Russia Oil Firms Face Heavy Fines for Gas Flaring

Russian oil companies are facing fines of hundreds of millions of dollars or more for polluting the atmosphere with excess amounts of flared gas, the newly appointed resources minister said on Saturday.

Russia, the world's top energy producer, set a target for oil companies not to flare off more than 5 percent of the associated petroleum gas (APG) they produce as a byproduct of crude extraction by 2012.

Sticking to the previous government's policy, Sergei Donskoy told TV channel Russia 24 the threatened fines were in the "tens of billions of roubles" range. "It's hard to do a (more detailed) assessment at the moment," he told TV channel Russia 24.

Industry insiders and experts had expected the target to be eased given the absence of the infrastructure needed to recycle APG.

Donskoy was appointed minister for Natural Resources and Ecology last month following Vladimir Putin's return to the Kremlin.

"We expect first estimates (of fines) after gathering data on the first quarter," he said, adding that on average, Russian industry uses only 76 percent of APG it produces against the 95 percent target.

Russia flares around 20 billion cubic meters of associated petroleum gas every year, or approximately one-third of the total amount extracted at the country's oilfields. Trapping this gas can result in vast emission cuts, as well as increased gas sales.

Some experts rank Russia as the world's leading flarer, although the country's own calculations place it second to Nigeria.

Oil companies, including market leaders Rosneft, LUKOIL and TNK-BP, have been investing hundreds of millions of dollars to meet the government's target of increasing associated gas utilization.

"I believe the companies will reach 95 percent in 2014," the minister said, adding that so far only Russia's fourth-largest crude producer Surgutneftegaz and mid-sized oil company Tatneft have managed to flare gas within the required volumes.