There is much I like about the oil and gas business. One I especially like is the industry’s innate ability to solve some of the most pressing technological problems that any business faces, though perhaps with some foresight, this might not have been necessary. That’s something I don’t like.
Natural gas has reached a point of convergence with the environment as the most practical way to alleviate climate change unless we return to nuclear energy. Herein is the problem: the persistent flaring of the natural gas byproduct that has resulted from the oil drilling, particularly in the sparse Bakken Shale in North Dakota which lacks pipelines and regulations. New York Times reporter Clifford Krauss wrote an excellent article entitled “Applying Creativity to a Byproduct of Oil Drilling” (Dec. 17).
The article begins with a memorable lead: “Viewed from outer space, the 1,500 blazing oil well flares burning off excess natural gas illuminates the plains of western North Dakota more brilliantly than Minneapolis hundreds of miles away.”
In fact, Krauss writes, the excess gas they’re burning off could heat a million homes. The level of emissions is three times as great as two years ago, even as the percentage of flared gas has decreased from 36% to 29%. This isn’t sitting well with environmentalists, landowners and a growing number of lawmakers.
North Dakota is the second-leading oil producer in the U.S., trailing only Texas, and output is expected to reach 1 million bpd this year. In their rush to exploit the liquids-rich resource, producers took note of the historic price differential of oil vs. natural gas; it made financial sense to burn off the excess gas rather than wait for infrastructure development. That’s also happening in the Eagle Ford play in South Texas. It sure helps when you work in a state where regulations traditionally take a backseat to business.
Unless steps are taken soon, the problem will only get worse. The federal Energy Information Administration’s Annual Energy Outlook indicates that production from shale formations in the United States will peak at 4.8 million (bpd) in 2021, thanks to shale plays. Output should rise by 1.2 million bpd to 3.5 million bpd in 2013.
Production will exceed 4 million bpd this year and rise more gradually toward its peak. It will fall to 3.2 million bpd by 2040. Even those figures may be considerably off as last year, the EIA expected shale oil production to peak in 2020 at 2.8 million bpd, with this year’s production at 2.3 million bpd.
Inevitably, there is a bright spot here. Realizing that it would be good business to reduce this wasteful flaring, oil companies and other industries are working together to find solutions. Building more gas gathering pipelines and gas processing plants will be an answer. So will building new fertilizer plants that use natural gas as a feedstock and converting rigs and other equipment to natural gas, Krauss writes.
Statoil is teaming with GE on a low-cost prototype that conceivably could be used in Africa and Asia where flared gas could be retained for cooking, Krauss reports. GE has designed a storage device it calls “CNG in a box” that was intended to be a mobile natural gas filling station. What Statoil proposes to do is use those boxes to fuel equipment, particularly drilling rigs that have already been converted to replace 40% of the diesel they burn with natural gas. According to the article, if all the rigs in the Bakken were converted to operate even partly on natural gas, more than 60 MMcf/d, or 20% of the gas now being flared, could be saved.
Rail may also pitch in. BNSF, the biggest oil shipper of Bakken crude, will test natural gas as an alternative fuel to diesel for its locomotives.
Meanwhile, state officials tell the Times that more than 2,400 miles of pipelines, mostly gathering, were built in 2012 and now outpace drilling. Six gas processing plants will be built or expanded to boost capacity from 1 MMcf/d to 1.7 MMcf/d by 2015.
Still, it could take 10 years to get the flaring under control. The report notes that so many wells are being drilled throughout the Bakken’s vast 15,000 square miles that energy experts expect an additional 40% increase in the gas produced by the end of 2015.
“The production and development is outpacing the safeguards to the environment,” says Wayne Schafer, Sierra Club conservation organizer in North Dakota.
For once I have to agree with them.