• 5 minutes 'No - Deal Brexit' vs 'Operation Fear' Globalist Pushback ... Impact to World Economies and Oil
  • 8 minutes China has *Already* Lost the Trade War. Meantime, the U.S. Might Sanction China’s Largest Oil Company
  • 12 minutes Will Uncle Sam Step Up and Cut Production
  • 30 mins China has invested btw $30 - $40 Billon in Canadian Oil Sands. Trump should put 10% tariffs on all Chinese oil exported into or thru U.S. in which Chinese companies have invested .
  • 15 hours A legitimate Request: France Wants Progress In Ukraine Before Russia Returns To G7
  • 8 hours Danish Royal Palace ‘Surprised’ By Trump Canceling Trip
  • 7 hours US to Drown the World in Oil
  • 3 hours Used Thin Film Solar Panels at 15 Cents per Watt
  • 4 hours The Rarely Revealed Part of the Nuclear Problem
  • 10 hours Iran Is Winning Big In The Middle East
  • 7 hours With Global Warming Greenland is Prime Real Estate
  • 17 hours IS ANOTHER MIDDLE EAST WAR REQUIRED TO BOLSTER THE OIL PRICE
  • 8 hours Tit For Tat: China Strikes Back In Trade Dispute With U.S. With New Tariffs
  • 12 hours Strait Of Hormuz As a Breakpoint: Germany Not Taking Part In U.S. Naval Mission
  • 4 hours Trump cancels Denmark visit amid spat over sale of Greenland
  • 15 hours LA Solar Power/Storage Contract
  • 12 hours Philadelphia Energy Solutions seeks to permanently shut oil refinery - sources
Alt Text

The Real Reason Why US Oil Production Has Peaked

Despite major supply outages, oil…

Alt Text

Saudis Scramble To Arrest Oil Price Slide

Saudi Arabia has approached other…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Premium Content

Will The U.S Gas Glut Cap Oil Production?

A pipeline company is fighting the practice of flaring gas in Texas, threatening to slow the pace of oil production.

Flaring gas has become an epidemic in Texas. Permian drillers have ramped up oil production to astounding levels, which has led to a wave of associated natural gas output. But while there have been serious constraints for moving oil on pipelines, the bottlenecks for gas pipelines are even worse. With no place to put the gas, shale companies are simply lighting the gas on fire and flaring it off into the air.

In the Permian and the Eagle Ford, shale drillers flared an average of 740 million cubic feet of natural gas per day in the first quarter, according to the Wall Street Journal. The amount of gas burned off into the air in the first three months of the year was worth $1.8 million per day and emitted the equivalent greenhouse gas emissions of 5 million cars, the WSJ said.

Perhaps even more shocking is the fact that the Texas Railroad Commission, the oil regulator in Texas, has received more than 27,000 requests for flaring permits in the last seven years, and has not denied a single request, according to the Wall Street Journal. There are ostensibly limits on flaring in the state, but in practice nothing is really enforced. “Then why have the statue in the first place?” John Hays Jr., an attorney with pipeline operator Williams Co., said in an interview with the Wall Street Journal. Related: The Scary Truth About Canada's Energy Security

As WSJ notes, Williams Co. is trying to contest a flaring permit request by Eagle Ford shale driller Exco Resources. Exco apparently wants to flare all of the gas from a series of wells in South Texas despite the fact that the wells can be connected to existing pipelines. Exco wants to flare the gas because its more profitable than buying space on the pipeline. Williams fears that unchecked flaring would be a setback for pipeline companies who look for contracts before building new pipelines.

Texas shale drillers have not run into significant resistance to flaring to date, but opposition from a powerful midstream company may pose a more formidable obstacle. If the Texas Railroad Commission denies the permit, it could slow the pace of oil production in the state.

Evidence of this dynamic is already visible in North Dakota, where flaring is also running well above state limits. But the constraints on flaring in the Bakken, such as they are, are nonetheless having more of an impact than they are in Texas. North Dakota’s Lieutenant Governor Brent Sanford told an industry conference that Bakken oil production would be vastly higher if not for bottlenecks on capturing natural gas.

“The only thing keeping us from setting a new oil production record is our gas production. It is outpacing our oil production and makes it difficult to meet our gas capture goals,” Sanford said at the Bakken Oil and Gas Conference Expo in Bismarck, according to S&P Global Platts. Sanford argued that North Dakota would be producing 2 million barrels per day (mb/d) if not for gas constraints, up from roughly 1.4 mb/d currently. He said that the “gas capture challenge is limiting further growth.” Related: Gulf Of Mexico Oil Production Restarts After Tropical Storm

North Dakota has a “goal” of limiting gas flaring to 12 percent of gas produced for this year, a limit that will decline to 9 percent in November 2020. However, as recently as May 2019, the industry flared about 19 percent. Nevertheless, state regulators say that drillers are throttling back on oil production in an effort to curtail flaring.

Meanwhile, not too far away in Alberta, natural gas drillers are facing the prospect of “widespread corporate failures, significant job loss,” and a “liquidity crisis,” according to a group of gas companies. The issue there is also one of pipelines, although in Alberta, amid pipeline constraints, gas producers are fighting for access with TC Energy (formerly TransCanada). When pipelines go offline for maintenance, gas producers say prices suffer from severe volatility and rock bottom prices. Natural gas in the region recently dipped into negative territory. More than a handful of gas drillers are proposing voluntary production cuts, with some even calling for mandatory curbs similar to those seen for the oil industry.

In all cases, natural gas production has outpaced the ability to capture it. The result is financial pain for the drillers themselves, and in some cases, an impact on oil production.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage


Leave a comment
  • Old-Ruffneck Smith on July 17 2019 said:
    I some parts of the western side of the Permian they are injecting the Gas back into the ground. Sorta costly but pressure up and keep them pores open and the oil flowing.
    Just like injecting the waste-water back down 12,000 feet. Should be filtering after settling ponds and re-use. Water getting expensive in West Texas......

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play