Measuring gas flaring and emission costs through environmental management accounting and their impact on investment and disclosure decisions: An applied study of Al-Gharraf oil field, Iraq

Abstract

In the oil sector, this study aims to implement an economic and environmental cost framework for environmental management accounting with the corresponding cost of associated gas flaring and its linked emissions, and to link that cost with investment decision-making, in addition to climate and sustainability disclosure. We consider the Al Gharraf oil field in Dhi Qar Governorate as an applied case in this study as an active producing field that has a publicly known development path. It is a reference point for published gas recovery and flare reduction projects. By combining documentary analysis of the references that cover environmental management accounting and disclosure with quantitative modeling, the study is based on a mixed approach to estimate flaring emissions and environmental cost at the field level. This is achieved through the use of a coherent methodology that uses World Bank data and sectoral analysis available to connect the published production for the field with Iraq’s national flaring intensity. The findings illustrate the integration of wasted gas value costs with carbon costs and compliance costs, and disclosure costs into the integrated accounting framework, which is changing the way flare reduction projects are evaluated. It shifts them from being considered a limited environmental obligation to a sound investment decision with embedded economic and disclosure elements that can be aligned with the principles of IFRS S2, GRI 11, and GRI 305.