is no metering system that meets the Federal Ministry of Energy requirements in place. Efforts to increase associated gas use are captured in a cost coverage indicator, which reduces the overall fee. Production of less than 5 million m3 a year and production with a hydrocarbon saturation of less than 50 percent can be exempt from additional fees. Federal Decree No. 255, 2017 requires these fees to be paid in quarterly advance payments (except for the fourth quarter). Sections 1 and 3 empower the Federal Service for Supervision of Natural Resources to verify the fee calculations and collect the fees, which are not tax-deductible.
Article 20 of Federal Law No. 2395-1 on Subsoil, 1992 allows the Federal Agency for Mineral Resources to terminate upstream licenses if established or license-specific rules are violated. Federal Law No. 225-FZ on Production Sharing Agreements, 1995 links PSC renewal to the rational use of subsurface resources (Article 5) and allows for early termination of PSCs in case of noncompliance with federal legislation (Article 21).
No evidence regarding performance requirements could be found in the sources consulted.
Fees related to gas flaring and venting are not tax-deductible. However, legal entities participating in several oil and gas projects across the value chain could benefit from fiscal consolidation, allowing them to offset profits from one project against losses from another. Depending on how profitable the other operations are, doing so could enable the utilization of associated gas, which would otherwise be flared or vented.
No evidence regarding the use of market-based principles to reduce flaring, venting, or associated emissions could be found in the sources consulted.
Article 27 of Federal Law No. 69-FZ on Gas Supply, 1999 requires owners and operators of transmission and distribution facilities to give associated gas preferential access to free capacities. Article 32 of Federal Law No. 35-FZ on the Electric Power Industry, 2003 gives electricity produced from associated gas preferential access to the wholesale market.