Even with a multi-billion-dollar natural gas gathering and processing infrastructure buildout ongoing, North Dakota is not likely to greatly reduce the volumes of gas being flared as an offshoot of its accelerated oil boom, according to an analysis released Thursday by RBN Energy LLC.
RBN author Sandy Fielden reminded readers in the report that in many instances gas production increases faster than oil production as wells mature in the Bakken Shale. Fielden suggested that it behooves operators in the future to find a home for their associated gas before starting new oil wells, or run the risk of having to deal with gas volumes in mandated, uneconomic ways.
Currently, more than one-third of North Dakota’s associated gas supplies are flared. While there is no exact measurement of how much of the nation’s flaring is centered in the state, a reasonable guess is 25%, sources have told NGI‘s Shale Daily (see Shale Daily, Aug. 13).
With a state-set goal of reducing flaring to no more than 10% of the gas produced, North Dakota energy officials have said that the industry’s ongoing $3-4 billion push to build gathering system pipelines, other infrastructure and a number of new gas processing plants will begin over time to mitigate the problem.
Fielden noted that Bakken gas is rich in liquids, making it attractive to midstream companies as they can get higher returns off the liquids than dry gas. New gas processing plants and gathering pipelines should reduce flaring percentages, he said, but a recent study of the Bakken showed the gas production was accelerating faster than oil.
“The recent Bentek Energy study for the North Dakota Pipeline Authority has reported that the gas-to-oil ratio of Bakken wells increases during the life of those wells,” Fielden said. “This means the associated gas production will increase faster than oil. This is already happening, and there is more gas on the way.”
Fielden quoted the Bentek report as concluding that by the end of 2014, when gathering and processing infrastructure is expected to be in place, “gas product will quickly outpace capacity again, meaning more new infrastructure or more flaring is needed.”
Operationally, drilling companies must actively flare during the process of bringing a well to completion. Longer term, they flare because it would be far more environmentally damaging to vent the gas.
“Flaring is therefore allowed (usually through state permits) in order to burn associated gas that has no route to market,” Fielden said. “This allows oil production to start, revenue to flow, taxes and fees to be paid, and gas volumes to be assessed by infrastructure companies.”
In a report released last month, Washington, DC-based Energy Policy Research Foundation Inc. (EPRINC) concluded that the incidence of flaring overall will decline as more companies shift to in-fill drilling and holding acreage by production, but in parts of North Dakota flaring could actually increase due to large, high-producing wells coming online.
Ultimately, the state’s high-value associated gas should prove to be an effective incentive for addressing the issue, said Trisha Curtis, the author of EPRINC’s 22-page report.
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