Page 12 - GLNG Week 32

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Small-scale LNG touted as solution to Permian’s flaring problem
Edge LNG does not yet have operations in the Permian, but is working on finalising deals with customers.
PROJECTS & COMPANIES
A handful of players are touting small-scale LNG as a solution to flaring of associated nat- ural gas production in the Permian Basin, the US’ most prolific shale region. While the prac- tice has been reduced this year, in part because of the overall drop in shale activity following the collapse in crude prices in March, there are concerns that it could rise again as market con- ditions improve.
However, some producers are trying to take meaningful steps to reduce flaring in the long term, and small-scale LNG developers are look- ing at how they can help. The Houston Chronicle reported this week that there is scope not only for small-scale LNG, involving projects that produce no more than 100,000 gallons (378,541 litres) per day, but also micro-scale plants, yield- ing no more than 10,000 gallons (37,854 litres) per day of the super-chilled fuel.
Micro-scale projects have the advantage that they are small enough to be hauled to well sites by truck. One company active in this space – but not yet in the Permian – is Edge LNG, which has operations in the Marcellus and Bakken plays. Edge uses gas capture, liquefaction and storage modules known as Cryoboxes, which have a capacity of 10,000 gallons per day each, at stranded wells that lack pipeline takeaway capacity. In the Bakken, Edge’s LNG output is also used to power drilling and hydraulic frac- turing equipment.
The company does not yet have any Permian customers, but Edge’s CEO, Mark Casaday, told the Houston Chronicle that it was close to final- ising “a number” of deals, both in the Midland and the Delaware sub-basins. He noted, how- ever, that the economics of operating in the Permian would differ somewhat from those in the Bakken. This is because Permian gas is particularly rich in natural gas liquids (NGLs), and would have to be run through a separate
gas processing plant to strip them out prior to liquefaction.
In addition, local demand would be reliant on shale drilling activity in the basin.
“To make the economics work, you need drilling rigs and you need the frack crews, that’s what really burns the gas,” Casaday said.
The Houston Chronicle noted that larger – but small-scale – facilities also exist in Texas, including Stabilis Energy’s 100,000 gallon per day LNG plant in George West and Clean Energy Fuels’ plant in Willis. The newspaper cited Kelley GTM Manufacturing’s owner, Ken Kelley, as say- ing the key to establishing a robust small-scale industry in the Permian lay in first finding cus- tomers for the final product.
Policy developments on the state and fed-
eral levels could help spur the development of
a small-scale LNG industry in the Permian. On
the state level, the Railroad Commission of Texas
– the state’s oil and gas regulator – is consider-
ing tightening flaring rules and has proposed
changes intended to limit the exemptions pro- on the state and ducers use to flare volumes of associated gas.
A public comment period on the proposed
changes is currently underway and due to close
in September.
And on the federal level, rules permitting the
transport of LNG by rail were recently finalised.
Kelley said the new regulations would make it of a small-scale economical to export LNG from the Permian
to Mexico, where natural gas fetches a price
a price of $8 per 1,000 cubic feet ($226.56 per
1,000 cubic metres). This is considerably higher
than US natural gas prices, which have recently
averaged around $2 per 1,000 cubic feet ($56.64
per 1,000 cubic metres). And the potential to
profit from this differential could provide further
incentive for Permian producers to capture nat-
ural gas for liquefaction and export rather than
flare it.™
Policy developments
federal levels could help spur the development
LNG industry in the Permian.
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w w w . N E W S B A S E . c o m Week 32 14•August•2020