US Natural Gas Producers Practically Giving Gas Away

Oil drillers are burning off vast quantities of natural gas because it’s not profitable enough to capture and bring to market.

Drillers in North Dakota and other regions in the current oil boom have found themselves awash in natural gas but constrained by bottlenecks to bring it to market. With limited pipeline capacity, producers are committed to transporting oil and content to let natural gas burn off into the atmosphere.

Producers in the Peace Garden State flared 527 million cubic feet of gas per day, according to figures from 2017 first reported in The Bismarck Tribune. North and South Dakota, meanwhile, consumed about 530 million cubic feet of gas per day for furnaces and water heating.

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In the booming Permian Basin in parts of Texas and New Mexico shale drillers produced such quantities of oil – and had such limited pipeline capacity – that natural gas prices at times fell below zero.

Oil and gas firms have invested heavily in pipelines and other infrastructure to help ease constraints that have effectively blocked natural gas in North Dakota, Texas and New Mexico from reaching other markets. Earlier last year, for example, the US Energy Information Administration reported that US net natural gas exports in the first half of 2018 had more than doubled compared to the same period in 2017, a result of new and expanded terminals that liquefy natural gas for overseas export from the Gulf Coast.

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Meanwhile in North Dakota, companies have invested $3.1 billion to expand infrastructure for capturing more natural gas, from “gathering pipelines” that carry the gas from wellheads to processing plants to expanding processing plant capacity to building a new pipeline to transport natural gas liquids.

“Gas capture is at the front of everyone’s mind, whether it’s the producer, the royalty owner or the state of North Dakota,” Justin Kringstad, director of the North Dakota Pipeline Authority, told US News and World Report. “It’s critically important as this play matures to have adequate gas capture infrastructure.”

The downside is that most of the projects are not likely to be completed until the end of 2019, and they are not expected to keep pace with the huge amounts of natural gas being produced alongside crude oil.

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