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US Shale Row Flares UP

Business, Company Strategy, Economics, Environment, Olefins, Polyolefins, Sustainability, Technology, US
By John Richardson on 01-Feb-2013

Sorry for the corny headline; we couldn’t resist it.



By John Richardson

THE argument that the switch to natural gas from coal and oil is good for the environment has been further undermined by reports earlier this week of the big increase in the amount of gas-flaring in the US.

When the blog visited the World Gas Conference in Kuala Lumpur, Malaysia, last June it felt very suspicious of the “isn’t gas wonderful for reducing global warming” hype that dominated the event. We raised the concern over the rise in fugitive methane emissions as natural gas production continued to climb.

The focus has now switched specifically to the US and the 50% increase in flaring at the giant Bakken field North Dakota that occurred last year compared with 2011.

“Flaring in North Dakota increases by about 20% the greenhouse gas emissions resulting from the state’s oil production, refining and transport compared with the US average,” said the Financial Times in this article.

The volume of gas flared in the US as a whole has tripled in just five years and is now the fifth highest in the world, behind Russia, Nigeria, Iran and Iraq, according to World Bank estimates.

The photo at the top of this post, taken by NASA’s Suomi NPP satellite, shows the glow being emitted from hundreds of flares at the Bakken formation.

The picture compares the Bakken glow from space with those from Chicago and the twin cities of Minneapolis-St Paul.

(Apologies for the blurriness of the picture. Anybody reading the post in Bakken is likely to find the image even more blurry than the rest of us, as the smoke could well be in their eyes.) 

The reason for increased flaring at Bakken and other fields is the shale gas Ponzi scheme, which has reduced gas prices to record lows.

Because gas is so cheap, producers are being forced to waste hydrocarbons.

From a national perspective this seems an almost criminal waste of resources.

“Oil companies at the heart of the US shale oil boom are burning off enough gas to power all the homes in Chicago and Washington,” adds the FT. 

As long as gas prices remain where they are now, investment in extra storage and pipelines needed to reduce flaring is unlikely to occur.

What does this mean for the petrochemicals business?

Longer term, gas prices seem likely to go up as the financially under pressure US shale gas industry consolidates.

The glas flaring row could more immediately exert further environmental pressure on gas producers and petrochemicals companies.

Ultimately though, milllions more jobs will be created by the US energy boom, provided it is combined with education and immigration reform, and investment in better roads, rail and other infrastructure

Another key element for the success of re-shoring will be manufacturing new types of finished goods, and adapting existing products, for an ageing population.

We therefore think that the US general public is likely to accept the overall environmental cost of the shift towards energy independence.