There is no shortage of attention on the issue of Bakken related natural gas flaring

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There is no shortage of attention on the issue of Bakken related natural gas flaring….

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“North Dakota Flared Off $1 Billion Worth Of Natural Gas Last Year” – Scientific American , Sept. 2013

“Bakken Flaring Burns More Than $100 Million A Month” – Reuters, July 2013

“North Dakota Leaders Say Regulation Needed to Curb Flaring” – Midwest Energy News, Sept. 2013

“North Dakota Aims To Accelerate Flaring Cuts” – NGI’s Shale Daily, Sept. 2013

Bakken production Increases… Are driving flared gas volumes


Associated Gas Disposition

•  Capture –  Conventional Pipeline / Midstream Company

Contracts (Gathering Systems) –  Central Facility / Wellhead Compressed

Natural Gas (CNG)

•  Convert –  Combust to Generate Power (Piston Driven

Generators or Micro Turbines) –  Small Scale Methanol Plants –  Small Scale Nitrogen to Fertilizer Plants

•  Condense –  Micro Cryogenic Processing (LNG) –  Small Scale Refrigeration (NGL Extraction)

There are three primary options for generating value from gas:

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Mobile NGL Extraction Unit Spread Illustration

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50%+ C2 65%+ C3 95%+ C5+

+

40HP Compressor Refrigeration Skid Portable NGL Extraction

OR

Produced Natural Gas


Site Layout Considerations   Site configuration

dictates equipment placement

  Regulated spacing requirements must be adhered to

  Liquid recovery equip. has to cater to existing equip. and hauler routes

  Relatively small footprint required for equipment

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Off-‐load

MRU

NGL Storage

Flare

Generator


Practical Considerations with Liquid Extraction

•  Logistics & Operations: –  System portability, installation and de-mobilization time –  Operations & maintenance personnel – Service Co. or Operator? –  Contracting with liquid off-loaders, negotiating TF&M –  Pad size and configuration, any existing limitations

•  Safety –  System performance and integration – parts must work together for

maximum safety. PHA evaluation. –  NGL temporary storage vessel should be fit for purpose (dry fill

disconnects, pneumatic remote stop, high-flow and thermal ESVs. –  System spacing

•  Legal: –  Gathering system contracts - stripping prohibitions –  Royalty arrangements & prevailing market price clauses –  OSHA process safety management (PSM) jurisdiction and exemption –

PSM not applicable to oil and gas drilling and servicing operations or normally unoccupied remote facilities.

•  Marketing: –  Distance to Y-Grade NGL facility or loading terminal –  Fractionation or take-away capacity –  Y-grade purity requirements (H2S, Water, Ethane)

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Different situations will point toward different relationships and contractual regimes with providers.


Regulatory Movement

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•  NGL extraction qualifies under HB 1134, which went into effect July 1st, 2013

•  This allows for a production tax exemption on gas and extracted liquid for 2 years.

•  It also allows for flaring of tail gas during that period.

•  This legislation is likely the first round in tightening state and federal action.


NGL Extraction: Recovery Efficiency

0 10 20 30 40 50 60 70 80 90

100

Raw

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NGL Removal Bakken Gas, Avg. Two Dozen Samples (11 GPM) Mol % / 100 kg nominal mass

0

2

4

6

8

10

12

14

Removed

Inert & Other

Hexanes +

Pentanes (n,i)

Butanes (n,i)

Propane

Ethane

Methane

95%+

95%+

65%+

50%+

Nom.

None

76

59

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0 10 20 30 40 50 60 70 80 90

100

$* VOC's CO2

Liquid Removed Portion of: Bakken Gas, Avg. Two Dozen Samples %

* Value of liquids / Btu Value of Gas

While the portion of total stream removed is small, that portion of the gas stream is high impact.


