Closed-Loop Gas Capture Systems: A Sensible Alternative to Flaring and Shut-In for Stranded Gas but There Are Regulatory Challenges

     The Delaware Basin portion of the Permian oil and gas producing area of West Texas and New Mexico has among the highest flare intensities in the U.S. which results in the highest regional fugitive methane emissions in the country. One study found that the Permian region releases up to half of the oil & gas methane emissions in the U.S. due to flaring, venting, and leaks from gathering lines.

     The Permian, like many other oil plays, also produces associated gas, either as a gas cap above the oil, or as gas dissolved in the oil, and that gas needs to be produced into pipelines, flared, used in some way for power, or stored for later use. The main means to store for later use is to reinject it into nearby wells either to enhance oil recovery and/or simply to store it. As oil wells age it is common for gas-to-oil ratios (GORs) to increase, meaning more gas is produced from wells relative to oil. This means that stranded gas will remain an issue.

     Natural gas reinjection for various purposes is not a new idea. It has been done for many decades as a way to increase pressure in suitable oil wells in order to increase production. In that aspect it is simply a method of enhanced oil recovery. It has also been done for many decades to address stranded gas. In the U.S. Alaska is where most of the gas reinjection to store stranded gas has occurred. According to Dave Roby, senior reservoir engineer with the Alaska Oil and Gas Conservation Commission, it has been happening on Alaska’s North Slope since 1962. He notes that over 108 trillion cubic feet (TCF) of natural gas has been reinjected in Alaska which has enabled the production of billions of barrels of oil. For context that amount of gas re-injected is about 3.3 times the entire 2022 U.S. natural gas consumption of 32.3 TCF.

     The lack of gas pipelines and the expense of building them is the main reason why Alaska reinjects gas. A pipeline there would have to be at least 800 miles long like the Trans-Alaska oil pipeline unless it was piped to a new LNG export facility, which is possible in the future. In the Permian region, the issue is similar with costs and time to build new pipelines stranding gas. Regulatory issues also make building pipelines more difficult. There are costs to reinjecting gas as well including compression costs and fuel costs for the process. A 2014 study presented at the URTEC conference concluded that reinjection could be both profitable and address flaring in a major way for unconventional oil reservoirs like the Permian, the Eagle Ford, and the Bakken.

     Stranded gas is also often a feature of offshore oil plays. A 2016-2017 study compared different ways to deal with stranded gas in a field offshore Nigeria. The solutions compared were venting, flaring, natural gas hydrates, re-injection for oil production, underground sequestration without future production, temporary sequestration in a depleted reservoir for later production, and temporary sequestration in a non-depleted (virgin) reservoir for later production. The last two encompass CLGC. For the Nigerian example, underground storage was determined to be the best way to deal with stranded associated gas. In that example, it was determined that the gas would be stored for 2-3 years in a non-depleted reservoir until a gas pipeline became available. Simulations were done to look at operational risks such as injection causing near-wellbore or more widespread hydraulic fracturing due to rising pressures.

 

 

New Closed-Loop Gas Capture System Pilots by EOG, Occidental, and Chevron in New Mexico

 

     Three major operators in the New Mexico Delaware Basin, Occidental Petroleum, Chevron, and EOG Resources have joined together for a pilot project closed-loop gas capture (CLGC) system. These companies have all done a few similar projects before and have joined forced to share the infrastructure and processes. EOG has had limited pilots in the Permian, Eagle Ford, and Bakken regions. They are now concentrating on the New Mexico Permian due to new regulations from both the State of New Mexico and the Federal government. Smaller operators in the Permian that have had higher flare intensities than these bigger companies will likely be more negatively affected economically by these new rules. This may lead to even more acquisitions and divestitures in the region than the many that have been occurring.    

