SUMMARY:
Crude oil and natural gas
are often found together,
like two peas in a pod.
As crude oil
is pumped out
of an oil well,
a small amount
if natural gas
usually comes
out with it.
Over time,
for each well,
there's less oil,
and more
natural gas.
The U.S.
shale oil industry
is chasing oil,
so the natural gas
byproduct is not
really wanted.
Venting and
flaring (burning)
the excess
natural gas
is harmful to the
environment,
contributing to
greenhouse gas
emissions,
with no benefit
for humans.
Venting releases
methane into
the atmosphere,
which is a minor
greenhouse gas.
Flaring gets rid
of the methane,
but releases
carbon dioxide
into the air.
"Flaring" is the
official name
for burning
the excess
natural gas.
For the
Permian basin,
shale oil area,
there's far too little
natural gas
pipeline capacity
to move out
pipeline capacity
to move out
all the natural gas
"byproducts",
so they burn
a lot of gas
at the oil well.
That is the
Permian basin
pollution problem.
BACKGROUND
The Texas
Railroad
Commission,
regulates the
oil industry
in the state.
It has not denied
a single request
from an oil producer
for a flaring permit
in years, despite
a spike in flaring.
Earthworks, an
environmental group,
has filed over 103
complaints with the
Texas Commission on
Environmental Quality.
“Our field research
and complaints of
oil and gas operations
are doing the job that
Texas regulators
ought to be doing
to protect the public,”
Earthworks’ Senior
Policy Counsel
Aaron Mintzes said,
in a statement.
This is the incident
that got my attention:
A few months ago
the Texas Railroad
Commission approved
a company’s request
to flare, even though
the company had
natural gas pipeline
access available.
Williams Cos.,
a pipeline giant,
is suing the Texas
Railroad Commission
over that decision
to grant a flaring permit
to Exco Operating Co.
Exco has wells
in the Eagle Ford
area, that were
already connected
to a gas pipeline,
but Exco
balked at
paying the
pipeline fees.
The Railroad Commission
granted the flaring permit
anyway.
Williams Cos. is suing
the commission for
failing to uphold
the state’s own
regulations on flaring.
A Bloomberg News
report estimated
that the Texas
Railroad Commission
has issued around
7,000 permits in 2019
allowing companies
to vent or flare,
( up from only
500 in 2010, and
5,500 in 2018,
according to
the EIA ).
SHALE OIL
INDUSTRY
BACKGROUND
Note: This is
from my article
about high
world debt levels,
in my economics
blog, four days ago:
"The shale oil “miracle”
used debt to provide
the illusion that the
nation could be
self sufficient in oil.
Production is nearing
13 million barrels-a-day.
But it appears to be
a Ponzi scheme
business model.
The producers
can’t make money,
and they’ve
spent ten years
fooling investors.
The result will be
less investment ,
in a business that
requires constant
re-investment.
When the cost
of energy exceeds
the value of the
net energy you get,
then debts of every kind
can no longer be repaid.
The bankruptcies
have only just begun."
PERMIAN BASIN:
SUMMARY:
In the
Permian basin
of the
southswestern
United States,
there's too much
natural gas
being produced,
for the available
pipeline capacity
to get rid of it.
Permian drillers
can burn off the
extra natural gas,
( flaring )
release it
into the air
( venting )
or slow their oil
drilling activities,
to slow the flow
of excess
natural gas.
The volume
of excess U.S.
natural gas
burned,
or flared,
has been
increasing
at a rapid rate
for a few years.
Total U.S.
flaring and venting
has increased from
282 billion cubic feet
in 2017
( 0.772 bcf per day )
up +66%,
to 468 billion
cubic feet
in 2018
( 1.28 bcf per day )
( bcf = billions of cubic feet )
And those
numbers
will increase
even more
for 2019,
because 2019
oil production
had increased
about one million
barrels per day
(bpd) over 2018.
DETAILS:
After that background
information on the industry,
it becomes obvious
only the cheapest method
of burning off excess
natural gas will be used !
Flaring has increased
a lot in recent years,
as the discrepancy
between natural gas
production, and
pipeline capacity,
increased.
Example 1:
From 123 billion cubic feet
annually of vented and
flared gas in Texas in 2017,
to 238 billion cubic feet
annually in 2018,
( up 93% in one year ! )
according to the EIA.
Example 2:
North Dakota
has tighter
flaring regulations --
but the increase was from
88 billion cubic feet annually
in 2017, to 147 billion
cubic feet in 2018.
( up 67% in one year ! )
Oil drillers who
come up with
natural gas
as a byproduct
can also pay
to have it
removed
by pipelines.
Producers have to
pay pipeline companies
for use of their pipelines.
They recoup
pipeline costs
through their
natural gas
sales.
Companies with
no long-term
contracted
pipeline rates,
and contracted
shipments,
would have to buy
allotted pipeline
space from others,
usually at
a huge loss.
So that option
won't happen !
In the
Permian basin,
oil production
increased
from less than
2 million barrels
per day (bpd)
three years ago,
to nearly
5 million bpd
today.
And the EIA’s Monthly
Drilling Productivity
Report expects
January 2020
to increase
by 48,000 bpd
over
December 2019 !
Natural gas production
in the region is projected
as a 213 million cubic feet
per day increase from
December 2019
to January 2020.
These shale oil
companies,
as a group
are not making
any profits,
but
shutting oil wells
to cut excess
natural gas,
would reduce
their desperately
needed cash flow,
so will not happen !
There are lots
of new Permian
basin pipelines
being built,
or planned
for the future,
( timing assumes
no environmental
protests or lawsuits ):
Kinder Morgan’s
Permian Highway,
should increase
natural gas
takeaway capacity
by:
( 2.1 Bcf/d by late 2020 ),
Stonepeak’s Whistler
( 2.0 Bcf/d) by summer 2021 ),
Permian 2 Katy
( 1.7 Bcf/d to 2.3 Bcf/d ),
Pecos Trail
( 1.9 Bcf/d ),
Permian Global Access
( 2.0 Bcf/d ),
Bluebonnet Market Express
( 2.0 Bcf/d )
Permian Pass (2.0 Bcf/d).
Until these pipelines
come into service,
venting and flaring
natural gas is soaring !
The New York Times
documented several
“super emitters”
in the Permian basin,
using infrared cameras.
Venting is off limits
in North Dakota, and
restricted in Texas,
but flaring has been
ignored by regulators,
along with methane leaks
at every stage of the
oil extraction process.
Rystad Energy
estimated that
flaring and venting
in the Permian basin
reached an
all-time high,
from July 2019 to
September 2019,
at 750 million
cubic feet
per day.
In third quarter 2019,
the Permian basin
vented and flared
752 million cubic feet
of natural gas per day,
up 14% in six months,
from 661 mcf/d
in the first quarter,
according to
Rystad Energy.
“This represents
a new all-time high.
Oil production in the
Permian Basin
is growing at an
accelerated pace
again, and we observe
high, sustained levels
of flaring and venting
of associated gas
in the basin,”
said Artem Abramov,
head of shale research
at Rystad Energy,
in November 2019.
“A significant number
of operators have exhibited
a clear downwards shift
in flaring intensity in 2019.
Yet there are other examples
of a recent increase in flaring
intensity, which are primarily
represented by some operators
active in the Eastern
Midland Basin,”
Abramov said.
“It’s a black eye
for the Permian basin,”
Pioneer Natural Resources
Chief Executive Officer
Scott Sheffield said,
in 2019
“The state,
the pipeline companies
and the producers
-- we all need
to come together
to figure out a way
to stop the flaring.”