Page 16 - NorthAmOil Week 33

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Edge LNG does not yet
have operations in the
Permian, but is working
on finalising deals with
customers.

Small-scale LNG touted as solution

to Permian’s flaring problem

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

P16 www. NEWSBASE .com Week 33 20•August•2020