Corporate social responsibility
Based in London
Hours after this story, the oil patch provides an answer
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.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.
"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.
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.
Hi just wanted to say our gas is now hooked to a pipeline so we are getting separate ck now.No more Flaring boy did we loose alot of gas money before the pipeline was installed all those days of flaring and POOF up into the Air.Any way I just wanted to Vent "pun intended"
ReplyDeleteThank You Listening Bjack
I go back home during breaks from school and flow test wells. The last well I was on was a 4 well pad. During the two weeks we were there, the average daily production from the 4 wells was around 2400 bbl/day. The nat gas was eventually hooked up to a pipeline after the first week. The most gas we flared in a single day was around 1 MMSCF.
ReplyDeleteSome simple math:
2400 bbl/day * ~$100/bbl = $240,000
1 MMSCF * $3/MSCF = $3000 (generous estimate)
Percentage of nat gas gross profits from this pad: %1.25
I think they are blowing this way out of proportion.
Yes, they are blowing this way out of proportion. I've blogged about it several times -- but a long time ago.
Delete1. It is not economical to hook up the pipeline before drilling; that's just a fact.
2. If you don't release the natural gas, the whole well will explode; natural gas is a natural by-product of oil drilling.
3. North Daktoa restricts the amount of flaring allowed; and all flaring has to stop within a year of the well beginning production. So, eventually (within a year) all wells are hooked up to a pipeline.
4. The financial amount amount lost in a year of flaring -- if the flaring even went on that long -- is inconsequential, as you've noted.
Again, this is simply another non-issue.
Agreed, the reason these wells are getting drilled so fast is because of underbalanced drilling, drilling with a mud light enough that the natty gas is allowed to rise out of the column to be flared. Overbalanced drilling requires a much heavier mud, which is costly and reduces rate of penetration.
ReplyDeleteThanks for the interesting note on #3, I wasnt aware there was a timeline for getting the gas hooked up.
Big fan of your blog by the way, its my #1 stop for keeping in touch with whats going on back home.