In the midst of its oil and natural gas boom, North Dakota is coming clean on a dirty little secret -- flaring of more than one-third of its gas supplies produced in its rapidly expanding Bakken Shale formation's record-breaking oil production. While the latest analyses look closely at North Dakota's experience, there is no exact measurement of how much of the nation's flaring is centered there; a reasonable guess is 25%, sources say.
With a state-set goal of reducing flaring to no more than 10% of the gas produced, North Dakota energy officials told NGI's Shale Daily Thursday that the industry's ongoing $3-4 billion push to build new gathering system pipelines, other infrastructure and a number of new gas processing plants will start over time to mitigate the problem. And separately, a Washington, DC-based think tank is poised to release an assessment of flaring globally with a strong emphasis on North Dakota as the main source of the sharp increases in flaring in the United States since 2008.
The Energy Policy Research Foundation Inc. (EPRINC) report, "Understanding the Surge in Natural Gas Flaring," essentially concludes that the incidence of flaring will decline as more companies shift to in-fill drilling and holding acreage by production, but in North Dakota in some quarters the incidence of flaring could actually move upward due to large, high-producing new wells coming online. Ultimately, the state's high-value associated gas should prove as an effective incentive for addressing the issue, said Trisha Curtis, author of EPRINC's 22-page report, which is soon to be released. She offered a brief overview of the report in an interview with NGI.
Flaring peaked in North Dakota in September last year reaching 36% of production; it is currently about 30%, according to the North Dakota Industrial Commission, which includes the state Department of Mineral Resources (DMR) and the Pipeline Infrastructure Authority. Flaring globally peaked at more than 1 Tcf annually in the post-World War II years of the late 1940s. In the United States it has been growing, driven principally by North Dakota, and currently is about at the 200 Bcf/year level, according to Energy Information Administration (EIA) data, supplied by North Dakota sources.
"Flaring is somewhat of a natural progression of new [oil/natural gas] fields being discovered," said Justin Kringstad, director of the North Dakota pipe authority. "As we get the footprint expanded [over more than 18,000 square miles] we will be rapidly decreasing the flaring volumes." The time gap between new oil wells producing and the hook up with gas gathering systems will increasingly be narrowed going forward, he said.
North Dakota officials confirmed that all of the Bakken/Three Forks shale formation oil production has gas associated with it. "There are wells in different formations and regions of the Williston Basin that may produce only gas or oil," said Kringstad, adding that their significance is shrinking, however, because of the continued strong growth in the area.
Kringstad noted that up to 500 MMcf/d of processing capacity is now under construction and should all be on line between now and 2014, more than enough added processing capacity to start pushing the state toward its 10% goal for flaring, but there are other infrastructure needs, such as new gathering pipelines, that lag behind the E&P and production start-ups. Currently sitting at nearly 910 MMcf/d of gas processing capacity, that total will grow to nearly 1.35 Bcf/d at the end of 2014, Kringstad said.
New state production statistics are due to be released on Friday (Aug. 17), but a spokesperson at the DMR said there is no expectation for a large drop in flaring to be among those statistics. "It's going to be a stair-step decline, and we are still hanging around that 30% mark," the spokesperson said. "Obviously, that means 70% of the gas is being captured, but this isn't a process that is going to go down overnight. It is going to take time because those gathering lines need to be built, the rights-of-way need to obtained and more infrastructure needs to be put in place. The good news is that the [oil/gas] industry is continuing to step up their investment in the state."
Contributing to the problem in many of the new shale plays are held by production leases, where production has to be started up quickly in some cases to hold acreage. HBP acreage has put the E&P operations running ahead of the gathering infrastructure, which has to meet some tough economic tests before moving forward. In addition, the EPRINC report noted that the level of flaring could increase for an interim period as the quick connection of high producing new wells could force existing wells to begin flaring again temporarily to create more pipeline space for high-level producers.
"When a new well comes on with really high production, it also has a really high production of natural gas liquids (NGL). The existing well producing gas for the gathering system may have to start flaring again because the volumes are so high from the newer well. So if flaring is not coming down as quickly as some people would like, that is one factor," Curtis said.
EPRINC has concluded that if all flaring were halted,"the pace of crude oil production, particularly in North Dakota, would be delayed and in some cases substantially." The report will note, said Curtis, that while prohibiting flaring would preserve some of the gas currently being lost [from venting or flaring], the penalties tied to delaying oil production outweigh the benefits of the gas saving.
"Crude oil is more valuable than gas -- even considering NGLs -- and the economic penalty from delayed oil production exceeds the net gain of any future gas saving in future E&P activities."
EPRINC's report looks at the global and national statistics on flaring, using World Bank and other data, Curtis said. That data only runs through 2010, however. "One of the problems in calculating a percentage for North Dakota is that EIA relies on other states for data and many of them are not nearly as transparent as North Dakota is."
The oil and gas industry players are helping address the flaring with technology innovations in their operations, working with outside sources, such as the Energy and Environmental Research Center at the University of North Dakota. For example, the center and Continental Resources are working on a means of using raw gas at the wellhead to fire onsite electricity generation units to power drilling operations.
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