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North Dakota seeks to reduce natural gas flaring

By Bob Downing Published: September 2, 2014

From the U.S. Energy Information Administration:

 

North Dakota seeks to cut gas flaring to 10% of production by 2020

For the past four years, North Dakota oil producers have flared, or burned into the atmosphere, a third of the natural gas that has come up the wellbore with the oil, as they produced increasingly large volumes of light sweet crude oil.

The huge and rising volumes of this highly desirable oil have helped change the nation's oil import balance and have become a driving force in changing domestic pipelines, oil-train operations, and refining.

Now, the state's principal energy regulator, the North Dakota Industrial Commission (NDIC), is seeking to reduce the volume of flared gas to 10% of production by 2020, even if it means cutting back oil production. The NDIC's order said it will "consider amending… field rules to restrict oil production and/or impose such provisions as deemed appropriate to reduce the amount of flared gas."

The NDIC's most recent data, for June, show that 29% of gas production was flared, or a volume of 364 million cubic feet a day (MMCf/d). Total gas produced in June was 1,243 MMcf/d. After the flaring, the rest was either used on the hydrocarbon lease or sold. The commission seeks to reduce gas flaring to 26% of total gas production by the fourth quarter of this year. Further goals include cutting that flaring percentage to 23% by 1Q15, 15% by 1Q16, and 10% by October 2020.

An NDIC order on July 1 encouraged capturing greater volumes of the produced natural gas for use on the lease. The proportion of lease consumption to total production has remained constant since 2010 at 3%, which currently equates to 32 MMcf/d.

Since January 2010, the proportion of flared gas to total natural gas production has averaged 32%. There are two drivers of this high proportion. First, there is the rapid growth in North Dakota oil production, which rose from 227,000 barrels per day (b/d) in January 2010 to 1,080,000 b/d in June 2014. Second, there is an inability to match construction of new natural gas pipelines and processing plants with regional gas production because of minimum throughput requirements for this new infrastructure to be economic.

It is difficult to appropriately size midstream infrastructure because the Bakken/Three Forks production pattern is for high initial production followed by rapidly declining oil and gas production during its first year of operation. Construction of large-volume gas gathering and processing capacity to serve peak oil and gas production might not be economic. The rapid decline in oil production quickly results in low natural gas production rates for individual wells, which also weakens the economics for gas gathering and processing.

Low natural gas prices further undermine the economics of midstream infrastructure. In June 2014, the average North Dakota well produced 102 b/d of oil and 116 Mcf/d of natural gas, which means that a significant portion of North Dakota wells are producing considerably below these production rates.

As the commission said in launching the hearing on its new policy of reducing gas flaring, "The policy goals were to reduce the flared volume of gas, reduce the number of wells flaring, and reduce the duration of flaring from wells." In recognition of the difficult economics of dealing with rapidly declining production from newly drilled wells, however, the NDIC's order "allows for exemptions on a case-by-case basis."

In addition to the difficulty of some oilfield operations, the NDIC earlier this year highlighted causes of the delays in connecting natural gas to pipelines and processing facilities. The single biggest challenge, NDIC said, is securing landowner permission for connection activities, which can delay projects 180 days or longer.

Other obstacles include delays in zoning by counties and townships for midstream facilities; the short construction season caused by harsh weather; the limited number of available construction crews; and the review of permits for natural gas-fueled equipment.

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