Opening remarks at the Regional Conference on Gas Flaring Reduction Tashkent, Uzbekistan (June 15, 2012)

Honorable government officials, industry representatives, distinguished guests, colleagues, ladies and gentlemen…..

As we gather in Tashkentfor the thirdregional forum on flaring reduction and gasutilization, there could hardly be a better time to address issues related to energy security, energy efficiency and climate change.

This is also a time of unprecedented challenges for oil producing countries and companies. These challenges, however, also bring unprecedented opportunities.

In this context, the World Bank-led Global Gas Flaring Reduction partnership plays a critical role in several oil producing countries around the world to foster a greater utilization of associated gas, thus reducing the waste of a valuable resource and of some 400 million tons of annual greenhouse gas emissions from global flaring.And let me here commend the more than 30 government and company partners that are already taking part in the GGFR initiative,showing a firm commitment to reducing gas flaring to minimum levels worldwide.

Let me alsothankthe Uzbekistanauthorities, particularly at the Cabinet of Ministers, Uzbekneftegaz National Holding Company, and international companies which are participating in this regional forum, for showing the vision and leadership required to meet the energy challenges and opportunities of this new century.

Furthermore, I am certain most of you will agree that the significance of this regional forum goes beyond the gas flaring challenge and will indeed contribute to addressing some of the broader energy issues that countries around the world, including some in Europe and Central Asia, are facing today.

What are some of these global issues that I am referring to?

The first one is climate change and energy efficiency. The negative impact of climate change on the environment also has implications for poverty reduction efforts. The policy response is focused on mainly two dimensions: climate change mitigation and climate change adaptation. Reducing greenhouse gases like carbon dioxide from gas flaring and methane from venting will certainly contribute to the mitigation efforts, and to increasing energy efficiency.

The second one is energy access. The lack of access to energy in various countries is not only causing the loss of productivity and economic growth but also jeopardizing the achievement of poverty reduction goals in several regions around the world, including Europe and Central Asia. Thus, generating electricity with gas that otherwise would be flared, particularly in remote rural areas, is a desirable contribution to broadening the access to energy in the most possible efficient manner.

And the third one is energy security. With a growing and better-off population around the world, it is no surprise that there is a growing demand for energy. However, there is also great uncertainty about whether supply will be able to meet this demand. Avoiding then the unnecessary waste of a valuable and cleaner resource, like natural gas, is a relevant contribution to increasing the security of energy supply.

As you can see, gas flaring reduction is not just a technical or economic issue that the oil industry and oil producing countries have to deal with, but is arelevant dimension of today’s energy debate.

And in this debate, everyone is looking for win-win solutions that mitigate climate change, provide access to cleaner sources of energy and increase economic growth. And gas flaring reduction has the potential to do precisely that.

These should then be sufficient reasons to step up our efforts in reducing gas flaring and increasing the utilization of natural gas. We know, however, that this is not an easy task given that some countriesface important barriers related to infrastructure, regulations, and other technical restrictions such as gas composition. But that’s also why the GGFR partners are working together, and some of them are present here today, so we can buildon each other’s efforts and experiences rather than playing it alone.

Let me now briefly mention some challenges and opportunities in this region

It is no surprise to this audience that Europe and Central Asia is the major flaring region of associated gas. The region flares about 60 BCM of associated gas (about 40 per cent of global flaring). And countries like Russia, Kazakhstan and Uzbekistan are amongst the top 20 flaring countries in the world.

The oil industry, in the region and worldwide,is also facing several challenges. On one hand some countries/companies are facing a drop in the production rate, a drop in the reserves restitution rate and the effects of a limited refining, transport, storage and distribution infrastructure.

On the other hand, the days of “easy oil” are literally over and the sector needs to embrace technological development and move towards a sustainable energy transition. There is no doubt that in this transition natural gas needs to play the crucial role of a “bridge” fuel between the non-renewable and the renewable energies.

