28 January 2013
Oil Well Natural Gas Flares Seen from Space
Posted by John Freeland
From the blog Random Policy: Waste Not, Want Not, Michael Cain presents an interesting NASA night time satalite image of North America. The continent is dark except for lights emitted from cities and other sources, notabley, waste gas flares from the Bakken and Eagle Ford shale oil fields.
Near the North Dakota-Montana border is a cluster of gas flares roughly the size of Pittsburgh.
The Eagle Ford flares trace a 400 (644 km) mile-long arc across south and eastern Texas. Burning the “sour” gas (high in hydrogen sulfide) threatens air quality in nearby San Antonio.
While controversy over the proposed TransCanada Keystone XL pipeline, which would carry bitumen from Canadian oil sands to the Gulf coast, garners much attention in the news, millions of cubic feet of cleaner burning natural gas are flared off as a waste product. With the current glut of natural gas driving down prices, it’s cheaper for companies to burn the gas than invest in the infrastructure necessary to deliver it to market.
(Digression) When I was a boy, we had a kindly old babysitter who was usually fun to have running the house while our parents were away. The one time I remember her being “put out” with me was when I refused to finish a meal. She had me sit until I’d finish. But I didn’t finish the food. I just sat there figuring I could hold out longer than my “opponent” in what had become a foolish contest. Finally, she decided to it was time to clean up and move on.
“Some day, you’ll wish you had that,” she said.
It’s estimated that the “useless” gas burning away in North Dakota could supply 70% of the homes in that state. Instead, it pours more carbon dioxide into the atmosphere without providing any benefit.
What we have here, is a market failure. The oil is, according to the commodities market, much more valuable than the natural gas, even though the more abundant natural gas burns cleaner. Burn enough of the natural gas away, make it more scarce, and the price will go up. Then it will be worth capturing and selling. Seems crazy, doesn’t it?
The report A Market Failures Framework for Defining the Government’s Role in Energy Efficiency published out of the Oak Ridge National Laboratory explores this topic and suggests general approaches (bold type) to make energy markets more efficient. After each of the bold items are my interpretations of what they might actually mean:
Direct Regulation – The government could take a number of steps to reduce the waste, such as forcing the companies to store the gas, placing limits on the number of wells drilled, even shutting them down until some time in the future when higher gas prices will incentivise more efficient use.
Quantity and Price Instruments – Here, the oil companies would be soaked with taxes or permit fees that would essentially punish them for their waste, making it an expensive option.
Subsidies – These could be price supports for the cheap gas, making it more economically attractive for oil companies to build the infrastructure needed to carry the natural gas to market. It might also take the form of public-private partnerships to build infrastructure, convert vehicles to run on natural gas, convert coal power plant to natual gas, or other actions to build a stronger market for natural gas.
Information Programs – This can be as simple as making enough entities aware (advertising) of an available resource that’s currently disposed of as a waste product, that somebody with the means figures out a way to capture and use it. Maybe the Chinese will figure it out.
Of these options, the first three are probably not politically doable. If I had to bet, I’d go with the last one, where a nation like China, or Japan, or India, that, through the course of its history, has experienced widespread deprivation.
Here at home, I suspect, we’ll sit and do nothing, comfortable in the notion that, come tomorrow, we’ll be “fed” once again, as always.
Here is a link to the Texas Railroad Commission on flaring: http://www.rrc.state.tx.us/about/faqs/flaringfaq.php. In Tx the max time is 180 days to flare, and estimates that .4% of the gas produced is flared. North Dakota has a problem of a lack of infrastructre relative to the Eagle Ford. But it also only allows one to avoid the severance tax on flared gas for a year. Perhaps the solution is to tax the gas that is flared.
Lyle: Thanks for the note. It’s good information. I’ll check out the link.
Lyle is correct….
The issue with all of the flaring gas is that companies have outdrilled the capacity of the midstream companies (gas gathering companies) infrastructure to hook-up the wells. The current gas plants are at capacity and there is not enough compression to move gas to the plants. High line pressures are also issues with the lower producing wells not having enough pressure to buck their way into the line. Trust me….no one is willfully burning money into the atmosphere….the object is to sell that money. Companies have to pay the royalty owners for that gas whether it is being flared, vented or sold.
Michael: Thanks for the comment. What you say makes perfect sense. I just wish planning and construction of the midstream facilities was managed to keep pace with the drilling.
Well we are sort of like Rommel’s tanks during WW II. Pioneer, the company I work for drilled somewhere around 750 wells in the Permian Basin last year and about another 250 down in the Eagle Ford Shale. We are one company out of a number who are not drilling quite as many, but in the hundreds as well.
