In North Dakota's Bakken Oil Fields, flaring is such a big problem it can be seen from space burning with equal intensity to neighboring city lights. Flaring is the combustion of associated gas, which is created as a byproduct of oil production.
North Dakota Flaring Can Be Seen From Space
According to the Energy Information Administration, the U.S. will be the largest oil and gas producer in the world by 2015. However, with this rapid increase in oil production comes a 50% increase in U.S. flaring of natural gas, thereby launching the U.S from the 14th largest flaring country in 2007 to the 4th largest in 2011. A recent industry report (available here) by Ceres Group states that the tremendous increase in U.S. oil and associated gas flaring is directly attributed to oil companies' fevered production of the North Dakota Bakken Oil Fields, which accounted for around 25% of U.S. flared/vented natural gas in 2011, and over 50% today.
Having increased oil production 40-fold since 2007, the Bakken lacks the pipeline and processing infrastructure to gather and process the residual associated natural gas created as a byproduct of oil production. As a result, ~30% of Bakken gas is flared because oil producers are unable to gather and process it economically. This inability has created a highly visible, triple-threat problem in the Bakken where economic, regulatory, and legal drivers have come together to create a very pressing pain point requiring an immediate solution.
Economic, Regulatory, and Legal Drivers have come together in The Bakken
Over $1 Billion is wasted through flaring in North Dakota alone
Flaring annually wastes $40B of natural gas globally, including $2B in the U.S., and $1B+ in North Dakota alone. Specifically, the North Dakota Bakken Oil Fields are very young with limited natural gas gathering and processing infrastructure. Traditional natural gas gathering and processing infrastructure additions are unable to keep pace with rapid associated gas production resulting from dramatically increasing oil production.
North Dakota regulations are becoming more ominous; flaring tolerance is coming to an end
Current North Dakota state regulations allow oil and gas producers to flare for up to 1 year, with additional allowances thereafter, if an economic flaring solution is not available. However, if an economic solution were to be developed (such as ITC's proposed Stirling Cryocooler), regulations would essentially mandate the rapid adoption of the technology. All indications are that North Dakota regulations will become more stringent and, even more ominously for the oil and gas industry, EPA regulations are also expected.
In October 2013, TEN lawsuits were filed against Bakken oil companies
In October 2013, royalty owners filed 10 class action lawsuits against Bakken Oil Companies for lost royalties. Each of the lawsuits claimed millions of dollars in lost royalties because of oil companies' wasteful flaring practices. More lawsuits are expected to follow.
The alignment of economic, regulatory, and legal drivers is making it increasingly valuable to producers to seek out near-term economic solutions to reduce and/or eliminate flaring. This presents a significant commercial opportunity for ITC's proposed high efficiency cryocooler for flaring mitigation and distributed natural gas processing (methane/ethane recovery). ITC's transformational cryocooler technology will enable oil producers to economically process natural gas at the wellhead site by providing the ability to separate out and liquefy the ethane and methane in addition to processing the longer chain hydrocarbon NGLs.
Presenting: The Stirling Solution
In October 2013, North Dakota officials announced the creation of the Bakken Flaring Task Force whose purpose is to seek out economic solutions to reduce flaring. Although currently there are several potential flaring solutions, all are far too large for the vast majority of flaring wells and have questionable economics (e.g. associated gas utilization for power generation). ITC's main competition in this market is the incumbent practice of flaring, which is rapidly becoming politically and environmentally unacceptable, and the traditional centralized gas gathering and processing business model which has very marginal economics in the Bakken because of limited incumbent infrastructure and rapid production decline curves.
ITC will partner with oil and gas industry skid integrator distribution partners to integrate their proposed high efficiency Stirling cryocooler with an existing natural gas treatment skid for NGLs.
Natural Gas Treatment Skid
ITC Stirling LNG Solution
The full skid and ITC cryocooler assembly will be a mobile unit, allowing gas processing directly at the wellhead site. After the wellhead gas is treated by the skid unit, it will enter the ITC processing stream at -40°C and be liquefied by ITC ethane and methane coolers at -90 and -163°C respectively. The liquefied ethane and liquefied methane (a.k.a. LNG) will then be stored in tanks and trucked offsite.
ITC's Value Proposition includes the following differentiators:
High Efficiency Ethane & Methane Liquefaction
LNG Production (Methane Liquefaction) Doubling Residual Gas Value
Small-Scale Gas Processing perfectly suited for average quantity flared per typical Bakken well
Low First-Time & Overall Operating Costs, resulting in a 2 - 3 year payback
ITC has ongoing discussions with potential partners, all who have expressed extreme interest and excitement in ITC's value proposition and are calling it "the missing link" to eliminate flaring.