ND continues to confront flaring
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Pipeline authority-hosted webinar examines the ongoing flaring issue and technologies available to address stranded natural gas
By Mike Ellerd
For Petroleum News Bakken
The North Dakota Oil and Gas Division and the North Dakota Pipeline Authority hosted a webinar Dec. 18 to address the ongoing issue of natural gas flaring in the state and to offer information on a variety of services available to producers to address stranded gas and reduce or eliminate flaring.
In his opening remarks, division Director Lynn Helms said that 30 percent of the natural gas produced in North Dakota was flared in October, and with gas production reaching a total of 796 million cubic feet for the month, that amounts to just under 240 million cubic feet of gas flared per day in the state. Flaring reached a peak of 36 percent in September 2011, but by August 2012 flaring fell to 29 percent before rising back up to the 30 percent flared in October 2012.
Without a reduction in flaring, the problem will only get worse as production increases. Helms said North Dakota would like to reduce flaring to below 10 percent. However, by the time flaring is reduced to 10 percent, production projections indicate the state will be increasing production to between 2 million and 2.5 million cubic feet of natural gas, which puts the flared volume back upwards of 250 million cubic feet per day. It would be “great,” Helms said, if the state could reduce flaring to 5 percent, which would lower the flared volume down to the 100 million to 125 million cubic feet per day range. “So short-term and long-term, there’s tremendous opportunity in the utilization of flared gas.”
ND RegulationsThe North Dakota Industrial Commission has jurisdiction over the field rules. Helms says that typically under field rules, wells are allowed to produce unrestricted for 60 days in order to test the wells, but after the initial 60 days, production is limited to 200 barrels per day for the next 60 days, then to 150 barrels per day for another 60 days, and finally down to 100 barrels per day thereafter.
But according to Helms, the Commission has not rigorously enforced that rule because of the large differential between oil and gas value and concern that enforcing the rule would potentially reduce the net present value of a Bakken well to 25 percent, which he said “would be a significant economic hit to the industry.” However, Helms says the commission is eager to more rigorously enforce the field rule policies as flaring solutions are developed and made available.
Flaring itself is also regulated by the commission. The flaring rule states that produced gas can be flared for a period of one year, after which the well must be capped, connected to a gas gathering system or connected to an electrical generator that consumes at least 75 percent of the gas. If the producer violates the rule, taxes are imposed on the producer, and the producer must pay royalties to the royalty owners.
However, there is also a flaring exemption rule in North Dakota which allows continued flaring without the imposition of gas taxes and royalty payments if a producer can demonstrate that it would not be economically feasible to connect to a gathering system or to a generator,
Operators have been requesting “increasingly lengthy” exemptions to the field and flaring rules, according to Helms, and the commission has “tightened up” and is currently issuing only six month extensions. The commission, he said, is aware that new technologies are continually being developed, and is also aware of such other issues as changing oil prices as well as changing well economics. The commission, therefore, does not want to make long-term commitments based on short-term economics.
New legislationHelms said he believes there will be “some pretty significant amendments” to these and other gas statues that deal with flare gas solutions in the upcoming legislative session.
He said Rep. Todd Porter of Mandan has already submitted a bill which he says will “change the landscape” in terms of tax exemptions, production exemptions, how utilization of flared gas is reported to the commission and how that reporting will relieve some liability concerns that operators have.
“And of course we’re open to new ideas and new thoughts to make that the best possible piece of legislation it can be. We only get a chance to work on it every two years, so this will be a big piece of the puzzle of working on North Dakota’s flare gas,” Helms concluded.
Options for stranded gasEight firms that have developed or are developing technologies to address stranded natural gas at the wellhead were invited to share information on their specific areas of expertise during the Dec. 18 webinar.
Blaise Energy Inc., of Bismarck, offers a variety of solutions for wellhead gas. The company employs generators at the wellhead and uses wellhead gas to generate electricity that can either be used for site power or can to fed directly into the electrical grid. The company also provides an option for larger-scale electrical generation to power such operations as gas plants. It also can separate natural gas liquids, and is working on developing a process that converts methane to methanol.
Expansion Energy is a technology development company whose business model is to develop technologies and then license those technologies to other parties for implementation. It recently entered into a manufacturing partnership with Dresser Rand, and is developing a mobile liquid natural gas production system known as “VX Cycle,” which is estimated to be commercially available by the third quarter of 2013.
LPP Combustion LLC is a fuel technology and equipment supply company with interests in using flare gas and natural gas liquids for onsite power generation. The company has a patented process for converting flare gas and natural gas liquids into a substitute natural gas for application in gas turbines, reciprocating engines, and duct and boiler burners onsite without having to separate out the liquids.
Wellhead Energy Systems LLP is a company that works in cooperation with Ohio-based EnerFab, an energy engineering, fabrication, field erected and maintenance services firm. Wellhead Energy employs mobile modular units that use natural gas to generate electricity which can be used onsite or transferred to an electrical grid.
Boewulf N-Flex LLC has a proprietary technology that converts methane to ammonia fertilizer at the wellhead. In this process, the natural gas liquids are separated out and the methane is converted to anhydrous ammonia. In November, Boewulf N-Flex received a $1 million grant from the North Dakota Industrial Commission to help the company get the company’s first units into operation.
BX Energy of Billings, Mont., is a company that focuses on capturing and transporting gas to gathering pipelines. The company compresses gas and associated liquids at the wellhead and then transports the compressed mixture via truck to gathering pipelines.
G2G Solutions of Billings, Mont., utilizes refrigeration technology to separate natural gas liquids from produced gas at the wellhead. The units are fully integrated, mobile and scalable and can typically be moved from one location to another in less than a day.
Alternative Gas Processing Inc. is a manufacturer’s representative firm whose primary principles are Tucker Gas Process Equipment and the midstream firm NGL Energy Partners. Collectively these firms offer an associated gas recovery, transport and marketing service.
The webinar can be heard on the North Dakota Pipeline Authority’s website, and all of the presenter’s slides are also available at that website.