Sunday, January 22, 2012

Flaring natural gas is a waste - a dialogue

A: Flaring has always struck me as a huge waste...I get that sometimes the economics justify it but it seems pretty much every oil field comes with NG as a byproduct.

B: It's too cheap to capture a lot of places - and you can't not extract it if you want the oil. So they flare.

C: One begins to think oil is next, should things slow down worldwide.

B: Not to the same extent as in the past - the production isn't there like it was. Easier to back production off as price drops below marginal cost to recover.

But because the producers are even more operationally levered than ever before - the economic slap to them might be worse than in the 80s.

C: Should be running back into the formation to repressurize, and run more of the drilling rigs in neighboring pads, but hey, they only get advanced after the easy money is made.

So much in the energy industry is still awaiting efficiency.

The days of the wildcatter are pretty much dead.

Guess I am going to finish my exit from that position. Too much gas is going to be endemic for a couple of years until demand switches enough to justify my capital at risk, paltry as it is.

D: Encana actually runs some NG drilling rigs on natural gas and even use the gas on site to fuel the rig. Given that NG cost about 20% of diesel you'd think they'd all be doing it, especially when they tout converting gas and trucks to NG. Physician convert thyself.

B: A lot of field gas is really corrosive. Eats equipment. The cost of the special alloy alone is staggering. I talked to one refinery manager who said their best corrosion resistant piping - chrome nickel based alloy large diameter pipe - cost almost a $1000 a linear foot. Regular stainless gets eaten like candy.

D: They actually process the gas in the field:

Natural Gas Powered Drilling Rigs Improve Air Emissions and the Bottom line — Colorado Energy News

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