May-2020

To flare or not

What do you do with the gas associated with crude oil production if there is no local processing capacity and no gas gathering network to collect and deliver cleaned-up natural gas?

Chris Cunningham
PTQ Editor

Article Summary

If the value of the gas is attractive enough, you can invest in more processing and build a section of pipeline.
Or you could just vent it to atmosphere, reinject it to produce more oil, or flare it off and have done with it. The argument in favour of flaring (and, let’s face it, it is the only argument in its favour) is that its chief release is carbon dioxide. Venting means a release of methane which is generally reckoned to be a much more serious contributor to climate change.

So flaring is the simple option for oil producers, provided there are no moves to force them to clean up and monetise their sideline in gas production. It is a global practice and most regions have local permitting bodies to give the go-ahead or otherwise to applications to burn off gas production. In several producing nations, steps are afoot to reduce flaring as much as possible. Nigeria, for instance, was recently horrified to note that flaring operations by its oil industry were losing one billion dollars worth of revenue. However, the centre of attention in the debate about gas flaring, like news in general about oil exploration and production, is in US tight oil operations.

One operator in the Texas Permian, ExxonMobil, has made a stand about one aspect of its environmental performance. It has devised what it calls a model framework for methane regulations in the US oil industry with the aim of developing “enhanced rules to reduce emissions in all phases of production”. The company says that it has been applying the principles of its framework to oil and natural gas operations for several years, resulting in improvements that demonstrate what is practicable and achievable. The model framework is based on a voluntary methane reduction programme, which involves replacement of leaky components at production sites, as well as improvements to technology, data gathering, and research. ExxonMobil says that it has reduced methane emissions from its tight oil operations by 20% in four years with the aim of 15% reductions across the company. In other words, the intention is to reduce gas leaks, but the contained gas can still be flared.

The outlook for objectors to flaring in Texas is not promising. The state has elected regulators to oversee its oil and gas industry and they are reportedly highly defensive about local flaring activities, comparing them as favourably as possible to other oil-producing regions at home and abroad. In recent years, Texas has not turned down any applications for flaring permits during the rush to develop Permian oil resources.

Operators in the Permian say that they are striving to reduce flaring and some are taking strides to do so. However, the incentives to eliminate flaring in Texas and elsewhere are fiscally limited. The tight oil bonanza is, in the general scheme of petroleum production, a short-lived operation. If in five years’ time the industry is winding down, as seems likely, a flare-free operation would leave behind the expensive carcasses of redundant gas processing and gas gathering hardware.

This short article was the editorial forward in PTQ's 2020 Gas Supplement

You can view the issue HERE