On the heels of a report indicating oil producers in North Dakota wasted about $1 billion worth of natural gas last year, industry officials said they are working to reduce flaring.
Producers resort to flaring, or burning off natural gas, in North Dakota's sprawling Bakken Shale play because the state does not have adequate midstream infrastructure to get it to market.
The Bakken has developed as an oil play, propelling North Dakota to its current status as the United States' No. 2 oil producer, so it doesn't have a lot of natural gas infrastructure, officials said.
A report issued Monday by sustainability advocate Ceres shows flaring has more than doubled over the past two years in North Dakota.
“In 2012 alone, flaring resulted in the loss of approximately $1 billion in fuel and the GHG (greenhouse gas) emissions equivalent of adding one million cars to the road,” the report states.
Jeff Hume, vice chairman of strategic growth initiatives at Oklahoma City-based Continental Resources Inc., said the Ceres report misrepresents what is happening in North Dakota by using “alarmist” statistics about how much natural gas is being flared.
“I think everybody's working pretty hard to bring this product to market,” he said.
Hume said such efforts are necessary because pipelines are the only way to get natural gas to market. It can't be trucked like oil.
Oil production skyrocketed to a record 810,000 barrels a day in May, bringing with it a bounty of natural gas, according to the North Dakota Industrial Commission's department of mineral resources.
“This gas is produced along with the oil,” agency spokeswoman Alison Ritter said.
The Ceres report cites data from the state indicating nearly 30 percent of the natural gas being produced in North Dakota is being flared.
Ritter said everyone agrees that figure it too high, so producers and midstream companies are working together to connect wells with pipeline systems that can carry that natural gas to market.
She said the agency's data indicates newly drilled wells in North Dakota are getting connected to midstream systems more quickly, while producers continue working to tie in older wells.
ONEOK Partners LP is doing its part to move more gas from the wellhead to the marketplace. The Tulsa-based firm is spending up to $1.8 billion to build gas processing plants and related infrastructure in North Dakota.
Spokesman Brad Borror said ONEOK Partners has built three process plants capable of handling 300 million cubic feet of gas a day since December 2011. It will build two more by 2015.
“That kind of capacity is needed up in that area,” he said.
Trying to catch up
Borror said midstream companies have been playing catch-up in North Dakota as production continues to grow.
“It's just the nature of the business,” Borror said. “We chase the producers, so to speak.”
“The clock starts ticking on that from the time a rig begins drilling.”
The Ceres report called for stronger regulations and increased cooperation among producers in North Dakota to limit flaring, which could continue to rise along with overall production in the state.
“If Bakken producers and North Dakota regulators are able to generate economic solutions to the problem of flaring, ideally those solutions would be replicable in the Eagle Ford, Permian and other U.S. oil plays, generating positive outcomes for a variety of stakeholders,” the report states. “Undoubtedly, no investor, regulator or producer wants to see billions of dollars of product go up in flames.”
Continental's Hume said infrastructure is catching up quickly with producers in North Dakota.
Continental, which flared 10.8 percent of its North Dakota gas in May, already has two-thirds of its wells connected to pipelines, but there still is not enough processing capacity in place.
“It will happen,” he said.