Putin warns oil firms: cut flaring or pay fines

By Gleb Bryanski and Vladimir Soldatkin

MOSCOW (Reuters) - Russian oil companies will face heavy fines for missing targets to reduce gas flaring by 2012, Prime Minister Vladimir Putin said at a meeting on Tuesday, reinforcing government plans to reduce the wasteful practice.

Russia, the world's largest energy producer, flares more gas than most other countries, sending the greenhouse gas carbon dioxide into the atmosphere after burning gas from oilfields that is deemed too difficult or expensive to move to market.

Oil firms, including market leaders Rosneft, LUKOIL and TNK-BP, are investing hundreds of millions of dollars to meet the government's target of increasing associated gas utilization to 95 percent by 2012.

"Oil companies that do not meet this requirement will pay huge fines," Putin told executives at the industry meeting.

Russia flares around 20 billion cubic meters of associated 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.

Putin also promised preferred access to Russia's power grid for electricity generated from associated gas, a further incentive to companies to reduce waste.

"Electricity produced from (associated gas) will receive priority access to the country's energy grid," he said at the meeting.