How Big Oil Could Help on Climate Change in Iraq

Flaring destroys huge stores of natural gas and pours carbon into the atmosphere, but stopping the waste will take money, know-how and infrastructure.

By + More

Look at this satellite image of fires rising up from Iraq:

These hot spots, detected from 500 miles into space, were not sparked by bombings or by gunfire on the war-torn ground. They are neither flames of insurgency nor of combat. This is a snapshot of energy waste and the pointless release of millions of tons of greenhouse gas into the atmosphere.

This image shows the flaring, or burning, of natural gas that is brought to the surface as the Iraqis extract oil. There's no way to get the oil out without releasing this "associated" gas. Flaring is the cheap and dirty way to get rid of this combustible fuel when there are no pipelines, gas-fired power plants, or export terminals nearby. Iraq is by no means alone in gas flaring; it is the fourth-worst offender in the world, behind Russia, Nigeria, and Iran. Sadly, flaring still goes on in remote oil fields in the United States, although the volumes are much reduced over the years and much less than in Iraq and the other top-flaring countries.

I hope to write more about global gas flaring in the future, but it is the situation in Iraq—one of 22 countries where flaring has increased since the mid-1990s—that bears looking at now. As this Reuters story details, the Iraqi government is now having the world's oil companies register to compete for service contracts to help it develop its oil infrastructure. Of course, the main aim of the oil companies is to partner with Iraq, for a share of the profit, in increasing oil production from the fourth-largest proven petroleum reserves in the world. But it is quite possible that some of the earlier deals that will be struck between Big Oil and Iraq will be aimed at stopping the flaring and using the natural gas—both to generate power within electricity-starved Iraq and to sell abroad. As the U.S. Energy Information Administration notes here, Shell, for example, has worked on a master natural gas plan for Iraq.

Those knowledgeable about Iraq say the country is now flaring 600 million cubic feet per day of natural gas. (The World Bank, which spearheads a Global Gas Flaring Reduction Partnership, has a slightly higher estimate, based in part on the satellite study of data through 2006 it commissioned from the U.S. National Oceanic and Atmospheric Administration—source of the photo above— but I'll use the more conservative figure.) It's wasting a fuel that can be used to generate electricity, at a time when Iraq is generating only half of the power it needs to meet demand. The amount of gas Iraq is throwing away is equal to the natural gas consumption of countries like Syria, Norway, and Singapore. If valued at the wellhead price for natural gas in the United States over the past couple of years ($6.40 per thousand cubic feet), it would be worth $1.4 billion a year. And by burning the gas, it is releasing millions of tons of carbon dioxide into the atmosphere annually.

But capturing that gas and putting it to use will take pipelines, power plants, and other expensive investments, and that's where Iraq would like the Big Oil companies and their huge cash reserves to come in. How quickly that's going to happen is uncertain, since Iraq has not yet passed a law that would set the ground rules for such deals. Iraqi Oil Minister Hussein Shahristani recently said his country would begin negotiations without waiting for the legislation. But Shell's chief executive officer, Jeroen van der Veer, noted a couple of weeks ago that the petroleum law was still a "matter outstanding" that needed to be dealt with. "We would like to work in Iraq," he said. "But we would like to know what the rules of the game are."

The idea of major oil companies making their entrée into Iraq is anathema to many, particularly those who opposed the war, and in fact, British activist groups have organized a "Hands off Iraqi Oil" day of protest on February 23.

But the picture that's emerging is complicated. What if Big Oil's moves in Iraq include addressing the fuel waste and needless climate burden of gas flaring? Even if the oil companies' eyes remain on the prize of profitable oil production sharing agreements, the beneficial outcome of capturing natural gas—a cleaner fuel than the oil that Iraq now uses to generate most of its inadequate electricity—is something that has to be considered. I'd be interested in what people who care about climate change, energy supply, and the role of oil companies in the world think about the problem of putting out these fires in Iraq.