Oil and Gas

Flaring of Unused Natural Gas Is a Major Mistake

I grew up where I now live in northeastern Pennsylvania. We’re about 1 1/2 hours from both New York City and Philadelphia.

Over the years, I have made countless trips into both cities for business and pleasure. Outside of each city are sprawling oil refinery operations.

When you drive by at night, you can see the towering gas flares.

These tall flare stacks have an important use in an industrial plant: They burn off flammable gas.

But what you may not know is that it’s a HUGE mistake…

Sometimes during a refining or chemical process, an unplanned overpressuring situation develops.

If the chemical is a flammable gas, it is directed to a flare stack so it can be safely ignited. These gases may need to be burned during a plant startup, shutdown or maintenance period.

Flare stacks are also commonly part of the on-site equipment at both offshore and onshore oil wells. After all, underground oil reservoirs often contain large pockets of natural gas.

When the oil is pumped to the surface, natural gas comes up too. Where there is no pipeline infrastructure (like in Nigeria or on isolated offshore rigs), the gas is often sent to a flare stack to be burned.

In some cases, gas is reinjected into the reservoir. This keeps well pressures high, which helps keep oil production at higher levels for longer periods.

In many areas of the world, oil producers freely flare natural gas.

They may not have access to pipelines. Or there may not be any penalties associated with gas flaring.

The process is far safer than venting unburned natural gas.

However, flaring produces carbon dioxide and contributes to global warming.

There are more than 16,000 flaring stacks at oil production sites around the world.

They emit about 350 million tons of carbon dioxide annually. The black soot produced by flaring is deposited on the snow of the Arctic ice cap (including Greenland).

When the sun hits clean snow, most of its energy is reflected back into space. But when it hits snow blackened by soot, the snow melts.

This further concentrates the soot, which further blackens the snow and speeds up the melting process.

In addition to emitting carbon dioxide and methane, improperly operating wellheads and flares can emit sulfur dioxide.

Sulfur dioxide can worsen asthma and other respiratory problems. The gas can also contain benzene, toluene, xylene and benzopyrene – all carcinogenic compounds.

Below, you’ll see the top 30 worst offending gas-flaring nations…

It’s interesting to note that the top three flaring countries – Russia, Iraq and Iran – all saw big increases in flaring in 2016. The next five – Venezuela, Algeria, the U.S., Nigeria and Mexico – all managed to either reduce or maintain their flaring.

Global warming aside, it makes financial sense to eliminate gas flaring.

The Global Gas Flaring Reduction Partnership estimates 5.3 trillion cubic feet, or 150 billion cubic meters, of natural gas are flared annually.

That’s equal to 30% of the European Union’s use or 25% of the U.S.’ annual gas use. At today’s prices of $2.625 per million British thermal units, that’s about $13.9 billion worth of natural gas.

In the U.S., North Dakota leads the way in flaring reduction. It has a plan in place to reduce flared gas to 5% by the end of 2020.

Today, natural gas capture initiatives in North Dakota have resulted in capture levels of 88%. This means its natural gas flaring is just 12%, down from 30% four years ago.

Producers have big incentives to meet state flaring limits. If they don’t, North Dakota will impose production limits.

The good news is that natural gas produced at well sites – including offshore rigs – can be captured and used to run equipment. If the right infrastructure exists, it can be reinjected into the well and sent off to a processing plant.

Based on what flares do at industrial plants, I don’t think we’ll see them disappearing anytime soon. But they’re small potatoes compared with natural gas flaring and venting from oil production sites and offshore platforms.

There’s no point in wasting such a valuable nonrenewable resource. We need to capture it and put it to good use.

After all, it’s our transition fuel to a more sustainable world.

Good investing,