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With natural gas to burn, drillers try using it to power rigs

Statoil aims to put it to good use while reducing emissions

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Ferus Natural Gas trailers carry white tubes of compressed natural gas that power a Statoil drilling rig in the Bakken Shale. Statoil, Ferus and GE are partners in a project to fuel equipment with natural gas. 
Ferus Natural Gas trailers carry white tubes of compressed natural gas that power a Statoil drilling rig in the Bakken Shale. Statoil, Ferus and GE are partners in a project to fuel equipment with natural gas. Jay Pickthorn/AP/Statoil

Statoil, the Norway-based oil company with a major presence in North Dakota's Bakken Shale, will expand the use of technology that lets the company power its oil field equipment using natural gas that it otherwise would burn off.

The effort aims to address an ongoing challenge producers face in the Bakken and increasingly in other unconventional plays as well: When they drill for crude oil, they also get natural gas. But because gas prices are low and transportation infrastructure is scarce, they often burn the gas instead of trying to ship or sell it.

Statoil officials said Wednesday they will move beyond an eight-month pilot phase and use natural gas the company captures to power up to six drilling rigs anda fleet of hydraulic fracturing equipment in the Bakken.

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Lance Langford, the oil company's vice president for Bakken development and production, said he believes the technology could work in other parts of the U.S. and in emerging shale plays elsewhere in the world.

"It's going to be much bigger than just the Bakken or just Statoil," Langford said. "It will have a huge impact on the industry and on the environment."

Statoil is one of the most active producers in the Bakken and has a big presence in the Houston area.

GE Oil & Gas, the company that developed the compressed natural gas technology dubbed CNG in a Box, is in discussions to provide the technology to other companies, said John Westerheide, general manager of unconventional resources marketing at GE Oil & Gas.

He declined to say how much the technology costs, and Langford declined to say how much Statoil has invested.

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Langford said the company is moving beyond a simple examination of whether the technology works and now wants to see if its use on a larger scale can be an effective business model.

"It's more of a full-scale economic test," he said.

The effort comes as North Dakota is tightening flaring regulations. Starting next month, companies operating in the Bakken will face stricter limits on the amount of flaring they can perform at their wells.

Through expanded use of the CNG in a Box technology, Statoil expects that by the end of this year it will capture 3 million to5 million cubic feet of natural gas per day that it otherwise would have flared. That translates to 120,000 to 200,000 metric tons of greenhouse gas emissions, the company said.

The system captures natural gas from oil wells, separates out liquid propane and butane for sale, compresses the remaining natural gas and puts it into portable tanks.

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Trucks operated by another partner in the project, Ferus Natural Gas, then take the gas elsewhere - preferably not more than 60 miles, Westerheide said - to fuel drilling rigs and potentially vehicles and other equipment.

The basic technology isn't new, Statoil officials said, but the partners have developed it to be small, mobile and suitable for harsh winter weather.

GE originally designed the system to service light- and medium-duty vehicles at fueling stations, but then realized it also could be useful for oil field customers, Westerheide said.

Statoil's rigs use bi-fuel systems that run on a combination of compressed natural gas and diesel. Company officials expect the program to reduce those rigs' diesel consumption by up to 50 percent.

An estimated one-third of the natural gas coming out of Bakken wells is flared off, producing carbon dioxide emissions. The alternative is venting unburned methane, the main component of natural gas, which is an even more potent greenhouse gas than carbon dioxide.

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The Statoil project is one of several upstart technologies intended to find uses for natural gas that's far from the pipeline.

But the emerging technologies alone likely can't solve the problem, said Ryan Salmon, senior manager of the oil and gas program at Ceres, a nonprofit consortium of investors and environmentalists.

"Without building out the pipeline and processing infrastructure to be able to accommodate the growth and production, it just seems unlikely that, beyond helping a bit on the margin, this kind of technology could help tackle the issue," Salmon said.

Langford said the technology potentially could work in South Texas' Eagle Ford Shale, another region where flaring is common because natural gas production has exceeded the pace of pipeline development.

Earlier this year, the Texas Railroad Commission sent letters to Eagle Ford operators reminding them to comply with state rules that generally limit burn-off of excess natural gas to periods of drilling and 10 days after drilling is completed. In some cases, permits allow up to 180 days of additional flaring.

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From 2009 to 2012, the energy industry flared 33 billion cubic feet of natural gas in Texas, including 21 billion cubic feet from the Eagle Ford, according to a recent San Antonio Express-News investigation.

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Ryan Holeywell is senior editor at Rice University's Kinder Institute for Urban Research.

Previously, he covered energy for the Houston Chronicle. Before that, he wrote about transportation and municipal finance for Governing magazine, which is read by state and local government officials nationwide. Holeywell’s previous work has been published by the Washington Post and USA Today, and he has appeared on CNN and public radio to discuss his articles. Holeywell, a Houston native, graduated from George Washington University in Washington, D.C.