Set Fire To The Gas – The Fight to Limit Bakken Flaring

Bakken gas flaring is still close to 30 percent of production. At the end of April the North Dakota State Assembly passed legislation providing tax incentives for producers to reduce flaring by finding alternative uses for gas that would otherwise be flared. Analysis by the North Dakota Pipeline Authority shows that 45 percent of flaring occurs from wells that are already connected to gas processing plants. Today we describe efforts to reduce gas flaring in the Bakken.

Gas flaring in North Dakota continues to present a public relations challenge for the State’s energy industry. Recent legislation coming into effect in July 2013 provides tax relief for producers who find alternative uses at the wellhead for otherwise flared gas – an indication of political sensitivity to the issue. Flaring is the capture and burning of “associated” natural gas produced from oil wells. North Dakota Industrial Commission data indicates that oil production increased by 40 percent in the past year from 558 Mb/d in February 2012 to 779 Mb/d in February 2013. Associated natural gas produced with that oil increased just as rapidly from 600 MMcf/d in February 2012 to 850 MMcf/d in February 2013. About 30.4 percent or 258 MMcf/d of February gas production was flared. Although gas flaring in North Dakota is down from a high of 36 percent in September 2011 it is still far greater than for any other basin in North America.

We previously explained gas flaring in North Dakota and the two big challenges that can cause it to occur at such significant levels (see Why Will Bakken Flaring Not Fade Away?). The first is the economics of installing infrastructure to connect wells to gas processing plants as soon after production starts as possible. This has been the principal challenge in the Bakken because of the large distances between wells and processing plants, the rugged terrain where many of these wells are located and the low value of associated gas compared to oil. The second challenge is normally the lack of gas processing plant capacity and mainline gas pipeline infrastructure to transport processed gas to market.

Addressing the second of these challenges first, we discussed the market for Bakken natural gas in “Border Wars” including in that blog the results of a Bentek study (copy here) conducted for the North Dakota Pipeline Authority (NDPA). That study indicated there was adequate dry natural gas takeaway capacity on the 2.37 Bcf/d Northern Border pipeline to accommodate existing and projected Bakken gas production at least until 2017 provided that producers undercut competing gas from Western Canada that currently uses the pipeline. More recently we covered new Bakken natural gas processing capacity that came online in April (see The Race is On). With the addition of the Oneok Stateline II plant there is now nearly 1 Bcf/d of operational processing capacity to support North Dakota natural gas production. In many cases the wells that are flaring gas are too far away from processing plants to connect economically so more plants need to be constructed where new drilling is happening but the situation is improving.

However, although gas flaring in North Dakota certainly results from a lack of gathering system pipeline infrastructure to transport associated gas to processing plants that is not the whole story. In a recent webinar presentation in March (view here), NDPA Director Justin Kringstad explained some nuances of the gas gathering pipeline system that result in an estimated 45 percent of flaring occurring from wells that are already connected to processing plants.

Source: NDPA Webinar Presentation March 2013 (Click to Enlarge)

The chart above shows the NDPA estimate of gas flaring in North Dakota using December 2012 data. The largest part of gas production shown in green is the percentage that is currently processed and sent to market (the chart says 72 percent but it probably should be 71). The other 29 percent is the gas that was flared in December 2012. The flaring is divided between gas not yet connected to a gathering system (16 percent shown in blue) and gas flared in spite of being connected to a gathering system (13 percent shown in red).

The 13 percent of total gas production that is flared from wells already connected by pipelines is the result of inadequate compression and capacity in the gathering systems. The flaring occurs because new wells connected to the gathering system produce gas at higher initial production rates and higher pressure. Gas from these new wells takes up pipeline capacity and knocks older lower pressure wells off the gathering system, causing their gas to flow back to the wellhead and require flaring. The diagram below illustrates the problem. In the top half of the picture three older existing wells are connected to the gas processing plant (green icon). Because these wells are older their rate of production and gas pressure is low. In the lower half of the picture a new high-pressure well takes up available gathering pipeline capacity and results in the older wells having to be flared. Pipeline capacity issues are not just caused by compression but can also result from clogging in the lines. Clogging is caused by natural gas liquids (NGLs) dropping (condensing) out of the gas stream and pooling at the bottom of the pipe. NGL pooling is a particular problem during the winter months when lower ground temperatures cause more liquids to drop from the gas – further reducing the pipeline capacity and increasing the likelihood that connected wells will need to be flared.

Source: NDPA Webinar Presentation March 2013 (Click to Enlarge)

The solution to pressure problems that throw older wells off the gathering system is to increase compression in the system or to add additional capacity to existing pipelines by looping. The solution to NGL pooling is more frequent pigging of the pipelines. Pigging means sending foam or rubber “pig” devices down the pipeline to “sweep” out NGL liquids clogging the line.

While explaining these apparently fixable issues with existing gathering system pipelines the NDPA also expressed optimism over the rate at which new wells are being connected to gathering system infrastructure. Unconnected wells account for 16 percent of North Dakota gas flaring but producers have improved the rate of connection over the past six months. There is certainly less economic argument today than there was a year ago for new wells not to be connected to gas processing plants. A year ago a producer could argue that natural gas at $2/MMBtu was not economic to recover by investing in gathering system pipes. Since then the price of natural gas doubled to above $4/MMBtu this April (NYMEX futures). And besides that Bakken gas is rich in NGLs. Now that adequate liquids processing capacity is online, flaring not only burns up the value of the gas but also the NGLs.

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