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James Burgess

James Burgess

James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…

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North Dakota Flares $100m of Natural Gas a Month

North Dakota Flares $100m of Natural Gas a Month

It is well known that advances in technology have enabled the US to experience a huge boom in oil production over the past several years. Since 2007, oil production from North Dakota’s Bakken formation has increased by 4,000%, and turning the state into the second largest oil producer after Texas. The problem is that a natural by-product of oil extraction is natural gas, and due to the lack of infrastructure to store, transport, and compress the gas, nearly 30% has to be burned at the well in a process known as flaring.

Think Progress reports that an estimated $100 million worth of natural gas is flared in North Dakota every month, depriving the US economy of a huge source of revenue, and also releasing vast amounts of carbon emissions into the atmosphere.

On Wednesday, the North Dakota Petroleum Council, comprised of hundreds of companies, promised to try and resolve this problem and reduce the amount of gas being flared.

Related article: Natural Gas Locomotives Soon in North America?

“The industry can increase natural gas capture to 85 percent within two years, 90 percent capture in six years, and could capture up to 95 percent of gas.”

The New York Times wrote that “roughly six million tons of carbon dioxide into the atmosphere every year, roughly equivalent to three medium-sized coal plants,” and “experts expect a 40 percent increase in the gas produced from the Bakken field by the end of 2015.”

Such large volumes of gas are flared because the infrastructure doesn’t exist to make use of it, and it hasn’t been developed due to the fact that gas is worth so little. The North Dakota Industrial Commission estimated that the crude oil to natural gas price ratio was 30 to 1 for 2013.

Ron Ness, the President of the North Dakota Petroleum Council, stated, “where would your emphasis be? If you’ve got a barrel of oil that’s worth $95 and you’ve got [1,000 cubic feet] of gas … that’s worth $4.25, which infrastructure would you build first?”

Related article: Time to Play the Natural Gas Rally?

In July 2013, CERES released a report in which it explained that “natural gas requires its own infrastructure to be collected and marketed, necessitating further investment. In the absence of a strong regulatory framework that prohibits flaring, companies working with a limited amount of capital (which is to say all companies) have a strong incentive to put their capital toward oil production, given its higher return relative to natural gas.”

Oil companies generally don’t have the money to develop huge levels of infrastructure to carry the natural gas off to market, so another alternative would be to slow down the rate of production, reducing the volume of natural gas extracted.

By. James Burgess of Oilprice.com



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  • Synapsid on February 03 2014 said:
    Is Mr Burgess aware that if the infrastructure existed to "make use of" the natural gas being flared in North Dakota then the natural gas would be sent to be burned, "releasing vast amounts of carbon emissions into the atmosphere"?
  • Jeffrey J Brown on February 03 2014 said:
    Talk about a non-story.

    The EIA estimates that about 0.7% of gross US natural gas production was vented/flared in 2012:

    http://www.eia.gov/dnav/ng/ng_prod_sum_dcu_NUS_a.htm

    Of course, not long along, one of the talking head geniuses on CNBC, Jim Cramer, proclaimed that we were “Flaring more gas than we are producing.” And a few months ago, another CNBC talking head asserted that the US was already a net crude oil exporter.

    And so it goes.

    Of course, the much bigger story regarding gas is the huge decline rate in existing production, which Citi Research estimates is about 24%/year. This would be the simple percentage decline in US natural gas production from 2012 to 2013 if no new wells were completed in 2013. This decline rate implies that the industry has to put on line the productive equivalent of about 20 times the 2013 annual production from the Marcellus Play over the next 10 years, just to maintain current gas production for 10 years.

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