I’ll use this tweet to kick off a post about associated gas:
A months-long investigation by my colleague @Deon_Daugherty found that every day, #Permian producers now flare a record 700MMcf of #gas — enough to power >17,000 homes for a year. That’s every single day. To date, the @txrrc has never denied a producer a flaring permit.
— Casey Sattler (@cs_energyintel) July 15, 2019
When you produce crude oil through a well, it’s not just oil that comes up. You also get mud, water, gas, and certain nasty substances. The water is called “produced water” for obvious reasons, and the gas “associated gas”. This means it is associated with oil production, which distinguishes if from a field which is developed purely for its gas reserves (in which case it’s called unassociated gas).
The problem of what to do with associated gas is one that has plagued the oil industry since its founding. Produced water can be treated and put back into the sea or a water course, but you can’t do that with gas. Until a decade or two ago, oil companies would simply burn it off, which is why old pictures of oilfields showed enormous flares lighting up the entire region twenty four hours a day. This pumped some pretty nasty substances into the local environment, but important people only really got concerned when global warming came along and they started looking at how much CO2 was produced by this practice. So what is known as “operational flaring” got severely restricted or banned in most places. The tweet above is referring to the ongoing practice of operational flaring in the Permian basin, the home of the US shale revolution.
One small point before we continue: you still see flares on modern oil and gas facilities because they are part of the process safety system. If you have a problem on your plant, the option of last resort is to dump all your inventory to the flare and let it burn. It’s not good, but better than blowing up the whole plant, taking the neighbouring town with it. So this is why you still see a small, lazy flare burning at the top of a stack in a refinery: it’s burning fuel gas, just to keep it lit for when it’s needed. This is completely different from operational flaring.
So if you can’t flare the associated gas, you have two options. You can reinject it into the reservoir, either to increase reservoir pressure to aid production or just to stop it being emitted to the atmosphere. If that’s not possible either because the reservoir engineers will get upset or, in the case of shale, there is no reservoir, the other option is to monetise it somehow (which might be attractive even if you can reinject it). In many developments, this means running a pipeline to an existing gas plant. If your oilfield is close to other developments, this is often possible. LNG isn’t really an option with associated gas, but you might be able to build a gas plant providing power to local homes and businesses if there is a population centre nearby. Another option is an LPG plant where the gas gets treated and bottled and then trucked to a nearby population centre. I’ve heard of oil companies talking about giving away gas stoves to locals in order to create a market for LPG, but I’m not sure if it was ever done.
The problem comes when none of these options are feasible. I’ve been involved in lots of new development studies at the preliminary stages and the question always arises: what do we do with the gas? One project was in Kurdistan, miles from anywhere. The intention was to produce crude, store it in those huge tanks you see beside refineries, and then pipe it to a refinery or terminal somewhere or offload it into trucks. But we didn’t know what to do with the gas, and there was a lot of it. We couldn’t reinject it, and there was no population centre nearby. We then discovered the gas was full of nasty substances so when we crunched the numbers we’d find we’d be spending X of CAPEX to produce oil and 2X processing the associated gas, and then not knowing what to do with it. So the project got binned: too expensive.
This is why they still allow operational flaring in the Permian basin. It’s not good for the environment, but if it were banned there would be no shale revolution, the oil price would still be above a $100 per barrel, and I might still have a career. One option, and I don’t know how feasible this is without looking at the area in question, would be for the government to provide incentives to all players to build a central gas processing facility which could take all the associated gas and do something with it. But that might face all sorts of regulatory hurdles, let alone the pipelines associated with such a scheme. So they’re stuck between a rock and hard place: force them to dispose of the gas or charge them for emissions, and you’d kill the industry and America’s new-found energy independence. I expect we’ll see several battles played out over this issue in the years to come.