In 2008,
according to data from the CDC’s National Vital Statistics System and National
Center for Health Statistics, there were some 108k excess winter deaths in the
U.S. (as in above the average for the rest of the year). Across the pond in 2012-2013,
as the coldest winter weather for nearly half a century settled upon Europe,
the UK’s Office for National Statistics reported as many as 31k excess winter
deaths across England and Wales, with the primary populations being over 75
pensioners on a fixed income.
For
families whose loved ones have perished under bitterly cold conditions, largely
due to a lack of capital for increasingly costly heating expenses, it would
likely come as a shock that World Bank data for 2012 alone indicated some $50B
worldwide in natural gas was being wasted annually through gas flaring, the
practice of burning off excess gas at the site of an oil well. In the U.S. last
year we burned off over $1B in gas according to a Ceres Group study, which drew
heavily on data from the North Dakota Industrial Commission (NDIC), where the
fracking boom has led to massive amounts of drilling and energy recovery in the
Williston Basin’s Bakken and Three Forks formations.
About
one-third of all gas produced in North Dakota was flared last year, where the
fracking boom has led to an amazing 391% or more jump in production over the
last four years, from around 230k bbls/day in 2010, to over 1.13M bbls/day as
of this August. North Dakota’s Industrial Commission has subsequently set some
rather aggressive flaring targets, with the first being a reduction to 26% by
Q4 this year and longer-term goals of 10% by 2020, creating serious pressure on
oil and gas developers to find ways to reduce or otherwise offset flaring.
Without some way to harness the otherwise burned off gas, North Dakota may even
end up forcing producers to scale back output in order to meet these targets.
Environmental
Protection Agency (EPA) regulations, DOE foot-dragging, a lack of pipeline
infrastructure and the prohibitively high costs of building LNG liquefaction
plants have only exacerbated the underlying dynamics. We could be consuming the
gas domestically, making it easier for retired people to heat their homes in
the winter, or shipping LNG off to Europe and reducing the heightened tensions
between the Russian Federation and EU if we had better processing capacity.
Instead we face not only the obvious wastefulness, as old people die from the
cold this winter, but we also incur a massive environmental black eye as well,
with roughly 28% of the 1,340 MMcf/d of gas produced in North Dakota being
burnt off, straight into the atmosphere.
Some hope
for addressing the environmental concerns in North Dakota comes in the form of
a recent announcement by Badlands NGL and their partners, who have moved to
build a $4B polyethylene manufacturing facility in the state, which will eat up
large amounts of ethane and yield over 3.3B pounds annually. This initiative,
combined with other facilities looking to convert natural gas components into
products like fertilizer, will certainly help curb flaring, but a more
comprehensive utilization approach is necessary if the NDIC targets are to be
met. Big players like General Electric have moved in to fill the gap, with
efforts like their JV leveraging Last Mile™ Fueling Solution architectures and
GE’s own CNG In A Box™ technology, to capture some 5 MMcf per day by the end of
this year.
Another,
smaller company making inroads here is Well Power, Inc. (OTCQB: WPWR), which
stated mid-October that they have now picked an area to build a prototype of
the Micro-Refinery Unit (MRU) system licensed via Canada-based ME Resource
Corp. (OTC: MEEXF). The ground-breaking MRU technology is an ingenious fusion
of proven commercial technologies with a proprietary micro-reactor system that
collectively represents an economical, mobile and fully scalable solution for
developers to generate value-added revenue streams from otherwise wasted flare
gas. The MRU offers an easily transportable and configurable means for
processing natural gas into Engineered Fuels™ like diluents, drop-in diesel,
and even pipeline-quality synthetic crude, as well as clean electricity.
WPWR has
currently engaged process engineers to design the prototype MRU, upon which
future commercial units will be based, and has chosen a location proximal to
where their R&D team is located in order to maximize developmental cost
efficiency. The benchmark capabilities of the MRU technology to process 75 Mcf
to 250 Mcf gas flows makes it an ideal solution for most E&P operators.
This technology uses a powerful two-step process to condition/convert methane
and condensates into syngas (CO-Hydrogen), before applying a sophisticated
Fischer-Tropsch reaction in order to create Engineered Fuels, generating clean
electricity as well from associated exothermic reactions and/or deliberate
combustion.
North
Dakota oil and gas producers looking to meet increasingly strict EPA and state
regulations will have little choice as to whether or not they will employ such
technologies in the future and that spells serious upside for a currently small
player like WPWR. Moreover, Well Power’s Equity Purchase/Registration Rights
Agreement as of this August with Premier Venture Partners, whereby Premier is
slated to purchase up to $10M in common stock, provides a major financing
vector for the company to pursue commercial development of the MRU technology.
Once Well
Power is solidly in the business of distributing MRUs, investors should start
to see some real traction, as otherwise flared natural gas is turned into
profits, simultaneously helping to offset growing energy costs for domestic
consumers, and this technology will also be able to tackle stranded/shut-in natural
gas sources as well. Exciting news as we head into winter and America’s natural
gas stocks dip to their lowest levels in six years, down 11% from last year to
around 3.1 trillion cubic feet as of late September. Add to this the fact that
we have shut down coal-fired and nuclear plants since last year, to the tune of
roughly 1B cubic feet of natural gas in extra demand required in order to
compensate, while coal stocks slump to a 39-day supply from the 57-day supply
we had on hand in 2013 (largely due to insufficient rail capacity according to
OilPrice.com), and you have a perfect storm of energy shortages brewing for
this winter.
More info
on Well Power is available at www.wellpowerinc.com
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