Aug. 27–Oil drillers are burning excess natural gas to keep the crude oil ?owing. Natural gas is mostly a byproduct of crude oil drilling in the Permian Basin. So the shortage of pipeline capacity to transport the gas to market has played a role in companies burning — or ?aring — large amounts of natural gas to keep that roadblock from slowing oil production. State data and analysts’ reports show large increases in ?aring permits and volumes in Texas. A similar situation happened — although with much larger percentages ?ared — several years ago in North Dakota. That prompted state regulators to rein in the practice. Texas Railroad Commissioner Ryan Sitton said this summer he expects to address the situation within the next six months.
Flaring is on the rise in Texas
The percentage of natural gas ?ared is still small, but the volumes are signi?cant.
North Dakota’s natural gas problem
Drillers ?ared as much as a third of their gas before the state intervened.
“The regulatory side is going to start to be a problem as we continue to try to ?are more gas in order to get the commodity we’re looking for, which is crude oil. The ?aring is not only value lost to the operator, but it’s also value lost to the state in terms of tax dollars.”
Sarp Ozkan, senior oil and gas marketing analyst, Drillinginfo
Cheap natural gas makes ?aring easier
Drillers want to sell their gas but not if it slows oil production.
Henry Hub natural gas spot prices, dollars per million BTU
“Flaring that you’re seeing right now is more related to the infrastructure within the Permian. … We are forecasting some additional constraints on that downstream takeaway. … We’re producing a little over 8 bcf [billion cubic feet] a day of residue gas leaving the area, and that’s up from about 5 bcf just in 2015. If you plotted that projection, you would start to run out of capacity really by the end of this year.”
Suzie Boyd, president of consulting service Caballo Loco Midstream
Flaring permits peaked in 2015
Although the number of permits is decreasing, volumes are increasing.
Number of flaring permits
“Midstream companies are building new pipelines to clear the natural gas choke point in the Permian Basin. Much of that capacity is still a year or two off, though. Besides the ?nancial impacts, there are environmental repercussions of ?aring, from climate change effects to interfering with views at the McDonald Observatory in West Texas.”
Jeff Mosier, energy and environment writer, The Dallas Morning News
SOURCES: Drillinginfo; U.S. Energy Information Administration; Texas Railroad Commission
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