Innovators Seek To Transform Flaring Into Money and Power

Instead of burning money, why not make electricity? This is the big pitch being made by a growing number of technology companies who see green every time they see a red-hot flare burning associated gas.

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The rising levels of routine flaring in the US have caught the eye of many, especially innovators who see a big opportunity to marry environmental action with good business sense. All these technology developers are united around the idea that routine flaring equates to burning billions of dollars a year.

But most shale producers, faced with low prices and chronic takeaway constraints, have had little incentive to invest in capturing associated gas.

But most shale producers, faced with low prices and chronic takeaway constraints, have had little incentive to invest in capturing associated gas.

However, the broad reach of North American shale developments has made the flaring of associated gas one of the sector’s most visible public relations problems, drawing ire from environmentalists and increased scrutiny from the media, regulators, and investors. There are now concerns that the “clean” reputation of natural gas may be lost if too much of it is burned up at the wellsite or, worse, vented straight into the atmosphere.

In an earnings calls last year, executives at Pioneer Natural Resources—the largest pure-play operator in the Permian Basin—told investors that the company flares the second-smallest percentage of associated gas among large explorers. Pioneer shared a chart showing that it burned less than 2% of its associated gas compared with a basin peer group average of 5%. Including this measurable in its earnings report was a first for Pioneer and suggests that flaring may be a differentiator going forward. This development was followed by Occidental Petroleum, another large Permian operator, which said in February that it would commit to zero routine flaring by 2030—becoming the first US-based producer to make such a commitment.

One way operators are cutting flaring is simply by not outstripping their takeaway capacity. Sometimes this means slowing well development or shutting in wells. The goal also can be reached by investing in technologies that put associated gas to a productive use, while allowing crude to flow from wellheads unabated.

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