The good news in the region is that different public and private sector stakeholders are conscious of these challenges and are looking at ways of turning them into opportunities for increasing energy efficiency and moving toward renewable sources of energy.

Cooperation between GGFR and Uzbekistan, for example, started in 2008, focusing on the inventory of all gas flaring, measurement of volumes of flared gas, identification and preparation of potential gas utilization projects, sharing of best practices, and assistance on capacity building.

Uzbekneftegaz also prepared the company’s first Associated Gas Recovery Plan (AGRP), which provides technical solutions, defines required budget, and provides a realistic time line for the plan’s implementation and utilization of currently flared or vented gases.

The World Bank, GGFR and Uzbekneftegaz also are actively cooperating in the application of the Clean Development Mechanism for flared gas utilization projects. Currently, Uzbekneftegaz is negotiating the Emissions Reductions Purchase Agreement with Macquarie Bank.

Within the framework of technical assistance andUzbekneftegaz ‘s capacity building program, GGFR organized and facilitated a joint workshops on improvement of flaring gas data collection. These workshopswere based on associated gas volumes measurement equipment purchased and delivered by GGFR to the company.

We believe that these efforts along with other relevant reforms will allow Uzbekistan, and other countries in the region,to build an energy sector that strikes the right balance between protecting the environment and meeting the future energy needs.

We believe that these efforts also offer us the opportunity to “unlock” the value of currently wasted gas.

Over the past ten years we have accumulated a wealth of experience, lessons and best practices about gas flaring reduction. We now better understand the barriers that we need to overcome, and thus it is clear what we need to do to “unlock this value”.

And what do I mean by unlocking the value of wasted gas?

First, we need better data to gauge the magnitude of the practice at the country and company level.

Second, government entities need to ensure that they have not only effective regulations in place but also clear policies with the right incentives for operating companies. It is only then that the necessary infrastructure can be put in place and markets for gas utilization developed.

Third, we are now certain that gas flaring reduction has been most successful where there is country ownership, high-level support and an effective local partnership between government and industry. There should no longer be any doubt that government and other stakeholders need to work as real partners if tangible results are to be achieved.

Fourth, leadership and commitment are fundamental. I cannot overemphasize the critical role that leadership and commitment play in both the public and private sectors in order to sustain progress over the long term. But the time has come where being committed to a cause is not going to be enough – we will be judged by our actions to reduce flaring and the final results.

And last but not least, new and small-scale gas utilization technologies need to be nurtured to commercialization, to provide additional economic options to flaring. In this regard, it is also important to pay attention to small-scale gas utilization opportunities.

As we can see, “unlocking” the value of wasted gas requires a concerted effort by governments and industry, as well as other stakeholders including multilateral financial institutions and technology developers. This is why the World Bank-led GGFR Partnership was created in the first place. GGFR’s main role is that of a catalyst that brings key stakeholders around the table, facilitates the establishment of a common ground with clear targets, and does not allow them to give up or get distracted from the ultimate objective of reducing flaring.

GGFR is also aiming to play this catalyst role in Europe and Central Asia region, and we certainly hope that more countries and companies in this region will join the GGFR partnership.

Let me conclude by thanking the co-organizers of this regional conference, Uzbekneftegaz National Holding Company and other companies, government representatives and stakeholders present here today.

I do hope that you all take advantage of this conference as a space for learning, exchanging ideas, sharing best practices, planning future projects, and advancing flaring and venting reduction initiatives in the region.

I also urge you tolook at the gas flaring reduction challenge as an opportunity to make a concrete contribution to climate change mitigation, energy efficiency, and expanding access to a cleaner source of energy for the people who most need it.

In the end, we have to remember that the green credentials of oil producing countries and companies are going to be measured by their own efficiency in exploiting and delivering energy. In the case of the oil industry, this simply means reducing flaring and venting to minimum levels and using the associated gas more productively.

Ultimately this also means that each one of us in this room, and beyond, does whatever it takes to unlock the value of wasted gas because our actions will always speak louder than any of our words.

Thank you and wish you much success