Flaring in the Permian basin: let's collaborate to eliminate
There have been a number of concerns raised in the last year or two about the amount of flaring of natural gas in the Permian basin. This is gas associated with the oil being produced from horizontal wells in the Wolfcamp, Bone Spring and other “shale” formations in the Midland and Delaware basins of the Permian. Moreover, some believe that more gas is being flared that is actually reported. At the last count, the volume was more than 400 million standard cubic feet a day (MMscfd). Enough to power several 1000 MW gas-powered generators.
The immediate reasons for this flaring are self-obvious with lack of takeaway pipeline capacity driving operators to flare so they can produce and sell the more valuable crude oil. Environmental groups have called for tighter regulations to reduce or prevent this loss, such as a production tax on gas produced, whether sold or flared. Some large minerals owners, for example the University Lands, already do this. There are other longer term solutions. I am told that there have been some “in the box” attempts at solving this problem, but I see this as an adaptive challenge, requiring an integrated range of technological solutions, together with some shifts in mindsets and beliefs.
Meanwhile, however, the flaring continues and is expected to grow before additional pipeline capacity is installed. The flaring is wrong at so many levels: it’s a waste of resource; it’s emissions without any benefit; and it’s a blot on the copy book of an industry already short on admirers. In the context of the energy transition and threat of climate change, this is just one small issue, but it’s a really good one that several industry sectors can tackle together to deliver progress and build wider coalitions. And it’s also an opportunity for the oil and gas E&Ps to demonstrate their skill, ingenuity and their willingness to progress, while they and others involved capture a revenue stream that otherwise goes up, ahem, in smoke.
Here’s how.
Let’s put together an alliance or joint venture to solve the problem and deliver value to stakeholders in so doing. Simply put the problem statement is: how do we eliminate flaring from the Permian basin while making at least a modest return on capital employed? I envisage the initial project being a fairly intense problem solving exercise, moving quickly through root cause analysis (considering both technical and mindset issues), to rapidly begin identifying a range of solutions, and building an investment proposal founded on those ideas.
We need some participants who have one or more of the following: vested interest, expertise, capital and most importantly a willingness to collaborate in action, not a desire to be right. I suggest that we need to have several producers involved, midstream gathering companies, electrical power companies, the Texas Railroad Commission and the New Mexico Oil Conservation Division, some willing and available scientists, engineers and commercial/tax gurus. I am confident I can enroll some of those resources from my network and indeed already have had some interest from kindred spirits. This is not an activist group, it’s a business venture that will turn a profit for the participants, as well as eliminate the wastage of a national resource and make a contribution to emissions reduction.
Interested in your company or organization being involved? Contact me on this site and we’ll get started.