WASHINGTON — Energy companies are making strides in capturing the natural gas that flows out of North Dakota oil wells but still have a long way to go to stop burning off the fossil fuel, governors and business executives said Monday.
Right now about a third of the natural gas coming out of those oil wells each day is flared as a less-lucrative byproduct of the more valuable crude, sending carbon dioxide into the atmosphere instead of extra money into investors’ pockets. In North Dakota’s sprawling Bakken formation, oil companies have relatively few natural gas gathering lines and processing centers to transport the gas to market.
“We are flaring a tremendous amount of gas right now,” said North Dakota Gov. Jack Dalrymple at the Bloomberg Energy 2020 summit in Washington, D.C. “Everybody feels it is a huge waste, to say nothing of the environmental impact.”
Burning the methane is a better alternative to simply venting that potent greenhouse gas into the atmosphere, but it produces another heat-trapping emission — carbon dioxide — as a result. And even with natural gas trading at relatively modest prices, burning off the fossil fuel means lost value to landowners expecting royalties from the energy production and the oil companies that are developing the Bakken.
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Companies have been working to fill in the gap, by constructing nearby facilities to transform natural gas components into fertilizer, installing new gathering lines and building processing plants. The industry is on track to spend some $6 billion on natural gas gathering and processing infrastructure by the end of next year.
But that is no match for the roughly 180 rigs constantly drilling new wells in the Bakken formation.
Even though “companies are scrambling as fast as they can to gather this gas . . . we keep finding more oil and gas, so for the time being, we’re really not gaining on the problem,” Dalrymple said.
GE, Ferus Natural Gas Fuels and Statoil think they may have found one solution: Putting that natural gas to use in the oil field itself.
Together, the three companies are capturing natural gas as it comes out of Statoil’s Bakken oil wells and then stripping out the liquids propane and butane so they can be trucked to processing facilities. The remaining natural gas is then compressed using GE’s “CNG-In-A-Box” system, so it can fuel trucks and other equipment.
Statoil had already converted 10 rigs to bi-fuel systems that can run on a 50-50 mixture of diesel and natural gas at a cost of about $200,000 each. The CNG units can now help keep those rigs running.
On Monday, Statoil, GE and Ferus launched a test to see if they could use the same CNG system to power the hydraulic fracturing equipment it contracts from Halliburton to pump water, sand and chemicals underground to unlock hydrocarbons from the dense subterranean rock.
The compressed natural gas eventually may be deployed to power generators, trucks and other oilfield equipment.
“The scale of the flaring challenge was not created by one producer in isolation, nor will it be solved by one company standing alone,” stressed Lance Langford, Statoil’s vice president of North American Development and Production. But so far, he said the “Last Mile Fueling” endeavor is yielding “very exciting” results.
“We’re replacing diesel with cleaner burning gas, and we’re also decreasing costs because we’re replacing more expensive diesel with less expensive natural gas,” Langford said.
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Eventually, the systems could be used to replace diesel in oilfield equipment well beyond North Dakota, even in the gas-rich Marcellus Shale spanning Pennsylvania, Ohio and New York. The techniques also could be deployed in some resource-rich nations where the natural gas could help residents cook and heat their homes.
John Westerheide, general manager of unconventional resources at GEO Oil & Gas, said switching from higher-cost diesel to lower-price natural gas to power oilfield equipment makes good economic sense, even if the gas isn’t pulled from a flare.
Because of the sparse gas infrastructure in the Bakken, it has been too difficult to guarantee a steady, reliable supply of the fossil fuel, but the approach Statoil, GE and Ferus are pioneering could overcome that challenge, said Stewart Wilson, Ferus’ vice president of commercial development.
A cascade of other industries that use heat from burning gasoline and diesel can profit from switching to natural gas — be it drying crops or the sand used in hydraulic fracturing, Wilson said.