((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto)) by Georgina McCartney and Scott DiSavino
Amid a supply glut and weak prices, oil drilling operators in Texas are scrambling to get rid of their excess natural gas, which has led to increased demands for flaring.
The Railroad Commission of Texas (RRC), which regulates the state’s oil and gas industry, last week approved 21 requests for flaring exemptions from operators, primarily in the Permian and Eagle shale fields Ford, more than four times the number of applications approved last year at the same time.
Flaring, that is, the incineration of unwanted gas, has come under increased regulatory scrutiny in recent years, following pressure from advocacy groups environment and other stakeholders to put a stop to this practice which releases greenhouse gases in order to help slow climate change.
Producers, however, now face a dilemma with CLc1 crude oil prices trading above $80 per barrel, but gas remains depressed and in some places falling into negative territory.
“We think operators will use every tool in their toolbox to try to continue producing oil because oil yields are quite high right now,” said Jason Feit, an advisor to the oil data provider. Enverus energy.
“Flaring is getting harder and harder everywhere, so I think it’s something they probably don’t want to do, but it would be preferable to shutting in wells, that’s for sure,” he said. added.
Operators can request a waiver of the Texas flaring rule for safety, maintenance or emergency reasons, and for the first ten days of production when bringing a new well into service, CRR said .
Devon Energy DVN.N requested 12 of these exemptions for its operations in the Eagle Ford in South Texas, while Callon, which was acquired by Apache APA.O in early April, made six requests for assets in the Permian. All of these requests were approved.
Devon declined to comment and Apache did not respond to a request for comment.
Gas prices in many states, including Texas, have traded below zero several times over the past month, due to low demand, an abundance of renewable energy sources, outages pipelines and other construction that blocked gas in the nation’s top oil-producing state.
Spot natural gas on the Houston Ship Channel
NG-PHSC-TX-SNL in Texas, the industry price used for the Ford Eagle, has averaged $1.68 per million British thermal units (mmBtu) since the start of the year, according to SNL Energy data on the LSEG terminal.
This compares to an average of $2.26 per million British thermal units in 2023 and $4.07 per million British thermal units over the five-year period from 2018 to 2022.
Meanwhile, prices at the Waha hub
NG-WAH-WTX-SNL in West Texas closed at a negative $2.99 per mmBtu in mid-April, its lowest level since December 2022, according to LSEG data, meaning that operators must pay for their gas to be taken away.
Although Waha prices have recovered somewhat, they remain depressed.
Associated gas supply is not expected to decline anytime soon as more producers continue to seek profitable barrels of oil in the Permian.
Permian gas production is expected to increase by 140 million cubic feet per day (mcfd) to 25.2 billion cubic feet per day (bcfd) next month, according to the Energy Information Administration (EIA).
