Tuesday, September 28, 2010

A Breakthrough Invention in the Oil and Gas Market?

From Keith Schaefer at "Oil and Gas Investments Bulletin"....

An oil and gas entrepreneur in the US has devised an inexpensive way to capture oil and natural gas vapors around a well site, and sell them to make money. These vapors are often flared (burned), or vented into the atmosphere, and trust me, if people really knew how much oil and gas was flared around the world every day, even in first world countries, the media outcry would make the "water fracking" issue look like a kindergarten party. In fact satellite images show intense flaring occurring, principally in third world countries. Shell has just committed $2 billion to reduce flaring from its operations in Nigeria.

“Air pollution requirements related to oil and gas production from the states are becoming increasingly restrictive,” says co-inventor Dr. Paul Trost. And Trost's solution can be profitable. He adds that a study near Denver in the hydrocarbon rich Denver Basin containing almost 8000 oil and gas wells showed the “fugitive” hydrocarbons, gases emanating from production tanks can be captured and sold at a profit rather than burned in a flare. Just like water evaporates in a dish, oil and gas evaporates from the production tank at a well site, and escapes into the atmosphere or alternately is burned (flared).

The problem becomes bigger when a combination of gas and oil are produced with the gas being injected into a pipeline having pressure. The oil then is also pressurized and the pressurized gases (like gas in a pop can) then “flash” or boil off like a shaken beer can. In certain areas these gases are captured and directed to a flare for burning rather than being allowed to vent to the atmosphere.

Trost’s invention, called the V3RU (Variable Volume Vapor Recovery Unit), is different than other vapor recovery systems in that it uses a flexible accumulator (bag) to capture the vapors. “It swells up like it is taking a deep breath,” says Trost. “The bag thus captures both the flash gas and also any contained liquids. We exhale it slowly into compressor for injection and sale to a pipeline. It’s a variable volume bag and it’s safety rated. The alternative energy industry already uses it around breweries located in or adjacent to cities.” Without a bag, Trost says oxygen can get at the vapour and then it won’t meet pipeline specifications. The gas is then useless and must be flared. Using a bag allows some back pressure to be used, so it won’t let air in, and the gas retains its purity and suitability for pipeline sale.

Trost says the payout for the V3RU increases as the oil content of the natural gas increases, and also as the oil gets lighter (has a higher API rating) and contains more condensate. Typically the V3RU will range in cost from $8,000-$30,000. He gives a real life example of a gas/condensate well in Colorado that was producing about 30 BOPD and 400 mcfd, but high pipeline pressures were causing a large amount of “flash” gas, containing both recoverable oil and gas, was being lost. Application of the V3RU will allow the operator was able to capture an additional 8-10 boe/d, resulting in roughly a 2 year payout.

The product has been used almost exclusively in the Denver Basin, Trost says, but it is now starting to be used in other areas. Trost is a board member of Nextraction Energy (NEX-TSXv), which will be using the V3RU vapor recovery system to meet air quality regulations at Nextraction’s newly discovered gas-condensate well located at the Pinedale Anticline play in Wyoming.

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