sectoral economic costs and benefits of ghg mitigation - IPCC

Fossil Fuels
In market economies, particularly market economies with 19 th century gas reticulation systems in
cities, reducing methane leakage is an economic, and a safety issue. No gas company wishes to
lose gas from its system which it has paid to produce or purchase, and then fail to obtain any
recompense for this gas from customers. However, even less do companies wish to take the risk
of exposing their customers to explosions which may occur because of system leakage; and
which may involve the company in litigation and eventual compensation payments. There is thus
a double incentive to reduce leakage wherever possible. However, these incentives only exist in
economies where customers are paying cost-based prices for gas.
This is the point at which our discussion moves specifically to the issue of leakage in EITs, and
in particular Russia and Ukraine where gas deliveries to customers in 1998 were around 370
Bcm. 1 In the same year, Gazprom estimated that it received only around 20% of its receivables
on time and in cash, a figure which the company estimates has since increased somewhat, but in
the first quarter of 2000 did not exceed 30%. 2 Gazprom has estimated its leakage from the high
pressure system at around 1% of system throughput. A study of leakage relating to exports of gas
to Germany from Siberia published in 1997, arrived at a figure of 1.8%. This study found that
emissions were mainly due to leakage during maintenance and repair work and leaks from
mainline valves and compressor stations. 3
But Gazprom’s measurement problems are minor in comparison to those of the local distribution
companies to which it sells gas for “resale” to residential, commercial and small industrial
customers – the needs of which are met primarily by district heating. A large proportion of
residential customers have never been metered for gas and heat (a charge was included in their
rent for these services.) Lack of metering renders leakage estimates in the distribution systems
extremely approximate. Lack of payment deprives distribution companies of the means and
incentive to repair systems even when leakage has been identified. The key issue to keep in mind
when seeking rough estimates of leakage is that – although the figures for residential distribution
may be relatively high – this represents a relatively small proportion of the total (less than 20%
of total demand). Clearly more research and better data are required for accurate representation
of leakage rates in Russia (and other EITs) but extravagant estimates of double-digit leakage
percentages are greatly exaggerated.
As a concluding remark on leakage, it is worth noting that this issue provides an ideal focus for
Joint Implementation Projects which can be narrowly or widely focussed around one section of
pipeline (transmission or distribution network) and focus on optimising gas flows and/or
replacement and upgrading/refurbishment of pipelines. 4
1 Not including gas used for compression. This was around 16% of total world natural gas demand. For
comparison, European (western and eastern) gas demand in the same year was around 467 Bcm.
2 For more details see: Jonathan P. Stern, “Soviet and Russian Gas: the origins and evolution of Gazprom’s
export strategy”, in eds. Robert Mabro and Ian Wybrew-Bond, Gas to Europe: the strategies of the four
main suppliers, Oxford University Press: 1999, pp. 135-199.
3 W. Zittel, Study Concerning Present Knowledge of Methane Emissions from Russian Natural Gas Exports
to Germany, Ludwig-Bolkow-Systemtechnik (sponsored by Ruhrgas), May 1997. With such a huge
production located so far from centres of demand – necessitating a transmission network of several
thousand kilometres – Gazprom’s use of gas for compression is around 50 Bcm/year – which is more than
the total gas demand of most countries.
4 For example: Y.G. Dedikov and J.E. Katelhon, “Reducing the burden on the environment by optimising
gas transmission”, paper presented to the International Energy Agency Workshop, Opportunities for
International Cooperation Under the Kyoto Protocol, Moscow 1-2 October 1998.
72