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The Gas Flaring Crisis in the US Oil

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DiscoverGold   Friday, 06/07/19 04:08:13 PM
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The Gas Flaring Crisis in the US Oil Patch
By: Oilprice.com | June 6, 2019

In its relentless pursuit of oil, the shale industry burns more and more gas into the air. This wasted gas exceeds the yearly demand of nations such as Israel, Colombia and Romania.

The rate of flaring in the Permian basin reached a record high in the first three months of this year, averaging 661 million cubic feet per day (MMcfd), according to Rystad Energy. That is more than double the amount of flaring for the same period from a year earlier.

There is little chance of a reduction in the next few months. “We anticipate that basin-wide flaring will stay above 650 MMcfd before the Gulf Coast Express pipeline comes online in the second half of 2019,” Artem Abramov, Head of Shale Research at Rystad Energy, said in a press release.

It’s an astonishing amount of gas that is being flared into the atmosphere. Rystad puts it into context, noting that the most productive gas facility in the U.S. Gulf of Mexico – Shell’s Mars-Ursa complex – produces about 260 to 270 MMcfd of gross natural gas. In other words, the most productive gas project in the Gulf of Mexico only produces about 40 percent of the volume of gas that is being flared and vented in West Texas and New Mexico every single day.

Things are not that much better in North Dakota. Bakken shale drillers flared and vented about 500 MMcfd in the first quarter of 2019, Rystad estimates. Together, the shale industry in the Permian and the Bakken flared or vented 1.15 billion cubic feet per day in the first quarter. “Converting to the metric system for comparative purposes, that represents 12 billion cubic meters of wasted gas per year, which exceeds the yearly gas demand of nations such as Israel, Colombia and Romania,” Rystad Energy concluded.

While the volumes are larger in the Permian, the industry is also much larger. Proportionally, the amount of gas flared or vented in the Bakken is actually worse. In the Permian, drillers are burning or venting about 5 percent of the gas that they extract out of the ground. In the Bakken, that share has topped 20 percent.

The problem in both regions is that as drillers pursue ever greater quantities of oil, they are extracting larger and larger volumes of natural gas, which comes out of the ground in tandem with crude oil. Lacking pipelines and storage facilities to move gas, the industry simply burns it off. Venting it is even worse in terms of its climate impact – unburned methane is a vastly more powerful greenhouse gas than carbon dioxide.

In North Dakota, state regulators have watched as drillers fail to comply with flaring limits. The state capped flaring at 15 percent in 2016, a limit that would lower to 10 percent by 2020. The current limit is 12 percent. However, the industry flared 20 percent in the first three months of this year. “Compliance with the state’s flaring policy is not working,” Wayde Schafer, spokesman for the North Dakota Sierra Club chapter, told the AP last month. “We need to revisit the policy.”

Even Republicans are not pleased with the extraordinary rate of flaring. “We need to find an excess flared gas solution immediately,” Republican Rep. Vicky Steiner told the AP. She represents a region that has seen a high concentration of drilling. “It’s a shame. I’d like to see us find a use for this.”

Individual companies are allowed to flare gas for a year without paying taxes or royalties, and can ask for a waiver extension that would allow them to continue to flare beyond the 12 months. The state typically grants those requests, the AP said.

The amount of gas flared in March in the Bakken is enough gas to heat all North Dakota homes ten times over, according to the AP, citing an analysis conducted by the North Dakota legislature.

Presumably, state regulators can require oil production cuts as a way of keeping flaring rates within limits. But the state, which is dependent on the energy industry for revenues, has declined to go that route. So, the flaring continues.

Earlier this year, the Environmental Defense Fund estimated that methane emissions at oil and gas sites in the Permian are five times higher than what the industry is reporting to regulators. Separately, EDF found that flaring in the Permian is likely twice as high as the companies say.

Shale companies have argued consistently that they have every incentive to capture the gas, because they can sell the product rather than simply burning it. New infrastructure is in the works in both Texas and North Dakota, but will take time to build. Meanwhile, natural gas prices at the Waha hub in West Texas have repeatedly fell into negative territory. In other words, the product is worthless, at least at current prices. Unless regulators get tougher and demand cutbacks in flaring, there is very little incentive for companies to do anything other than light the gas on fire.

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