Investors "Demanding" Drillers Come Clean About Amount of Flaring -- Another McGuffin

Corporate social responsibility

Based in London 
Hours after this story, the oil patch provides an answer

Updates

March 29: 2012: Several hours after posting the story below, I came across a story in today's Williston Herald about Statoil (recently bought BEXP in the Bakken) using flared natural gas directly from the well to power the rigs. This should take a bit of the wind out of the F&C Asset Management sails.

Original Post

To best of my knowledge, flaring data from North Dakota is freely and easily available from public sources. Regardless, oilmen are working this issue hard in North Dakota and ONEOK has taken advantage of it. At its best (when natural gas was priced a lot higher than it is now), the natural gas produced in North Dakota as a by-product of oil drilling accounted for less than 3 percent of the industry's economic play in North Dakota. Less than 3 percent.

See Reuters link here.

Investors representing $500 billion in assets are pushing energy companies in the shale oil rush in North Dakota and other states to disclose the amount of natural gas they burn - a practice they see as a wasteful financial risk.

"We want to encourage companies to articulate plans for resolving this issue while shale oil production is still in its relative infancy," said Karina Litvack, the head of governance and sustainable investment at F&C Asset Management.

Litvack is one of 36 investors who sent a letter to 21 oil drillers including Continental Resources Inc, Exxon Mobil, and Chesapeake Energy Corp asking them to disclose the amount of natural gas they are burning off, or flaring, at shale oil operations in North Dakota, Texas, Colorado and Ohio.

Regular readers know that the "wasteful financial risk" is a McGuffin.  In fact, oil and gas industry investors have much more to lose if a choke hold is placed on the oil and gas industry with regard to flaring. The price of natural gas is dropping fast, and might even go below $1 according to reports yesterday, though most folks don't think it will go much below $2.

Natural gas is a natural byproduct of drilling for oil and with oil commanding record high prices, the threat of "wasteful financial risk" is an outright lie. It will be interesting to see if we the "real" story behind the headline.

For more about F&C Asset Management, start with wiki:

F&C Asset Management Plc is a leading asset management company. Unlike many asset managers which are divisions of large financial firms such as banks, F&C Asset Management (known as F&C) is a standalone publicly-listed asset manager. It is an active shareholder with a strong commitment to corporate social responsibility. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.

Regardless, this will be a great opportunity for folks to learn more about the great investment opportunities to be had in the Bakken.

Disclaimer: I was not one of the 36 investors who, along with Litvack, sent any letters to any oil company regarding flaring.