Game on for Gas Capture Technology

Increases in shale gas production combined with less takeaway capacity and evolving markets translate into a comeback for flare technology demand and use across several U.S. shale plays.
By Patrick C. Miller | December 04, 2017

In the world of gas capture technology, it appears everything old is about to become new again as the problem of selling and transporting natural gas emerges as a potential trouble spot for the shale oil and gas industry. 

Indications are that the ability to produce natural gas is outstripping the markets and infrastructure needed to support production. This has renewed interest in technologies to capture gas in the field and use it to produce energy that might otherwise be obtained from outside sources, such as diesel generators or the electrical grid.

Over the past two years, reduced drilling and completions during the low-oil-price environment temporarily threw a wet blanket over the need for gas capture technologies, but this trend is rapidly coming to an end.

“By no means have the midstream folks caught up; they are still wildly behind,” says George Chedsey, vice president of GTUIT LLC, a company headquartered in Billings, Montana, that specializes in natural gas liquids capture and gas conditioning at well sites.

Chedsey says GTUIT is busy and committed to expanding in North Dakota’s Bakken shale play and the DJ Basin in Colorado where—despite investments in new infrastructure by midstream pipeline companies—they remain behind producers’ ability to drill and complete wells that produce more gas.

“We’ll be increasing our fleet by approximately 30 percent next year over this year,” he says, adding that he expects the upward trend to continue well into 2018. In the DJ Basin, Chedsey says DCP Midstream has put a hold on accepting additional gas into its system.

“All producers are currently maxed out until August of next year—it’s a real issue,” he explains. “It’s going to put quite a few companies into major re-evaluation. We’re moving several million cubic feet per day of processing capacity for three separate clients. Some of it’s new build and some of it’s equipment from the Bakken.”

In late November, the Wall Street Journal reported that increasing gas production and falling gas prices in West Texas threatens shale oil production in the region.  According to the article “…gas is fast becoming a major issue for companies in West Texas. Some drillers are racing to lock up space on pipelines so they can get their gas out of the Permian.”

While Mexico is viewed as a promising export market for West Texas natural gas, the Journal article said gas-fired electrical generating plants and the distribution infrastructure to support them has yet to be built while pipelines to Gulf Coast refiners and export facilities “are essentially full.”

North Dakota’s Bakken and Three Forks shale plays where the flaring issue was thought to be under control provides an example of how the situation is changing. The state’s oil production has remained steady at just above 1 million barrels per day. However, with production targeting the sweet spots of the Williston Basin and improved well completions, gas production in North Dakota has reached all-time high levels. In August, a state record of nearly 1.95 million cubic feet per day was achieved, falling slightly during September.

In mid-November, North Dakota’s Department of Mineral Resources announced that the percentage of gas flared increased to 17 percent during September—the first month the oil and gas industry missed its gas capture targets during the past three years of reporting. Lynn Helms, NDDMR director, attributed the increase in flaring to unanticipated problems involving maintenance, delayed right-of-way approvals and reduced NGL takeaway capacity.

Currently, North Dakota producers are required to capture 87 percent of produced gas. In November 2018, the requirement increases to 88 percent.

“We are going to struggle month by month from now until when we go to 88 percent capture this time next year,” Helms says. “We’re rapidly approaching the capacity of what we have out there for infrastructure. So we really need another gas plant or two by 2019 if we’re going to meet that 88 percent capture.”

Although production restrictions in North Dakota aren’t usually triggered by unforeseen events, Helms didn’t rule out that possibility if flare reduction goals are missed for two consecutive months.

“We probably need to be expanding our natural gas processing capacity by 10 to 12 percent a year,” Helms notes. “Ultimately, I think we need to add another 1.5 or 2 billion cubic feet. Industry has invested about $13 billion in gas gathering and processing. Our best estimates say they need to invest another $11 billion before gas production peaks. So they’re only a little better than half-way there.”

One company that declined to be named—but had been actively pursuing users for its flaring technology in North Dakota, Colorado and Texas since 2014—says it’s now looking at potential opportunities in the Marcellus and Utica formations. However, over the past two years, the company says its technology has received more interest overseas than it has in the U.S.

Loy Sneary, president and CEO of Gulf Coast Green Energy in Bay City, Texas, is well-versed in the ups and downs of the gas capture business. In late 2015, his company was involved in a successful technology demonstration on a Hess Corp. well in the Bakken. He was in discussions with the company about other potential sites where the technology could be used, but that ended when oil prices tumbled, drilling activity took a nosedive and the problem of complying with North Dakota’s flaring regulations became far less an issue.

But recently Sneary’s phone rang. It was a major producer headquartered in Oklahoma with operations in most major U.S. shale plays. They wanted him to make a presentation on his company’s gas capture system.

“We’re in the business to provide solutions and we’re a business,” Sneary relates. “But the bigger picture is when technologies like ours and others can reduce that flaring and put the gas to a beneficial use, that’s a win-win for everybody. We’re conserving our resources. The companies that I work with are committed to being good stewards of the resources they’re mining.”
In the gas flare capture technology business, it’s game on—again. 

Author: Patrick C. Miller
Staff Writer, North American Shale magazine