Back when oil was at $100 a barrel and the Obama administration first started showing signs that they were coming after oil and gas producers with new methane regulations, it was a hard sell to get the industry to take a real look at the potential of emerging wellhead capture and conversion technology. But now that West Texas Intermediate (WTI) crude oil is trading around $46 a barrel and the EPA’s Natural Gas STAR Methane Challenge Program draft framework is out – putting handles on the still-voluntary curbing of natural gas flaring, a national framework expected by many in the industry to drive already taxing state-based regulatory fees and fines on flaring to higher and higher levels – even companies who decided to bite the state fees bullet on not having access to natural gas pipeline tie-ins and simply flare, are turning their attention to such technology. With significantly tighter margins on the horizon for the foreseeable future, as energy producers adjust to the new normal of lower prices, squeezing every last drop of revenue out of producing assets has quickly become the industry’s new watchword.
Upon closer examination of the regulatory landscape, we see that many states are already leading the charge on the issue of gas flaring, backed up by federal as well as global initiatives designed to satisfy environmental, as well as economic concerns. Early last month a team of four New Mexico Democrats, led by Udall and Heinrich, pushed the Obama administration to level strong rulings on methane emissions from oil and gas producers ahead of the EPA draft framework. This is a move clearly understood by operators across the spectrum in the oil and gas industry to be a signal flare for what is likely to come, with state regulators picking up the federal initiatives for voluntary self-regulation and turning them into even stricter fee-based protocols, with or without mandatory federal targets. For a state like New Mexico, which delivered over 12.7 million bbls of crude and some 117 MMcf of gas in March 2015 from over 48,000 currently producing wells, which has some of the most concentrated levels of methane nationwide and is one of the top country’s top producers from federal lands, this move calling for amped-up methane regulations is an unmistakably clear shot across the bow of the industry, signaling the inevitability of much tighter controls on the practice of gas flaring. In North Dakota, the rules implemented a year ago requiring that oil companies capture 90 percent of natural gas by 2020 were recently highlighted by the state’s top regulator as being in jeopardy due to slumping energy prices, in large part as a direct result of key natural gas infrastructure projects being put on hold.
The idea of avoiding regulatory fees and fines on flaring, and even generating revenue from otherwise flared, excess natural gas that cannot be tied-in to pipelines due to insufficient national infrastructure, or due to the slow pace of new pipeline rollouts in the country’s major production regions, is now an exceptionally attractive proposition to operators. The simple truth is that, even with an estimated $54 billion spent since 2009 on new natural gas pipeline capacity in the U.S. and another $104 billion spend on the table for more networking by 2018, many operators will not have access to pipelines and will be forced to either flare and eat the associated costs, or get serious about wellhead capture/conversion technology.
One of the few publicly trading companies at the forefront of this nascent industry is Well Power, Inc. (OTCQB: WPWR), which is continuing to work towards commercialization of a robust, exclusively licensed Micro-Refinery Unit (MRU) technology that can be deployed near the wellhead and used to process high-volume raw natural gas outputs into clean power and Engineered Fuels™, such as no-sulfur diesel, diluents, and pipeline-quality synthetic crude. In order to prepare for the advent of inevitable industry changes worldwide, such highly economical, mobile and scalable solutions must be developed, and the economies of scale must be sufficiently advanced to the point where smaller operators also have access to ubiquitous capture/conversion systems.
With looming data points on the global scene like the U.N. and World Bank Group’s joint Zero Routine Flaring by 2030 initiative, which is already endorsed by nine countries and major sector players like Royal Dutch Shell (NYSE: RDS.A and RDS.B) and Statoil (NYSE: STO), the true demand for such capture/conversion technology as Well Power’s MRU is becoming increasingly apparent. In countries like Nigeria, which lost $868 million last year due to flaring according to the Nigerian National Petroleum Corporation, operators like Midwestern Oil and Gas have already pledged to completely end the practice, and to do so well ahead of the Zero Routine Flaring by 2030 target. The humble little MRU systems currently being ramped towards commercialization by WPWR in the state of Texas could be the key to helping countries like Nigeria realize their methane emission objectives, especially since the technology’s potential for rapid deployment addresses the fundamental problem facing countries like Nigeria, and many, many others. Namely, the lack of a robust pipeline networks or sufficient CNG/LNG infrastructure, a problem we generally faced by countries all across the globe, and even here in the United States where we enjoy one of the most comprehensive natural gas distribution networks on the planet.
How will small countries without sufficiently advanced pipeline infrastructures ever meet the rapidly coalescing global regulatory targets for methane emissions without robust, mobile, scalable and above all affordable wellhead capture/conversion technology? The short answer is that they won’t. The oil and gas production industries in such countries, in an environment of lower energy prices, will eventually end up crippled by regulatory costs in ways that make the challenges faced by domestic wildcats here in the U.S. seem like a walk in the park. Well Power is dedicated to helping oil and gas operators of any size not only meet the increasingly strict obligations of regulatory oversight, but actually generate vital revenue streams as well. Revenue streams which capitalize on globally apparent lack of CNG/LNG or refinery capacity, empowering operators to not only generate immediately usable electricity at the well site, but ready-for-market Engineered Fuels that can be shipped off to local or global energy-hungry consumers.
To dig deeper, check out the MRU technology by visiting www.wellpowerinc.com
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