DENVER -- Midstream, hear this: Plan ahead or plan to go home.
“In midstream, we don’t have the benefit of being reactive,” said David Scobel, COO of Caliber Midstream. “We have to be out 18 months to two years in front of our partners to be able to respond to the needs facing us.”
Scobel outlined three risks in particular for the industry during his participation on the Bakken midstream panel during Hart Energy’s recent DUG Bakken and Niobrara conference. John Westerheide, general manager of unconventional resources for GE Oil & Gas, and Gabe Claypool, president and COO of Dakota Plains Holdings, joined Scobel on the panel.
Scobel’s list of major risks for the Bakken includes:
- Evolving crude-by-rail regulations: “We’re seeing a lot of impetus to create a lot of regulations around rail to create a safer environment for transport and crude-by-rail.”
- Flaring and emissions: “Almost every topic at the conference has some emissions component to it.”
- Downspacing trend and batch completions: “There are some logistical, physical and complexity risks. Midstream can be a part of the solution.”
Tackling these challenges requires collaboration with upstream partners, he said.
“We need to be thinking about how this batch completion process is going to work out in the future,” said Scobel, ticking items off his list. “We need to be working together to get the flames out on location. There are safety issues with having live flames on a hydrocarbon location. Flares go out. People have to relight them now in a hydrocarbon-rich environment.
“We have emissions that are associated with all this stuff,” he said. “We [could] have 10-well [initial production] coming on with 8,000 barrel per day (bbl/d), 10,000 bbl/d, 12,000 bbl/d, whatever that IP looks like. So, the alternative to putting [vapor recovery units] out there is midstream’s. We need to figure out how to get all this to a centralized location, get the fires down, get a zero-emissions pad."
“Let’s get that happening today.”
With the first risk on Scobel’s list, rail regulations, knowing exactly what to expect is the biggest challenge.
“There are going to be changing regulations, and how do we handle regulations when we don’t know what they’re going to be and how that’s going to change?” Scobel asked. Most rail carriers are already complying with the anticipated 50 mph speed limit. Another challenge is vapor pressure. Ramping up production will add a lot of high-pressure crude to the system and one future regulatory possibility is a limit of 9.5 Reid vapor pressure. Scobel’s solution: Take care of it now.
“We can do that today,” he said. “We have the technology and the ability, and midstream can be a part of that. We can avoid disruption that’s coming at us in the future. We can centralize that stabilization, make sure that we have the ability to have the last stop so that if there is a regulation that comes into play that says, ‘You have to meet this,’ we have the ability to say, ‘We can do it.’”
North Dakota regulations will require that flaring from initial production be stopped within a year. Gas capture plans will need to be filed with the North Dakota Industrial Commission or permits to drill will not be issued. That means shut-ins, loss of revenue and delays in moving product to customers. At first glance, it might appear to be an upstream issue, but it affects everyone in the industry. Scobel sees solutions coming from midstream.
“We have to expand our gathering and processing. Everybody knows that,” he said. “We need larger pipes if we’re going to be able to handle these larger IPs. We have to have larger systems. We need to be able to support additional gas capture. We have to be able to take those tank vapors that are currently flaring and get those monetized.
“Midstream’s going to have to innovate to be a part of this solution in a meaningful way. We don’t want to see thousands of VRUs out of the pad, more compression, more equipment to operate, more operators in an already tight market.”
Enhanced downspacing of rigs to bolster production was a major theme of many speakers at the conference. Adding wells to a pad adds complexity to the oil field and creates safety and environmental risks. Scobel sees the role that midstream can play in the solutions as:
- Reducing truck traffic
- Implementing large-diameter pipelines
- Filtering water on location
- Controlling flaring
The boom in the Bakken creates challenges and there is a lot to do to meet them, but Scobel is convinced that it is doable.
“There are solutions for this,” he said. “Caliber’s doing it. It can be done. We can get zero-emissions pads, we can get flow water into the location for the fracks by pipe, we can take flowback away from the locations by pipe. We just need to have enough planning and time to work with our producers to make sure that we plan for this and we’re ready when the IPs come.”