     CLGC systems can also route gas to storage during mechanical breakdowns and during pipeline  maintenance. EOG developed the process. The Interstate Oil and Gas Compact Commission notes how the development of CLGC came about: “In 2020, a multi-disciplinary team of EOG employees developed CLGC to provide an additional alternative to dealing with temporary downstream market interruptions.” Thus, the process was developed to deal with downstream pipeline disruptions from maintenance as an alternative to flaring or shutting in wells. Gas line shutdowns have resulted in significant though temporary venting and flaring increases in the New Mexico Permian. Winter cold snaps such as the one in December 2022 caused widespread pipeline shutdowns. Wells and gathering infrastructure are not winterized down there to deal with gas hydrates that can freeze, as they are further north where added methanol prevents them from freezing. EOG worked with New Mexico regulators to determine permitting and regulatory frameworks and to collect data. EOG did its first Permian CLGC pilot in 2020. The three companies now operate nine CLGC pilot projects in New Mexico. They, along with regulators, need to determine which wells store gas and keep track of how much gas comes and goes from each company. Based on the schematic below it looks like the sharing of compression and gathering lines is a feature of the 3-company systems. 

 

 Source: Interstate Oil and Gas Compact Commission

Regulatory Challenges

 

     In 2021, New Mexico implemented a rule that requires producers to capture at least 98% of the total gas that comes out of all of their wells in the state. The rule also prohibits all routine venting and flaring. Although most of the largest companies are well within this rate, many of the smaller companies are not, and total emissions are estimated to have increased by 50% in the past year and a half. Environmental Defense Fund (EDF) notes that half of the State of New Mexico’s greenhouse gas emissions come from the oil and gas industry and that regulatory enforcement will have to be ramped up to push companies to be within tolerance of the new rules. A new federal rule will begin in 2024 that will charge fees to companies for methane emissions. The fee begins at $900 per metric ton of methane, increasing to $1,500 per ton in 2026. This will make venting and flaring costly.

     CLGC systems are one potential solution to flaring but those systems will also need to be tabulated, monitored, and verified by regulators. More rules mean more compliance verification and enforcement. Gas production will need to be tabulated so as not to double-count it. In Alaska, there has been little monitoring and enforcement of gas re-injection due to its remoteness, so oversight there is considered to be inadequate. It seems likely that the fees will be used to hire more personnel for monitoring and enforcement in the Permian. EDF thinks CLGC systems can be a great solution if monitoring and enforcement can be assured.

 

References:

Natural gas recapturing process promises waste reduction — but questions linger. Jerry Redfern. Capital & Main September 27, 2023. Natural Gas Recapturing Process Promises Waste Reduction — but Questions Linger (capitalandmain.com)

Underground storage as a solution for stranded associated gas in oil fields. Kazeem A. Lawal, Mathilda I. Ovuru, Stella I. Eyitayo, Saka Matemilola, Ayodeji T. Adeniyi. Journal of Petroleum Science and Engineering. Volume 150, February 2017, Pages 366-375. Underground storage as a solution for stranded associated gas in oil fields - ScienceDirect

How Does Gas Injection Work? RigZone. How Does Gas Injection Work? | Rigzone

The Benefits of Reinjecting Instead of Flaring Produced Gas in Unconventional Oil Reservoirs. B. Todd Hoffman; Steve Sonnenberg; Hossein Kazemi; Qi Cui. Paper presented at the SPE/AAPG/SEG Unconventional Resources Technology Conference, Denver, Colorado, USA, August 2014. Paper Number: URTEC-1922257-MS. Abstract. The Benefits of Reinjecting Instead of Flaring Produced Gas in Unconventional Oil Reservoirs | SPE/AAPG/SEG Unconventional Resources Technology Conference | OnePetro

Gas reinjection. Wikipedia. Gas reinjection - Wikipedia

Closed Loop Gas Capture:

Improving Gas Capture Through Redundancy. Interstate Oil and Gas Compact Commission. large_company_-_eog_-iogcc_eogenvironmentalstewardshipsubmission.8.31.21.pdf (ok.gov)