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Oil Capped By COVID Fears

Oil Capped By COVID Fears

Oil prices rose this week…

Gas Flaring In The Permian Hits Record In Q1

A pipeline capacity shortage caused natural gas flaring and venting to skyrocket to a record high in the first quarter of the year in the Permian, Rystad Energy said in a new report.

The average daily rate of flaring and venting reached 661 million cu ft with the research firm noting “This widespread waste of a valuable commodity is the result of persistent infrastructure challenges, a lack of sufficient takeaway capacity and an unexpected outage on a key pipeline in the area.”

The annualized rate of gas flaring in the Permian comes in at 6.8 billion cu m, which is theoretically enough to meet much of the gas demand of whole countries. Together with the Bakken, which is the other flaring hot spot in the United States, oil and gas producers waste so much of the commodity that it exceeds the annual gas demand of certain countries such as Israel, Hungary, and Romania.

The good news is that this degree of flaring should fall when the Gulf Coast Express pipeline comes on stream, Rystad’s head of shale research, Artem Abramov, said. Reuters notes that the Gulf Coast Express is scheduled to start operations in October this year and transport up to 2 billion cu ft of natural gas.

The bad news: it is the only new pipeline to come on stream this year. The next large pipeline project in the Permian won’t be operational until late 2020.

The pipeline problem of the Permian became obvious last year amid fast-rising production but most of the focus has been on its effect on oil prices. A year ago, total pipeline capacity stood at 3.1 million barrels daily but since then some new capacity has come online, which has mitigated the effect of rising production somewhat. This included an extension to the Sunrise pipeline and the repurposing of the Seminole-Red pipeline to carry crude rather than natural gas liquids. This has perhaps served to worsen the situation with natural gas takeaway capacity.

By Irina Slav for Oilprice.com

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  • Eric Staib on June 06 2019 said:
    Well that's bad news. We should be taxed on this. Allowing us to do this is a subsidy. Before you attack me, read up on 'economic externalities.'

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