Posts Tagged ‘NYMEX’


Flared Natural Gas in the Bakken

Flared Natural Gas in the Bakken

Today’s WSJ reports (once again) that North Dakota is flaring (meaning burning up at the wellhead) 30% of the natural gas that’s produced at its fracking sites, amounting to more than 10 bcf (billion cubic feet) per month. Dollar-wise, that works out to about $50,000,000 a month.

Imagine for a moment that the NYMEX natural gas futures contract was done on paper. Now imagine further that you walk onto the floor of the NYMEX and buy ten natural gas futures contracts. That’s 100 million cubic feet of natural gas. Now take all of those paper NYMEX contracts and use them to start the coals in your barbecue. That’s how profligate is the waste of energy in North Dakota.

The main reason for this is that there’s no gathering system (network of pipelines) in the remote areas of North Dakota. You can put Bakken crude oil in a tanker truck and drive it to a railhead, but that’s not feasible for natural gas. The lack of a gathering system conspired with very low prices for natural gas over the last few years to make flaring the only logical thing to do with the gas.

Grab a 2-liter bottle of cola, shake it up and watch the bubbles. That’ll give you a rough idea of how the Bakken crude comes out of the ground, mixed with natural gas in much the same way as CO2 is dissolved in soda. Open the bottle (or drill the well), and the whole thing schpritzes over the top, just like the “gushers” Hollywood uses to depict oil drilling. For the Bakken operators, the natural gas is “associated” gas, a euphemism for “we have to get rid of this stuff somehow.”

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