There is no shortage of attention on the issue of Bakken related natural gas flaring.

Transcription

1 There is no shortage of attention on the issue of Bakken related natural gas flaring. North Dakota Flared Off $1 Billion Worth Of Natural Gas Last Year Scientific American, Sept Bakken Flaring Burns More Than $100 Million A Month Reuters, July 2013 North Dakota Leaders Say Regulation Needed to Curb Flaring Midwest Energy News, Sept North Dakota Aims To Accelerate Flaring Cuts NGI s Shale Daily, Sept Bakken production Increases Are driving flared gas volumes 1

2 Associated Gas Disposition There are three primary options for generating value from gas: Capture Conventional Pipeline / Midstream Company Contracts (Gathering Systems) Central Facility / Wellhead Compressed Natural Gas (CNG) Convert Combust to Generate Power (Piston Driven Generators or Micro Turbines) Small Scale Methanol Plants Small Scale Nitrogen to Fertilizer Plants Condense Micro Cryogenic Processing (LNG) Small Scale Refrigeration (NGL Extraction) 2

3 Mobile NGL Extraction Unit Spread Illustration + 40HP Compressor Refrigeration Skid Portable NGL Extraction 50%+ C2 65%+ C3 95%+ C5+ Produced Natural Gas OR 3

4 Site Layout Considerations Site configuration dictates equipment placement Regulated spacing requirements must be adhered to Flare Liquid recovery equip. has to cater to existing equip. and hauler routes MRU Off- load NGL Storage Generator Relatively small footprint required for equipment 4

5 Practical Considerations with Liquid Extraction Different situations will point toward different relationships and contractual regimes with providers. Logistics & Operations: System portability, installation and de-mobilization time Operations & maintenance personnel Service Co. or Operator? Contracting with liquid off-loaders, negotiating TF&M Pad size and configuration, any existing limitations Safety System performance and integration parts must work together for maximum safety. PHA evaluation. NGL temporary storage vessel should be fit for purpose (dry fill disconnects, pneumatic remote stop, high-flow and thermal ESVs. System spacing Legal: Gathering system contracts - stripping prohibitions Royalty arrangements & prevailing market price clauses OSHA process safety management (PSM) jurisdiction and exemption PSM not applicable to oil and gas drilling and servicing operations or normally unoccupied remote facilities. Marketing: Distance to Y-Grade NGL facility or loading terminal Fractionation or take-away capacity Y-grade purity requirements (H2S, Water, Ethane) 5

6 Regulatory Movement NGL extraction qualifies under HB 1134, which went into effect July 1 st, 2013 This allows for a production tax exemption on gas and extracted liquid for 2 years. It also allows for flaring of tail gas during that period. This legislation is likely the first round in tightening state and federal action. 6

7 NGL Extraction: Recovery Efficiency While the portion of total stream removed is small, that portion of the gas stream is high impact. NGL Removal Bakken Gas, Avg. Two Dozen Samples (11 GPM) Mol % / 100 kg nominal mass Raw Removed Inert & Other Hexanes + Pentanes (n,i) 95%+ Butanes (n,i) Propane Ethane Methane 95%+ 65%+ 50%+ Nom. None Liquid Removed Portion of: Bakken Gas, Avg. Two Dozen Samples % $* VOC's CO2 * Value of liquids / Btu Value of Gas 7

8 NGL Extraction Effects, 500 mcfd flare Example Economic and Environmental Impact of Extraction*: Liquid Extraction (500mcfd) Avg Sept. Prices (incl. TF&M discount) Monthly Revenue $62,000 Gas Tax Exemption (0.83/mcf) $12,500 Total Monthly Revenue $74,500 VOC Emissions Bakken Gas, Avg. Two Dozen Samples 500 mcfd flare, tons / year % reduceon vs. open flare 60% reduceon vs. open flare Liquid Extraction (500mcfd) Total Extraction Revenue (incl. tax exemption) Total Extraction Revenue (incl. tax exemption) x 20 applications Annual Revenue $888,000 $17,760,000 *For simplicity, excludes decline factor Open Flare 12.6 Thermal Oxidizer 20.7 Open Flare + Liquid Removal 5.2 Liquid Removal + Thermal Oxidizer 8

9 Delivering NGL Recovery Services Operator capability and risk appetite will impact tasks and desired contractual arrangement. Operators should choose liquid recovery partners that are able to fit capability and contractual needs Operator Assumes: Selling Gas (fixed $/mcf) Percent of Proceeds Leasing Equipment Maintenance Operations Marketing / Logistics Price Risks Service Co. Service Co. Service Co. Service Co. Service Co. Service Co. Operator Operator Operator Operator Operator Operator 9

10 Summary Benefits of Liquid Extraction: Portable quick installation and de-mobilization Short term 30 days + Economic extracts most valuable constituents Emissions Reduction Significantly reduces VOC and CO2 emissions, sometimes to within compliant ranges Regulatory Incentive Falls under permitted activities and can qualify for 2-yr. gas tax exemption Can be coupled with thermal oxidizer to turn off the flare and nearly eliminate VOCs 10

11 Low-Cost Onsite Power Generation 11

12 Natural Gas Generators: Fuel Cost Gas Consumption Gas opportunity cost* ¾ Load 150 kw (monthly) ¾ Load 150 kw (monthly) 905 mcf/mo 905 mcf/mo $3.00 / mcf $0 / mcf Gas $2,715 / mo $0 / mo ¾ Load 150 kw (annual) Fuel Savings: $276,468 / yr $309,048/ yr Diesel Consumption 6,132 gal / mo 6,132 gal / mo Diesel Price* $4.20 / gal $4.20 / gal Diesel Cost $25,754 / mo $25,754 / mo Fuel Savings: $23,039 / mo $25,754 / mo Note: Diesel consumpeon esemated at 8.4 gal/hr / 0.07 gal/kwh. * Gas opportunity cost based $0.50 netback to Henry Hub $3.50/mcf 9/24, Diesel costs based on $0.25 field premium to EIA US average $3.95 week of 9/ Stop Burning Money 12

13 Natural Gas Generator - 2 Cases Diesel Generator Substitution $ thousands, Annualized Cost Including Fuel 180 HP submersible pump 300 kva diesel generator 250 kva dual fuel gas generator Gas 61% Diesel Remote well operation Situation: Intermittent gas supply at a remote well. Existing gas generator stopped periodically and could not restart. A 400kW gas and 350kW Diesel generator was deployed to site. Diesel was used to start the well flowing and wires were manually switched. Teams were deployed each time the well went down. Solution: Dual fuel propane & nat gas generator. Switching under load allowed starting the well off of propane and a seamless transition to gas. When gas went low, the unit continued on propane and then switched back to gas without interruption. 13

14 Important Features for Utilization of Wellhead Gas for Power Production Switching under load between propane and natural gas fuels allows startup without high gas flows and continued operations without gas. Generators that can burn high btu gas, up to and beyond 2,000 btu, requiring customized control systems. Low emissions (below JJJJ limits); regulations becoming more stringent retroactive enforcement potential. Gas alone is not clean enough. Service with power for easy transition: Satellite telemetry and data reporting 24/7 and service support that can respond within a few hours with inclusion of O&M in lease contracts to avoid operator burden. 14