After oil majors promised to impose tighter regulations on gas flaring, following widespread criticism over the levels of gas being released into the atmosphere as a waste product from oil production, are they actually putting their money where their mouths are and taking action?
Natural gas flaring has been increasing in recent years, with an estimated 150 billion cubic meters (bcm) flared worldwide in 2019. Gas flaring results from wells drilled for oil production, which produce a mix of other hydrocarbons including condensates, natural gas liquids, and natural gas. But instead of being used in part of the production process, or in other industrial use, it is often flared – released into the atmosphere as waste.
While around 75 percent of the world’s associated gas is now being used on-site or being re-injected into the well, 25 percent of this gas is wasted. This is largely because building the infrastructure to re-use gas can be costly, or because oil sites did not incorporate this gas into the operations plan from the beginning.
However, this associated gas, primarily methane, is a valuable energy source that can be used in fuel and electricity production. In addition, wasting this gas through flaring has a detrimental effect on the environment, with the quantity of gas flared in 2019 contributing around 300 tonnes of CO2 emissions and other pollutants.
Both national governments and Big Oil have come under fire for their role in gas flaring, particularly in major oil-producing regions of the U.S. where little action has been taken to reduce gas flares, especially those states around the Permian Basin.
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Several oil majors have now joined initiatives to reduce gas flaring. Occidental, Chevron, and Shell have signed the Zero Routine Flaring by 2030 Initiative, with Zubin Bamji, program manager of the World Bank’s Global Gas Flaring Reduction Partnership, believing that gas flare reductions are achievable and should be considered “low-hanging fruit” compared to other methods used to reduce emissions.
In fact, experts believe it is possible for U.S. companies to stop routine flaring by as early as 2025 with an appropriate level of planning and investment. But with flaring appearing the easier and cheaper alternative to building the infrastructure required to re-use the gas, the will is often lacking in the industry. This can be seen due to the fact that the technology for reusing this waste gas has existed for years and yet many oil firms have failed to include plans for reusing gas in their operations.
But we are now seeing some promise as Texas has finally taken action on its gas flaring problem after the Texas Railroad Commission announced it would tighten the rules for gas flaring at oil fields earlier this year.
This month, Texas Railroad Commissioners put limits on an oil driller’s request to flare gas, restricting it to one year of flaring rather than the proposed two years. There were no modifications on requests from other gas companies, but this is potentially the first of many actions by the Commission to reduce flaring, at the very least warning operators that their requests to flare may now be met with resistance.
During a meeting, Commissioner Jim Wright stated that not having pipeline service is no longer a good enough reason to flare, suggesting the change in expectations from the agency and the need for gas and oil operators to invest in infrastructure to re-use rather than waste gas.
Bitcoin mining, electric power generation, and graphene production are just some of the potential uses for excess gas highlighted by Mr. Wright. These uses would see companies set up remote sites that could benefit from the gas released during oil production directly.
Several Bitcoin companies have started setting up small, transportable cryptocurrency data centers on oil sites to produce the high levels of electricity required to farm the currency. Bitcoin firms may be able to use this otherwise wasted gas to produce cheaper electricity for Bitcoin production, while oil companies can make a meaningful step towards reducing their carbon emissions in line with international expectations.
Texas has already come a long way as data from the Texas Methane & Flaring Coalition suggests that there has been a 73 percent reduction in flared gas volumes between June 2019 and May this year. This sets the example for other states and oil firms across the world to take similar action in their pursuit of lower-carbon energy production over the next decade.
It is getting to the point that the damage to a company’s reputation for flaring gas is outweighing the cost of investing in gas flare reduction practices. Due to international pressure causing oil supermajors to change their practices and shift their portfolios towards lower-carbon operations, smaller firms are now following suit as they invest in carbon reduction such as ending gas flaring. Partnering with other industries such as Bitcoin companies can also help midstream oil producers earn back some of their investment in gas re-use infrastructure.
So is Texas going to take significant action on gas flaring as international pressure mounts and the potential damage to operators’ reputations are at odds with continued carbon-producing practices? It looks like it might.
By Felicity Bradstock for Oilprice.com
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