…Another Bogus News Story on Energy…
Recently, the Wall Street Journal published an article with the headline: Billions of Dollars Up in Smoke.
The article went on to chastise energy companies for flaring natural gas rather than capturing it for use.
It claimed that the energy companies should pay a fee, or penalty, for flaring natural gas.
But, the headline was pure nonsense.
Very little, if any, money “went up in smoke” because the natural gas was worthless. It was flared because it was uneconomic to capture it for sale on the open market.
The WSJ article went on to claim there was a huge potential market in Iraq for natural gas, inferring the gas that’s being flared in the US could somehow be captured and sold in Iraq. Interestingly, natural gas is also flared in Iraq which contradicts the notion that natural gas in the US should be captured and sold in Iraq.
The article also inferred that the natural gas could be used to generate electricity for local use at the drilling site. Again, if it was economically feasible to use a micro turbine or some other method for generating electricity at the drilling site the local energy company would use it. Paying a penalty for flaring natural gas might tip the economic scale in favor of installing a micro turbine, but this gets to the true purpose of the article when the WSJ article said:
“Burning gas releases carbon dioxide, but simply releasing it into the air would be worse because methane is a far more potent greenhouse gas.”
The WSJ article is actually an effort to curtail fracking since a great deal of the gas that is flared comes from shale wells, and the WSJ article goes on to make that clear.
But the Energy Information Administration (EIA) published a report on flaring where it analyzed flaring in each state in the US, and also provided a study by the Texas Railroad Commission that analyzed, well by well, all the flaring in Texas.
In Texas, there were 90,967 individual flares. Of these, 20,154 would have earned less than $50,000 per year if they had captured and sold their natural gas at the Henry Hub price of $2.50 per Million cubic feet (Mcf). It’s hard to imagine any investment costing less than the revenues from selling these relatively small quantities of natural gas.
While Texas may not be typical of all areas in the world, this analysis would indicate it’s not worth making the investment to capture over 20% of the natural gas that’s flared.
Any penalty for flaring this gas would merely add to the cost of operating these wells and do nothing to reduce the CO2 added to the atmosphere.
The WSJ article’s headline is bogus because the natural gas that’s flared has no value.
It’s also possible that the quantities of gas are so small that, in 20% of the flares, it can be shown there is no economic rationale for making any investment to capture the natural gas.
It’s very likely, in the vast number of other cases, the cost of capturing and transporting the natural gas is more than can be obtained from selling it on the open market. Selling the natural gas would require, in most cases, building natural gas pipelines that cost more to build than the revenues from selling the gas.
The real purpose of the WSJ article was to promote fear of global warming caused by fossil fuels and provide another reason to stop fracking. Quoting the WSJ article:
“Flaring might be responsible for 1% of global greenhouse gas emissions.”
But that statement is bogus. It makes little difference whether the gas is flared or used in some application, since in both cases the same amount of CO2 is released into the atmosphere.
Since it can be shown that CO2 and Methane (from natural gas) are not a threat to mankind, the premiss of the WSJ article is also bogus. See, Why There is Good News Now.
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