1 Shocking Picture of America’s Drilling Boom

Bakken natural gas flaring at night as seen from space. Photo credit: Flickr/NASA Goddard Space Flight Center

The above photo was taken from space. It shows what appears to be a scattering of cities in Northwest North Dakota. The only problem is that this part of North Dakota is among the least densely populated in the U.S. What NASA took a picture of was oil wells where the natural gas is being flared off.

America's energy boom has actually made natural gas the surprising loser of the boom. In the Bakken, for example, 29% of the natural gas that is produced in association with oil is flared off. This is because wells are either not connected to natural gas pipelines or if a well is connected the infrastructure is inadequate. Natural gas has become an afterthought. 

Last year, for example, Bakken focused oil producer Kodiak Oil & Gas (NYSE: KOG  ) produced 6.6 billion cubic feet of gas as well as 4.8 million barrels of oil. But because of the lack of pipelines or system capacity, Kodiak Oil and Gas was forced to flare 3.3 billion cubic feet of natural gas, or half of its total natural gas production. This didn't have a major impact on Kodiak's operations last year as 89% of its production was oil. Still, Kodiak flared enough natural gas last year to heat a small city for one year.

The good news is that companies like Kodiak Oil & Gas are flaring less gas. The company noted in its last quarterly report that while it is still flaring natural gas it has connected a majority of its wells to pipelines. As more pipelines are built it will lead to additional volumes of natural gas being captured and sold.

The Bakken isn't the only place that natural gas has become an afterthought. Companies like EOG Resources (NYSE: EOG  ) are not investing any money to grow dry gas production in the U.S. The only reason EOG Resources is still modestly growing its gas volumes is because it's producing gas in association with oil or natural gas liquids in places like the Bakken or Eagle Ford Shale. This has dry gas shale plays like the Barnett and Haynesville seeing little investment.

The issue is that the price of natural gas just isn't high enough to justify these investments. Our energy boom has created too much supply. That has cost a lot of jobs as well. Chesapeake Energy (NYSE: CHK  ) , for example, slashed 10% of its workforce this year. The nation's number two natural gas producer has been forced to cut costs due to low natural gas prices. Like EOG Resources and Kodiak Oil & Gas virtually all of the natural gas production that Chesapeake Energy adds this year will be natural gas that is found with oil and natural gas liquids. Dry gas drilling, except for in some sections of the Marcellus Shale, just isn't profitable to drill.

What's most interesting is that until demand picks up, the price of natural gas isn't likely to budge much because we have plenty of associated natural gas that is still coming online. As new pipelines are built in the Bakken, it will enable the state to reduce its flaring so that the 29% that's currently flared can be used. Combine that with the continued focus on liquids and natural gas will continue to be the surprising loser of America's energy boom.

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Read/Post Comments (25) | Recommend This Article (9)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 17, 2013, at 11:24 AM, DaPurl wrote:

    Why is Capstone corp. not selling more of their turbines in this area? Co- generated electricity would do wonders for their sales growth.

  • Report this Comment On November 17, 2013, at 11:41 AM, catnip wrote:

    The more blood we suck out of planet earth will lead to faster human demise. You can only suck so much blood out of something before its parts start to die. We are part of the earth's body....Way to go human greed. Way to go.

    It's all about those green dollar signs...not about supporting life on earth.

  • Report this Comment On November 17, 2013, at 11:53 AM, rcgalaska wrote:

    Curious as to why they drill wells if there is no

    pipeline close enough to connect.

  • Report this Comment On November 17, 2013, at 11:53 AM, 702bdr wrote:

    Looks kinda like the image on the Shroud of Turin.

  • Report this Comment On November 17, 2013, at 12:37 PM, ddcmall wrote:

    Its not that natural gas has (become) an afterthought in oil production. It has always been thought of as a waste product since the days of the first oil well. Think of the untold TRILLIONS of cubic feet wasted.

  • Report this Comment On November 17, 2013, at 12:39 PM, Oobatz wrote:

    @rcgalaska

    "Curious as to why they drill wells if there is no

    pipeline close enough to connect."

    The wells are for oil, not natural gas. There is an oil pipeline for the oil, but there is no pipeline nearby for the natural gas. You need an entirely different pipeline for natural gas.

  • Report this Comment On November 17, 2013, at 1:18 PM, zuesIII wrote:

    Thats a shame - natural gas burns alot cleaner than coal, oil or gasoline. What a waste. Wallstreet wont waste any time with natural gas cause the price is tanked.

  • Report this Comment On November 17, 2013, at 1:42 PM, standaman wrote:

    in texas its the same story. they are only supposed to flare for 30 days, but I drive by the same wells for 6 months that are still flaring. the actual amount flared is extremely underreported for the sake of keeping concerned people quiet. I'm all for the production, but we need to be keeping this much needed energy and not burning it just to get rid of it.

  • Report this Comment On November 17, 2013, at 1:49 PM, Mathman6577 wrote:

    The answer is more pipelines, not less drilling.

  • Report this Comment On November 17, 2013, at 1:56 PM, altmd71 wrote:

    More pipelines and the DOE needs to approve more LNG export sites to sell the gas to Europe and Japan. Once again government infers with capitalism and causes waste of our natural resources.

