PUNTA DE MATA, Venezuela (Reuters) - A former Royal Dutch Shell executive who led its efforts to cut gas flaring in Iraq a decade ago is planning a similar project in another crisis-stricken OPEC nation: Venezuela.

Flames come out of a chimney in a gas processing plant in Punta de Mata, Venezuela February 21, 2020. Picture taken February 21, 2020. REUTERS/Fausto Torrealba

Mounir Bouaziz, who left Shell last year and is now an independent business developer, said he began talks last October with Venezuelan state oil company PDVSA and the oil ministry, but he acknowledged U.S. sanctions on PDVSA - designed to oust socialist President Nicolas Maduro - were an obstacle.

Bouaziz oversaw Shell’s efforts to reduce flaring in southern Iraq after years of war left infrastructure in poor shape. Venezuela is in a sixth year of economic crisis, leaving PDVSA without resources to maintain gas facilities.

“It’s the same story here in Venezuela,” Bouaziz said in a Feb. 28 interview in Caracas. “It’s much easier to have that experience than trying to reinvent the wheel.”

Bouaziz hopes to raise private investment to repair damaged processing plants to capture and use the gas, extracted alongside crude oil, that Venezuela currently burns.

This kind of flaring takes place at oilfields around the world without the infrastructure to process gas. Flaring releases 300 million tonnes of climate-warming carbon dioxide a year, according to the World Bank. That represents nearly 6% of greenhouse gas emissions from oil and gas operations, according to the International Energy Agency.

Venezuela flared or otherwise lost 3.4 billion cubic feet per day (bcfd) of natural gas in 2019, up from 2 bcfd in 2010, according to consultancy Gas Energy Latin America. That came even as oil output fell 56% in that period to 1 million barrels per day (bpd) in 2019.

Many gas processing plants - which help either reinject gas into oilfields to maintain reservoir pressure or send it to consumers - are damaged or outdated. That leads to flaring, but also means less gas is reinjected, hindering oil output.

The problem is severe in eastern Monagas state, where the Furrial and Punta de Mata light oil fields have a lot of associated natural gas.

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“There are too few plants, and those that are there do not work,” said Igor Miranda, who leads the Monagas chapter of the Oil Chamber of services companies.

Bouaziz plans to start by fixing compressors needing a few parts, which would cost tens of millions of dollars. He is in talks with potential investors but declined to name them.

PDVSA cannot finance such a project itself due to tumbling cash flow after years of mismanagement, corruption and falling oil prices. Sanctions also block it from major lenders.

Bouaziz said the project would make money by selling recovered gas to PDVSA’s joint ventures with private oil companies, which can reinject it, or domestic industrial consumers.

To be sure, the talks are in early stages, and Bouaziz said sanctions could spook investors and complicate imports of replacement parts for U.S.-built equipment. He said he would be transparent with international authorities and that the project would bring social and economic benefits.

“We are seeking legal advice on how to deliver this project while complying with any applicable sanctions,” he said.

Neither PDVSA nor Venezuela’s oil ministry responded to requests for comment. Shell, which has a separate project with PDVSA to reduce flaring in Monagas, declined to comment.

Neither the U.S. Treasury nor State Departments responded to requests for comment on whether such a project may be permitted under sanctions for social and environmental reasons.

Flared gas is a lost opportunity for Venezuela, where 90% of citizens do not have direct gas in their homes and depend on canisters of liquefied petroleum gas (LPG) to cook. Because of problems at Venezuela’s refineries, LPG has grown scarce, forcing many to cook with wood - including those who live near Furrial and Punta de Mata.

“It cannot be that in a gas-producing country we are in this kind of decadence,” said Franyarson Bravo, a 28-year-old street vendor as he waited outside an LPG hub in nearby Maturin to try to convince the manager to fill his canister.

If Venezuela’s flared gas were sold at market prices it would generate $1.5 billion per year, said Antero Alvarado, Gas Energy’s Venezuela director.