Mexico Commission Cracks Down on Pemex's Flaring of Gas

MEXICO CITY (Dow Jones), Nov. 27, 2009

A Mexican energy commission said it will enforce strict new rules to reduce the flaring of natural gas by state-run oil giant Petroleos Mexicanos, or Pemex.

The National Hydrocarbons Commission said the regulations, which go into effect Dec. 1, will cut the burning of gas associated with crude oil production from 17% in 2009 to 0.6% by 2024.

That final percentage is the minimum economically and technically viable and also is the standard used by the top oil firms in the field, the commission said in a statement.

Traditionally, Pemex has flared associated gas because the firm was focused on maximum oil production and didn't see the flaring as waste since the gas required no additional investment to produce, said the commission, part of the Energy Ministry.

The new flaring rules will be phased in gradually but call for a particularly sharp cut from the current 17% level to just 2% by 2012, it said.

The regulations apply to both new and existing oil projects, and the commission is empowered to fine Pemex for noncompliance.

The commission, which was set up under energy reforms last year to oversee government oil and gas activities, said Pemex lost gas to flaring and leaks worth about $3.1 billion in 2008. That waste also had negative environmental impacts.

"In addition, the objective of the new regulations is that the gas now sent into the atmosphere could be re-injected into oil fields to increase their pressure and therefore their production; to satisfy industrial demand; to generate electricity or be stored for later use," the commission's statement said.

The new rules were developed with help from the Global Gas Flaring Reduction Partnership of the World Bank.

Pemex produced an average of 4.509 billion cubic feet a day of associated natural gas in the first 10 months of this year, out of total natural gas production of 7.051 billion cubic feet a day.  

Copyright (c) 2009 Dow Jones & Company, Inc.

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