When a company is drilling for hydrocarbon resources, they don’t get to pick and choose what comes out of the ground. It is exceedingly rare to extract only oil, and there will always be some gas that comes out along with the oil. If the correct infrastructure is not in place to allow this gas to be sent to market, it can be considered “stranded” or “waste” gas, and something will have to be done.
Why do waste gases occur?
Many wells are drilled for crude oil production, with gas as an undesirable by-product. This gas is also known as associated gas, as it is associated with oil production.1 In the United States, about 12% of all natural gas production in 2018 was associated gas.2 This is not just an American issue—in Alberta, nearly every oil well produces some gas, with roughly 15% of all gas production in Q4 of 2021 being associated gas.3
What is the optimal way to deal with associated gas?
The ideal solution for associated gas production is tying into a pipeline to bring this produced gas to market. As gas prices and social expectations for companies to lower their emissions rise, companies should take this option whenever feasible.
However, if there are no pipelines nearby, it may be impossible to tie in, and it may be completely uneconomical to build one, even when gas prices are high. If the volumes of associated gas produced are small, building a dedicated pipeline may never be commercially viable for the company. Thus, they must go with another option.
What are some possible strategies?
There are three categories of alternative actions for managing waste gases: utilization, destruction, and venting.
If possible, the gas that cannot be transported out of a site should be used onsite. For example, it could be used to power gas-driven pumpjack engines or pneumatic instruments/pumps or used in a generator to produce onsite electricity or tied into an existing electricity grid.
Destruction is the process of burning natural gas with the goal of emitting carbon dioxide instead of methane since its greenhouse potential is significantly less. Broadly, three types of equipment can be used for this task: flares, incinerators, and enclosed combustors.
Venting is the intentional release of natural gas directly into the atmosphere. This strategy has been used liberally to date and is the easiest option since no additional infrastructure is needed. However, there have been crackdowns on venting in recent years since its environmental impact is significant due to the high greenhouse warming potential of methane, the primary component of natural gas.
When are these strategies suitable?
Not all waste gas management strategies are created equal. Each strategy has benefits as well as drawbacks, which should be considered.
Many equipment types could be operated on either gas-driven power or electricity. Examples include air compressors, chemical pumps, downhole pumps, actuators, and pumpjacks. In addition, gas driven instruments can directly utilize gas onsite, while electrified ones can utilize generated electricity onsite.
Stranded gas can power onsite generators, effectively taking a waste product and turning it into something highly valuable: electricity. If an electrical grid is available at the site, the generator can be connected to the grid, and this electricity can be sold. If this is not possible, electricity can be used onsite in various ways.
One emerging (and lucrative!) use for electricity generated on well sites is the powering of bitcoin mines.6,7 Bitcoin mining has created an enormous demand for electricity, so companies could profit off their stranded gas by creating power from what would have otherwise been considered “waste”. As a result, multiple large production companies have already begun working with cryptocurrency miners.8,9 Although crypto-mining has presented itself as an opportunity, it often presents investor hesitancy as many people are unfamiliar with the market due to the nature of the crypto-economy.
It may not always be possible to utilize stranded gas. In some cases, the natural gas is of poor quality (wet or contaminated gas) and shouldn’t be used. In this case, the next best approach is destruction.
Destruction can be broken into flaring, incineration, and destruction in enclosed combustors.
Flares are an option but are inefficient, often having less complete combustion than other technologies, resulting in higher unburnt gas going to the atmosphere. In addition, flares must be placed far away from other onsite infrastructure, are unsightly, and have issues with unlit pilots.
Figure 1. Lit flare stack.4
Incinerators are well suited to the destruction of natural gas wastes and heavier contaminants such as BTEX and H2S.5 They must also be operated with distancing requirements, although to a lesser extent than flares.
Enclosed combustors achieve complete combustion of waste gases and can be seen as “upgraded” incinerators. Their main benefit is reduced spacing requirements, as they can operate within 10m of wells and other equipment. Both incinerators and combustors produce no smoke, odour, or visible flame and are much better suited to use in proximity to developed or residential areas.
In Alberta, carbon credits may be given for technologies that utilize or destroy wastes gases. This ROI provides a greater incentive for producers to limit/eliminate stranded gases on sites.
Figure 2. Enclosed combustor
Venting or directly releasing stranded gas into the atmosphere costs the operators nothing. However, it should be used minimally as possible due to its high environmental cost. Venting should only be used as a last resort, given the plethora of options available for managing associated gases.
Doing nothing can get you shut-in
If none of the options listed here are available, you may not be able to produce your well as per regulatory requirements. If you have exceeded your allotted venting volume in Alberta, have not obtained permission to increase flare volumes, and don’t have any of these alternatives, the well will be shut-in. The operator of the well will not realize cash flow from producing the well, and the well will be classified as “inactive” and weigh more heavily on near-term asset retirement obligation spending requirements. It is nearly always better to apply technology to mitigate the waste gas and remain in operating status.
- Associated and nonassociated gas. PetroWiki https://petrowiki.spe.org/Associated_and_nonassociated_gas (2015).
- Associated gas contributes to growth in U.S. natural gas production. https://www.eia.gov/todayinenergy/detail.php?id=41873.
- geoSCOUT. geoLOGIC systems ltd. https://www.geologic.com/products/geoscout/.
- Flare System Types. EnggCyclopedia https://www.enggcyclopedia.com/2011/06/flare-system-types/ (2011).
- The differences between Flares, Incinerators and Enclosed Combustors – Energy News for the United States Oil & Gas Industry | EnergyNow.com. https://energynow.com/ https://energynow.com/2021/07/the-differences-between-flares-incinerators-and-enclosed-combustors/.
- Crypto miners see ‘stranded’ natural gas as a novel energy source. Marketplace https://www.marketplace.org/2022/03/25/crypto-miners-use-natural-gas-stranded-in-wells-to-power-energy-hungry-rigs/ (2022).
- Sigalos, M. These 23-year-old Texans made $4 million last year mining bitcoin off flare gas from oil drilling. CNBC https://www.cnbc.com/2022/02/12/23-year-old-texans-made-4-million-mining-bitcoin-off-flared-natural-gas.html (2022).
- ConocoPhillips supplying a Bitcoin miner with gas from Bakken. https://www.worldoil.com/news/2022/2/16/conocophillips-supplying-a-bitcoin-miner-with-gas-from-bakken/.
- Sigalos, M. Exxon is mining bitcoin in North Dakota as part of its plan to slash emissions. CNBC https://www.cnbc.com/2022/03/26/exxon-mining-bitcoin-with-crusoe-energy-in-north-dakota-bakken-region.html (2022).