NGL Extraction Effects, 500 mcfd flare Example

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VOC Emissions Bakken Gas, Avg. Two Dozen Samples 500 mcfd flare, tons / year

Economic and Environmental Impact of Extraction*:

50.6

12.6

20.7

5.2

0

10

20

30

40

50

60

Open Flare Thermal Oxidizer

Open Flare + Liquid Removal

Liquid Removal +

Thermal Oxidizer

90% reducEon vs. open flare

60% reducEon vs. open flare

Liquid Extraction (500mcfd) Monthly Revenue

Liquids @ Avg Sept. Prices (incl. TF&M discount) $62,000

Gas Tax Exemption (0.83/mcf) $12,500 Total Monthly Revenue $74,500

Liquid Extraction (500mcfd) Annual Revenue

Total Extraction Revenue (incl. tax exemption) $888,000

Total Extraction Revenue (incl. tax exemption) x 20 applications

$17,760,000

*For simplicity, excludes decline factor


Delivering NGL Recovery Services

Operator Assumes:

Maintenance Operations Marketing / Logistics

Price Risks

Selling Gas (fixed $/mcf) Service Co. Service Co. Service Co. Service Co.

Percent of Proceeds Service Co. Service Co. Operator Operator

Leasing Equipment Operator Operator Operator Operator

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•  Operator capability and risk appetite will impact tasks and desired contractual arrangement.

•  Operators should choose liquid recovery partners that are able to fit capability and contractual needs


Summary Benefits of Liquid Extraction:

•  Portable – quick installation and de-mobilization •  Short term – 30 days + •  Economic – extracts most valuable constituents •  Emissions Reduction – Significantly reduces VOC and

CO2 emissions, sometimes to within compliant ranges •  Regulatory Incentive – Falls under “permitted

activities” and can qualify for 2-yr. gas tax exemption •  Can be coupled with thermal oxidizer to “turn off the

flare” and nearly eliminate VOCs

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Low-Cost Onsite Power Generation

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Natural Gas Generators: Fuel Cost ¾ Load 150 kW

(monthly)

¾ Load 150 kW

(monthly)

Gas Consumption

905 mcf/mo 905 mcf/mo

Gas opportunity cost*

$3.00 / mcf $0 / mcf

Gas $2,715 / mo $0 / mo

Diesel Consumption

6,132 gal / mo

6,132 gal / mo

Diesel Price* $4.20 / gal $4.20 / gal

Diesel Cost $25,754 / mo $25,754 / mo

Fuel Savings: $23,039 / mo $25,754 / mo

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Note: Diesel consumpEon esEmated at 8.4 gal/hr / 0.07 gal/kWh. * Gas opportunity cost based $0.50 netback to Henry Hub $3.50/mcf 9/24, Diesel costs based on $0.25 field premium to EIA US average $3.95 week of 9/20.

¾ Load 150 kW (annual)

Fuel Savings: $276,468 / yr – $309,048/ yr

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Natural Gas Generator - 2 Cases

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Diesel

Gas

Diesel Generator Substitution $ thousands, Annualized Cost Including Fuel

61%

•  180 HP submersible pump •  300 kVa diesel generator •  250 kVa dual fuel gas generator

Remote well operation •  Situation: Intermittent gas supply at a remote well.

–  Existing gas generator stopped periodically and could not restart. –  A 400kW gas and 350kW Diesel generator was deployed to site. –  Diesel was used to start the well flowing and wires were manually switched. –  Teams were deployed each time the well went down.

•  Solution: Dual fuel propane & nat gas generator. –  Switching under load allowed starting the well off of propane and a seamless transition to gas. –  When gas went low, the unit continued on propane and then switched back to gas without

interruption.


Important Features for Utilization of Wellhead Gas for Power Production

•  Switching under load between propane and natural gas fuels allows startup without high gas flows and continued operations without gas.

•  Generators that can burn high btu gas, up to and beyond 2,000 btu, requiring customized control systems.

•  Low emissions (below JJJJ limits); regulations becoming more stringent – retroactive enforcement potential. Gas alone is not clean enough.

•  Service with power for easy transition: Satellite telemetry and data reporting 24/7 and service support that can respond within a few hours with inclusion of O&M in lease contracts to avoid operator burden.

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There is no shortage of attention on the issue of Bakken related natural gas flaring

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