American Oil and Gas Reporter - March 2020 - 55

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SpecialReport: Field Power Generation

Modular Units Convert Dry Gas To LNG
By Mark Casaday
MALVERN, PA.-Crude oil production
in the Permian Basin in Texas and New
Mexico increased by nearly 65% in the
24 months between February 2018 and
February 2020, according to the U.S.
Energy Information Administration. However, natural gas production in the world's
most celebrated oil basin increased even
more, with EIA recording 72% growth
for the same two years. The rapid expansion of associated gas output has
challenged the regional pipeline infrastructure's ability to move it to market,
even creating at times negative wellhead
natural gas values.
With so much gas being produced,
and limited pipeline capacity out of the
basin, Permian flaring volumes rose along
with the oil and gas totals. Analysis by
Rystad Energy found that more than 750
million cubic feet a day of natural gas
was being flared and vented across the
basin in the third quarter of 2019. New
pipelines entering service will help give
the associated gas outlets to market centers,
eventually making its way to Gulf Coast
liquified natural gas export terminals,
electricity generating facilities, petrochemical plants, commercial businesses
and residences.
However, some strategically minded
operators are taking matters into their
own hands by implementing mobile LNG
technology. With these modular, smallvolume systems on a well pad or flare
stack site, dry associated gas production
can be converted into liquid form, making
it possible to deliver by truck directly to
the consumption point.
Think of it as the gas market on a
micro level, giving producers the means
to "export" off location through a virtual
pipeline stranded or low-value gas that
otherwise might be flared. The modularized systems self-contain all necessary
components-liquefaction, vaporization,
compressors, control systems, etc. They
effectively reduce the scale of liquefaction
and regasification from massive terminals
handling billions of cubic feet a day to
the level of a single pad producing 1 million cubic feet a day. Up to 30 mobile
LNG plants can be installed in series to
handle anywhere from 1 MMcf/d to 30
MMcf/d. Moreover, the LNG can be
trucked to premium-priced end-use mar-

kets such as local electricity or petrochemical plants.
Reduced Flaring
The epicenter of Permian activity during the past couple years has been the
Wolfcamp play in the Delaware Basin in
New Mexico, a geologically complex region with stacked tight formations that
yield very light oil, natural gas liquids
and dry gas. While production has been
climbing rapidly in New Mexico, an effective statewide flaring rule gives producers clear and actionable market signals
and is pushing flaring in the right direction:
downward.
According to the U.S. Department
of Energy's Office of Fossil Energy,
New Mexico's performance on flaring
and venting has been impressive. In
2015, the state flared or vented 68
MMcf/d, but that number plummeted
to 13 MMcf/d in 2016 and dropped to
below 10 MMcf/d in 2017. What makes
this level of reduction even more remarkable is that both oil and gas production increased dramatically across
the board at the same time. In fact, the
daily volumes of gas produced from oil
wells effectively has doubled in recent
years in New Mexico.

Put all the numbers together and a
narrative emerges of an industry that has
managed to increase oil and gas production
while slashing venting and flaring. What
state's oil and gas sector would not want
to tell a similar story?
A full comparison of flaring regulatory
regimes is a discussion for another place
and time, but there are key aspects of
New Mexico's approach that are worth
highlighting. For starters, the New Mexico
Administrative Code states that operators
"shall not flare or vent casinghead gas
produced from a well after 60 days following the completion of a well. Exemptions to the rule exist and can be enacted
by obtaining a permit. These exemptions
include mechanical difficulties, associated
gas having no commercial value, and
other factors causing undue hardships to
the applicant."
In practice, this is a common-sense
approach to flaring that does not make
operators' lives harder during early production, and recognizes that there are
circumstances that make flaring necessary. However, operators also are not
given carte blanche to flare for sake of
convenience; the criteria are tougher
than that. One of the major benefits for
operators is regulatory certainty. The

Portable, modularized LNG systems contain all necessary components-liquefaction, revaporization, compressors, control systems, etc. They effectively reduce the scale of liquefaction and regasification from massive terminals handling billions of cubic feet a day
to the level of a single pad. Up to 30 mobile LNG plants can be installed in series to handle from 1 MMcf/d to 30 MMcf/d.

MARCH 2020 55

American Oil and Gas Reporter - March 2020

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