Bevill: Capturing a new market
North Dakota Gov. Jack Dalrymple took on a firm tone during the recent Williston Basin Petroleum Conference when addressing the practice of flaring natural gas at the state’s oil wells, warning producers that the days of the state “going easy” on companies are over.
His comments were backed by the June 1 implementation of more stringent flaring regulations, which Dalrymple promised conference attendees the state would enforce as it attempts to reign in the wasteful practice and reduce the overall level of flared gas at North Dakota wells from around 30 percent to 15 percent within two years and no more than 10 percent by 2020.
Prior to the new regulations, producers were allowed to flare gas for up to a year at well sites and could petition the Industrial Commission for an extension of that allowance if they could prove that capturing the gas was economically detrimental to their operations.
Now, producers must submit a gas capturing plan along with their drilling permit applications, proving that they have met with gas gathering companies, that they know the locations and capacities of surrounding gas gathering pipelines and processing plants, and explaining how they plan to apply specific alternate systems to reduce flaring at the well sites. Failure to comply with the new rules could result in the suspension or denial of new permit applications or the restriction of production at existing wells.
The gas capture plan requirement was initially set forth as a recommendation by the North Dakota Petroleum Council’s flaring task force. Tessa Sandstrom, the Petroleum Council’s communications manager, says some companies had been using a variation of the newly required plans prior to its implementation. Drillers who had not yet been strategizing how to capture flared gas will have catching up to do, as Sandstrom noted that the regulations require not only planning within the company, but communication with mid-stream gas gathering and processing companies as well.
“It will certainly add an additional burden for all parties but we are confident it will have a positive impact on the amount of gas captured,” she says.
Pipeline gathering systems and processing plants continue to be built and expanded throughout North Dakota’s Oil Patch, but they remain in short supply throughout much of the area, so alternative reduction methods will be needed to meet the state’s requirements. That need is already spurring the market for new technologies to be introduced. “Producers want to capture the gas more than anyone, when the right technologies come forward which we are beginning to see, they will take off quickly,” Sandstrom says.
New Jersey-based Primus Green Energy hopes its technology will be one that is chosen by North Dakota producers to curb flaring. The company is commercializing a patented three-stage thermocatalytic process that can be used to convert natural gas into drop-in replacement transportation fuels like gasoline or diesel fuel. The technology has been tested successfully at a mini-demonstration-scale facility in New Jersey and the company says it is now ready to begin deploying its technology in the Bakken and other oil plays.
One benefit of its technology over other options, according to the company, is that it offers a small-scale solution to flaring in that its units are comprised of scalable modules which can be trucked to well sites, assembled on-site, then disassembled and moved to a new location as desired. Vice President George Boyajian says the technology is also flexible and can be used to make a variety of products, which could be shipped via pipeline or truck along with the crude produced at the site.
The company is also offering producers an end-to-end gas-to-liquids solution, making the process easier on drillers, he says. “We will have all of the necessary components to turn that into a liquid product so that the owner doesn’t have to go out and have four or five different contractors,” he says. “The object of our business is to be a one-stop-shop for them.”
Primus’ process has not yet been tested in North Dakota, but Boyajian says the basic technology behind it is not new and has been used successfully in New Jersey, which endures a similar climate. A number of well-specific factors, including gas composition, desired end-product and infrastructure availability, make it difficult to estimate the cost of installing this technology, but he says it has been proven to produce 5 gallons of drop-in fuel per mmBTU of natural gas, which converts roughly to $12.50 of product for every $2 of natural gas.
Boyajian expects Primus will build and sell modules to drillers, but says the company is open to the option of partnerships or licensing the technology as well. The company has been developing its technology for some time, he says, so the roll-out of its commercial availability just as North Dakota producers are looking for alternatives to flaring is a combination of good timing and good fortune. “The timing couldn’t have been better for us.”
Bevill is the editor of Prairie Business Magazine, which is a part of Forum News Service. Email her at email@example.com.