Climate host Mexico struggles to curb gas flaring

* Burning of natural gas at oil fields surged since 2006

* Revenue needs from aging oil fields spur flaring

* State oil firm Pemex vows to slash gas flaring by 2012

* Flaring curbs part of government’s voluntary carbon cut

By Robert Campbell

MEXICO CITY, Oct 26 (BestGrowthStock) – Activists and diplomats
have hailed Mexico’s strong support for action against climate
change, but a spike in natural gas flaring at offshore oil
fields since 2006 has blemished its green reputation.

President Felipe Calderon has vowed to slash flaring by the
end of his term as part of Mexico’s efforts to voluntarily cut
greenhouse gas by 50 million tonnes a year and nudge the world
closer to a new climate treaty at talks next month in Cancun.

Although flaring peaked in 2008, state oil monopoly Pemex
is still burning off more gas than it did before Calderon took
office and is falling short of its own reduction targets.

Mexico’s long struggle to reduce its reliance on the
once-common oil industry practice, now seen as wasteful and
dirty, illustrates the challenges poorer nations face in
cutting emissions without rich world aid, a likely stumbling
block when climate officials meet in Cancun in late November.

Although gas flaring represents only about 1 percent of
global carbon emissions, the amount of gas burned off worldwide
each year is staggering, equal to a third of European demand.

For Mexico, gas flaring, in which surplus natural gas
associated with oil production is burned off into the
atmosphere, is about more than the environment. For years,
flaring at offshore fields has enabled Mexico to maximize oil
output, which funds more than a third of the federal budget.

(For a graphic on gas flaring in Mexico, please click on
http://r.reuters.com/van32q)

As Mexico’s oil fields have aged, more and more natural gas
is produced with every barrel of crude pumped from the ground.

That means Mexico can either scale back oil production to
keep gas output within the limits of processing capacity,
starving the government of funds, or it can burn off the gas,
polluting the environment and reducing long-term productivity.

State oil firm Pemex [PEMX.UL] has opted to burn. At its
peak in 2008, Mexico burned off as much gas as Poland consumed.
Even with recent reductions, Pemex still flares every day the
equivalent of 6,000 U.S. households’ annual gas supply.

“CRIMINAL” FLARING

Flaring, which a top Mexican energy official once branded
as “criminal,” has been a problem in Mexico since the 1940s,
especially in older installations designed when natural gas was
viewed as waste rather than a valuable resource.

In recent years flaring has been one of Mexico’s fastest
growing sources of greenhouse emissions and the main culprit
behind Pemex emissions jumping 37 percent between 2001 and 2008
to 54.9 million tonnes of carbon dioxide equivalent per year.

Despite the huge quantity of gas burned by Pemex, Mexico is
only the world’s 15th-largest gas flarer and is dwarfed by
leaders Russia and Nigeria, the U.S. government says.

While Pemex accounts for just under 9 percent of Mexico’s
total greenhouse gas emissions, the company admits it is still
burning off too much gas.

“We have installed a lot of compression equipment to
re-inject this gas … but it keeps growing and we’ve been
losing the race. We think that we’re now in a position to start
winning,” Carlos Morales, head of Pemex’s oil and gas
production arm, said in an interview.

Pemex has cut flaring to around 600 million cubic feet of
natural gas per day, or roughly 8 percent of national gas
output, less than half of what it was burning off in 2008.

The company remains far from a goal to cut flaring to under
240 million cubic feet per day this year, but Morales said a
$2.4-billion plan to cut flaring was starting to bear fruit.

Under new rules, Pemex is spending billions to update older
facilities and re-inject more excess gas into oil fields as it
seeks to cap flaring at 2 percent of gas output by 2012.
(Reporting by Robert Campbell; editing by Missy Ryan and
Philip Barbara)

Climate host Mexico struggles to curb gas flaring