Natural Gas Flaring in the Bakken: Why Can’t it Be Stopped?
Photo Credit: Wes Peck via Flickr. com
Background
Flaring of natural gas from wells in Bakken formation has been on steady climb since commercial scale drilling started taking place
Background
For past 4 years, more than 33% of gas produced from wells has been
flared
The national average for gas flared at well, Bakken excluded, is 1%
BackgroundSo much gas is flared that it can be seen from space!
Photo Source: NASA
The Economic Issue
By flaring off natural gas, producers are forfeiting more than $4 million in potential
revenue every day
Photo Source: NASAPhoto Credit: Wes Peck via Flickr. com
The Economic IssueThat’s like doing
this….
Photo Source: NASAPhoto Credit: Wes Peck via Flickr. com
….1.4 billion times every year!!!
Photo credit: Images money via Flickr.com
BackgroundWhy is it taking so long to fix?• Long delays on permitting• Labor shortages• Short construction season (have you been to ND in
the winter?!?!)
All add up to oil and gas wells coming online faster than pipelines and processing plants
Photo Source: NASA
Regulators looking to step in
The North Dakota Industrial Commission plans to implement regulations that would reduce gas
flaring to less than 10% of total gas produced by 2020
Photo Source: NASA
Regulators looking to step inPart of industrial Commission regulations would require companies
to submit a gas capture plan to obtain a drilling permit
Photo Source: NASAThis could potentially slow drilling and development in the region
Photo Credit: Wes Peck via Flickr. com
Is there hope in sight?3 major projects online/under construction• Hess Corp. Tioga Gas plant expansion (140 mmcfd)• ONEOK Partners Gas Plants– Garden Creek (200 mmcfd, online Q1 2015)– Lonesome Creek (200 mmcfd, online Q4 2015)
Enough capacity to process all gas flared today, but more wells will come online
Photo Source: NASA
Are there other options?
Photo Source: NASA
Are there other options?General Electric’s CNG-in-a-Box• A Small scale, mobile natural gas processing system that
separates natural gas liquids and compresses dry gas on site
• Liquids can be trucked off site for sale and compressed natural gas can be used as diesel replacement at wellhead for generators, fleet vehicles.
• GE is partnering with Statoil to test the idea
Photo Source: NASA
What does this all mean to me?
Companies that generate large portions of their oil production—think Continental Resources, Kodiak Oil & Gas, Oasis Petroleum—could see their production growth slow if gas capture plans are required for all wells, especially if gas infrastructure continues at its slow pace. Their one option for preventing this would be to find other methods for capturing gas such as GE’s CNG in a box. Investors should watch for announcements that producers in the region have developed gas capture alternatives, because these companies will likely have the greatest success in the future.
Photo Source: NASA