  • Report this Comment On November 17, 2013, at 1:58 PM, DJDynamicNC wrote:

    ^^ It's funny how the companies that are flaring off the gas aren't to blame, but somehow it's the government.

    That's like kids getting into a fight and then blaming their parents for it.

  • Report this Comment On November 17, 2013, at 3:15 PM, Sachemm wrote:

    I live and work up here in the Bakken. We are building pipelines and several miles of them it just takes time to build them and secure rights of way through landowners and what not. We have real winters here so can only dig in summer and fall until the ground freezes.

    With the environmentalist blocking parts of the process there isnt a way to get the pipelines finished.

    Switching cars to natural gas will raise the price of NG for it to be more profitable.

  • Report this Comment On November 17, 2013, at 3:17 PM, jasonjupiter wrote:

    Not so surprising.

  • Report this Comment On November 17, 2013, at 3:19 PM, Sissy wrote:

    One day we will wake up and the PH balance of the aire and oceans will be off to the point of mass deathes. Both humans and animals will be dying at such rapid pace that we will be on our knees begging God to help. I think he will just shake his head and think twice if whether or not he can tolerate Humans to rule the Earth any longer.

  • Report this Comment On November 17, 2013, at 3:21 PM, Sissy wrote:

    Oh ya, I almost forgot, God sent his only Son down to Earth to die for Human sins. Whew, thanks God.

  • Report this Comment On November 17, 2013, at 3:25 PM, buzzallnight wrote:

    This absolutely insane, immoral and should be illegal!

    While I don't believe it,

    have you heard of climate change caused by increased co2 in the atmosphere?

    Prepare to have lawyers, congressmen and environmentalists climb right up your butt!

    The price is not high enough for pipelines is just an utterly stupid statement!

    Find another way NOW!!!!!!!!!!!!!!!!!!!!!

    Do you understand what you are doing to your public relations???????

  • Report this Comment On November 17, 2013, at 5:05 PM, goodjobs wrote:

    HOLDING BACK THE KEYSTONE PIPELINE IS NOT HELPING.

    MORE GAS TO MARKET EQUALS LOWER PRICES TO HEAT HOMES AND GENERATE ELECTRICITY.

    OUR ECONOMY RUNS BETTER ON LOW ENERGY PRICES.

  • Report this Comment On November 17, 2013, at 5:12 PM, goodjobs wrote:

    THE WORLD HAS BEEN WARMING SINCE THE ICE AGE ENDED.

    BIG GOVERNMENT AND LIBERALS GONE WILD WILL END AMERICA THE BEAUTIFUL LONG BEFORE CLIMATE CHANGE.

  • Report this Comment On November 17, 2013, at 6:49 PM, allykat7825 wrote:

    How much carbon goes up in 'flaming'? Or is it captured by scrubbers? Or not.

  • Report this Comment On November 17, 2013, at 7:01 PM, Mathman6577 wrote:

    Good question allykat7825. I wonder what the carbon footprint of the wells is compared against the carbon footprint of the hypocrites like Al Gore and Matt Damon and the Hollywood elites when they fly their private jets and heat and light up their 20,000 sq. ft. mansions?

  • Report this Comment On November 17, 2013, at 9:31 PM, apistosrus wrote:

    I wish writers would check their facts. A typical flare diameter as seen from space is less than 5-feet in diameter and is YELLOW. Do you think a 5-foot diameter YELLOW flame a mile-apart would ever show up on a satellite photo (except for spy satellites)? The satellite picture shown here are drilling rigs that operate 24/7. Between 180 - 200 of these drilling rigs are operating in this oil field at any one time. These pads are typically 400 X 800 feet and totally lit with bright WHITE lights for safety purposes. That is what is seen in this photo. These same reporters don't have any idea on the facts of fracing either.

  • Report this Comment On November 18, 2013, at 12:28 AM, MrMose wrote:

    Two thing could be done, first in a short run from each site install a Condensing unit to help reduce to liquid to run a power plant. if there are enough left over that same power plant will run that gas back into the same place it came from to help produce more oil. sounds easy but I have seen it done.All without running alot of new lines and kept at well location.

  • Report this Comment On November 18, 2013, at 12:32 AM, Oilvet wrote:

    Until the associated gas is collected, compressed and pumped into pipe lines there is really nothing the producers can do with it other than flare it.

    I remember flying over Syria in the mid 1960's and you could see flares all over the Middle East from Saudi to Iran where the associated gas was flared.

    In fact I was involved in drilling the first wells drilled for sour gas in Iran to fill a pipe line to Russia ,

  • Report this Comment On November 18, 2013, at 7:13 AM, jasoncglass wrote:

    This is BS i work in the Gulf of Mexico we don't just flare off gas its against the law. The BSEE gets royalties of the oil and gas. They fine you if flare off gas you cannot flare off gas well gas its against the law

  • Report this Comment On November 19, 2013, at 1:57 PM, TMFmd19 wrote:

    @apistosrus and @jasoncglass - Google North Dakota flaring from space and you'll find plenty of resources that this is flaring. Not only that but the NASA photo said that is flaring: http://www.flickr.com/photos/gsfc/8249377475/in/photolist-dy...

    For anyone else interested, here is the report from the ND Pipeline Authority that was the inspiration for the article: http://ndpipelines.files.wordpress.com/2012/07/ndpa-detailed...

    Matt

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