Based on data from the World Bank, in 2011 natural gas burned as flare gas reached more 150 billion cubic meters (bcm) and added about 400 million tons of annual CO2 emissions. The first rank of the biggest fuel-gas producer is Russia with 37.4 bcm per year followed by Nigeria with annual production of 14.6 bcm. While Indonesia ranks fourth with an annual burning gas flame of 2.2 bcm. Several countries have started to pay attention to the impact of this flare gas. The country is making policies and regulations to reduce the flare gas of which are Canada, Norway, Russia, Kazakhstan, and Qatar.
According to the data, Indonesia, which is one of the world’s leading gas-burning countries through the National Planning Agency (Bappenas) has sought to reduce the production of flared gas flares through “the Indonesian Climate Change Sectoral Roadmap 2010″. In its implementation, it is supported by the National Action Plan for Emission Reduction and regulated by Presidential Regulation No. 61/2011. The goal is that the data of flare gas can be obtained accurately and structured. In principle, oil and gas contractors must seek government permission to carry out gas burning. This is in accordance with the Decree of the Minister of Energy and Mineral Resources of the Republic of Indonesia No. 31 Year 2012 on the Management of Gas Flares in Oil and Gas Processing. But this ministerial decision does not regulate the penalties or fines to companies that violate regulations. The rules are only normative.
It is necessary to formulate specific mechanisms related to economic instruments and other fiscal systems so that existing regulations are more effective and efficient. Such as incentive or disincentive arrangements imposed on gas producers and processors in more detail.
Based on the analysis of Low Carbon Support Program to Ministry of Finance Indonesia most of the flaring takes place offshore. Offshore Production Sharing Contracts (PSC) account for about 48.2% of gas combustion and 25.6% are produced by terrestrial PSC. Pertamina & Partners and Joint Operating Body for Production Sharing Contracts contributed 21.2% and 5.0% respectively. Flare gas data according to the company showed that five major flue gas producers produce 76.4% of the total production of national flare gas. These companies are BP Tangguh, Pertamina & Partners, Petrochina International Jabung Ltd, CNOOC SES Ltd, and Total Indonesia. While the top 10 and 15 companies contributed 87.5% and 93.2%.
A positive relationship between the size of the oilfield and the associated gas produced shows that the total flare gas is not the only indicator of efficiency. The application of Gas Flaring to Oil Production Ratio and Global Gas Flaring Reduction will be more relevant and provide additional information. The problem is that oil and gas are generally produced simultaneously in the production process, making it very difficult to separate the flare gas from oil production by flare gas from gas production.
To reduce the production of flare gas, the following things can be done:
1. Flaring can be implemented within certain limits for safety and maintenance purposes.
2. The polluter pays principle applies in policy formulation because the cost of pollution is directly charged to those who should bear.
3. Variations in emissions to barrels of oil equivalent between one place and another are large enough to require considerable investment discrepancies to mitigate emissions.
4. The utilization of revenues from fiscal disincentives is an important system to ensure fairness and investment funds.
From all the above descriptions we can conclude that there are three policy recommendations to minimize the flare gas that can be done by the government: commercialization of flare gas through regulations, enforcing government regulations to oil and gas companies, and disincentive fiscal use.