In satellite photos taken at night high above North America, the great metropolitan areas stand out with a brilliant glow. It’s easy to pick out New York, Mexico City and Los Angeles. And for anyone familiar with the locations of the continent’s shale plays, those areas also have distinct illuminations: gas flaring at drilling sites.
However, the light show in the Bakken Shale ─ as impressive as it may look from space ─ should be losing some of its luster.
On Sept. 30, laws that impose new restrictions on flaring natural gas in North Dakota went into effect. Producers will be required to abide by production guidelines that limit flaring at wells, both existing and those that will be drilled in the future.
Satellite image courtesy of NOAA.
The new standard seeks to have a 23% flaring rate by January 2015. Beyond that date, the target for flaring dips to 10% by 2020 and 5% after that point. By comparison, wells in the state flared at 30% in April, the last month that the North Dakota Industrial Commission (NDIC) provided statistics. The NDIC is the state’s regulatory body for oil and gas production.
By further comparison, Texas flares 0.8% of the gas it produces, according to statistics from the Texas Railroad Commission. Texas is the only state that produces more oil than North Dakota.
The North Dakota Pipeline Authority released a report for burn-off in May. It reported that 0.35-0.40 Bcf/d of gas was being flared. That is about 33% of current Bakken gas production, Raymond James said in an analysis.
Guidelines adopted by the NDIC were recommended by oil and gas companies that work in the state. The state could force companies that do not comply to cut back on the amount of oil they are allowed to produce. Furthermore, companies could face fines that tally has much as $12,500 per day.
The North Dakota Petroleum Council, which backs the oil and gas industry, said that as many as 1,500 wells could be forced to ease production.
Because of the tightened flaring levels, Raymond James concludes that producers will be forced to move their product instead of burning it off. Therefore, producers will lean toward investing more money in midstream development. Raymond James analysts also said that the flaring-reduction rules could be a negative factor in crude production.
“State regulators are well aware of the amount of money that is left on the table due to flaring, to the tune of $100-plus million per month,” Raymond James said in its report. “Simply put, the state views it as a waste of state resources.”
Producers will have some options as they conform to the new rules, according to Raymond James. After the first year of production a well must either be capped, connected to a gas gathering line, equipped with an electrical generator that consumes at least 75% of the gas, or equipped with a compression or gas liquefaction system that consumes at least 75% of the gas.
Bakken natural gas production could nearly double to more than 2.0 Bcf/d by 2020. That potential, however, creates some logistical problems for the industry. An additional 400 MMcf/d of gas-processing capacity is planned, Raymond James reports, and that should handle production growth through 2017. “Still, an additional 400 MMcf/d of gas processing capacity will be needed by the end of the decade.”
Meanwhile, North Dakota's oil production is flowing along. Daily oil production hit more than 1.1 million barrels in July, according to the NDIC. More than 11,000 wells operate in the state.
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