Pioneer is one of the few integrated companies in the US….meaning we have our own drilling company, our own frac fleets and workover rigs and as I mentioned in one of my previous posts….after buying Carmeuse USA we are now one of the largest sand mining companies in the US (just to ensure our own supply of frac sand). Unfortunately, we, just as all the other upstream E&P companies around here are not involved in the midstream gas gathering and transmission business. We are at the mercy of the infrastructure of these companies and unfortunately there are too few of them and those that are established are being overrun by the demand put on them to hook up wells. Wells just can’t produce the oil and not produce gas….the gas has to go somewhere so if it can’t go down the sales line….it goes to a flare or is just vented into the atmosphere. As I mentioned above….the gas is not worthless as suggested in an earlier post. If a well is flaring or venting 40mcf of gas a day….which is a very low amount, even at the Henry Price of say, $3.20/mcf..and most gas coming from shale plays etc. is liquid rich so that is a low estimate….at a minimum, that is over $125/day of revenue going up in smoke. Taken over 365 days/year….that is near $50K/year. Now say you have 50 or 100 wells flaring or venting….I think you can see the picture. No one is purposefully just flaring or venting…unless they are not very wise operators. This lost revenue can amount to a lot of money….and like I said….if the gas is going up in the air or a flare….the producers still have to pay royalties to the mineral interest owners, so we would all prefer to put that gas down the sales lines.
Another issue in these rapidly growing shale play areas is that even if there is the infrastructure in place, these big “new” wells….some making over 1,000 bbls/day and a lot of gas….the line pressures are too great for many of the older, lower volume, lower pressure wells to get into the system. It is physics….if the pressure going down the main line is greater than the pressure from your well….you can’t get in. You don’t just shut your production in….you turn it to vent and/or flare to keep it going.
We are turning a lot of our service vehicles to natural gas…..and we encourage other companies, municipalities and agencies to do the same. It is a cheap and clean source of energy.
I think you’ll start to see less and less flaring overall as they catch up. I was flying into Midland, Texas the other night and it looked like stars on the ground…there were hundreds of wells flaring. Things are getting better however…the midstream companies are expanding the capacity of their gas plants…which they can then put on more compression….which in turn lowers the line pressure….which in turn brings more gas in from the fields….and so on and so forth. It is all connected together.
Again, thanks for the good information that helps paint a more complete picture of what’s going on at these big shale oil & gas fields. I work in environmental due-diligence for midstream and gathering facility projects in the Utica Shale, eastern Ohio. I haven’t seen any flaring on the drill rigs here, but I spend most of my time on pipeline routes, beyond site of the rigs and wells. The Ashland Oil refinery off Highway 30 south of Canton flares like crazy.
Agreed, building the new pipelines, compressor stations, and well connections can be a frustratingly slow process. With typically smaller land parcels, the land agents here have a lot of landowners to negotiate with before settling on a final alignment plan. Of course, some property owners don’t want to participate, so the line has to route around them. Add in necessary environmental avoidances, and the pipelines take on a lot of twists and turns, which increases their overall length and build time. It all takes time.
I’d just like to see a greater sense of urgency to capture the gas that’s currently flared or vented to the atmosphere.
I fully agree with Lyle and Mr. Jacobs in that the infrastructure required for collecting and processing flared gas is simply not there yet in fields like the Bakken or other remote wells. Recently, our company has been getting more and more enquiries concerning EPA 40 CFR Part 60 Subpart 0000, which many in the industry call “Quad Zero” or “New Source Performance Standards”. Quad Zero would seem to be the government’s attempt to force collection and processing infrastructure to get built a little faster. While this has proven to be a boon for companies like mine that make mass flow meters to measure all this gas, there seems to be a lot of confusion in the industry on exactly how to implement these standards and even some court battles going on. This regulation as we interpret it seeks to reduce emission of volatile organic compounds (VOC’s) by requiring emission controls on “new sources”, most of them associated with hydraulic fracturing natural gas wells. Standards apply to
• storage tanks
• pneumatic controllers
• compressor seals
• sweetening units
• onshore gas plant leaks
• hydraulically fractured gas well completions
The rule mandates the use of Reduced Emission Completions (REC’s) and complete combustion devices (such as flaring) on such completions after January 1, 2015. This law became effective 10/15/12.
I see that most of the previous discussion has been about the associated gas from oil wells, but do you or your readers have any more insight in how the gas well industry is going to meet these challenges?
Hi Scott, thanks for the comment. You raise an interesting question about gas wells and I don’t have enough info to provide a satisfactory answer. But, as I understand, gas wells will flare gas shortly after completion when the well produces a mixture of gas and brine. The brine may be either flowback water from the hydrofracturing or production brine natually found in the gas-producing formation, or likely a mixture of both.
They sometimes flare gas until they have a pipeline connected or other facilities to contain and move the gas.
Apparently there are big regulatory changes starting 2015 aimed at drastically reducing flaring. I need to get into the details of that. Stay tuned.
My understanding is the same as yours with respect to flaring during flow back just after completion of a gas well. Until the passage of the Quad Zero rule, the release of this gas was unregulated and much was just vented off. I have read estimates that this flare gas and the associated gas from oil wells could supply up to 25% of the United States’ annual demand, but, as your readers have pointed out, a lot of it is not currently saleable. It still must be measured though.
What is of real interest to me is the how the industry will interpret and implement the Quad Zero regulations on those other “new sources” like the tanks, controllers and compressors. As a flow measurement guy, I know those to be some challenging measurements with small leak-rate flows from relatively large equipment. This should keep the flow industry busy for a while.
Hi Scott: As with many new regulations, there will probably be some “tweaks” to Quad Zero once the problems of implementation become clear. It’s an opportunity for the engineers and mechanics who design, build and operate the equipment to make improvements. Maybe a cap-and-trade program for fugitive gas would further incentivise improvements. Here is a link to a report about Quad Zero prepared by a company called Trihydro, with whom I’m not familiar.