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Shale Players Eye Pneumatics in ESG Push

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A number of US shale operators have rolled out programs to replace natural gas-fired pneumatic devices on oil-field equipment with air-driven ones, part of a massive effort to lower greenhouse gas (GHG) emissions and boost the companies’ green credentials.

Air-driven pneumatics can cut emissions in a big way, the companies say. For example, EQT, the US’ largest natural gas producer, told Energy Intelligence earlier this year it plans to reduce its annual emissions footprint from 1 million tons to 300,000-400,000 tons just by replacing pneumatics.

For some operators, however, the transition hasn’t been easy. Denver-Julesberg (DJ) Basin-focused Civitas Resources, which claims to be Colorado’s first carbon-neutral producer, found that the pneumatics inventory estimates from some of its legacy companies were not completely accurate.

“We ended up having to do a hand count of our pneumatic devices,” Chief Sustainability Officer Brian Cain said at the DUG Bakken + Rockies conference in Denver in June. “Why? Because we found that some of our legacy companies underestimated their pneumatic devices by as much as two times. And that's really significant in terms of knowing your numbers, in terms of knowing what your efficiencies actually are.”

‘Getting Burned’

Travis Wofford, a partner at law firm Baker Botts in Houston, told Energy Intelligence last week that he has seen at least one operator “get burned” by inaccurate counts of pneumatic devices.

“I wouldn't say that it's ubiquitous that every single operator at this point is checking that as part of the diligence, but I think that the sophisticated acquirers are paying attention to the categories of the facilities associated with the assets,” he said.

Inaccurate counts can increase integration costs on the back end for acquirers, since it is up to them to replace obsolete equipment. And that pressure is even higher now as operators increasingly base their brands on lower emissions footprints.

“That means that they will be going out and doing the replacement, they will be going out and retraining people in the field, their service providers are required to abide by certain standards as well,” Wofford said. “And so that increased expense, it affects their bottom line.”

Inventories

While Civitas did not respond to several requests for further comment, operators in other basins told Energy Intelligence that inventory accuracy when it comes to pneumatics is an issue for the industry as a whole.

“An operator does have to be very prudent,” Brian Woodard, Director of Government and Regulatory Affairs at Chesapeake Energy, told Energy Intelligence last week. “And there is a lot of manual analysis to where you have to get on location and ensure through an asset integrity check that you evaluate it for any actuating device in the field.”

For its part, Chesapeake has identified 19,000 pneumatics that need to be replaced or fitted with vent capture systems, with 95% of retrofits to be completed by the end of the year.

While Chesapeake has developed many of its own asset inventories, the company recently acquired developed properties in the Marcellus and Haynesville Shales. Woodard told Energy Intelligence the company sends out trained field teams to check asset integrity whenever an acquisition is made.

“For anyone that is acquiring, there's a certain element that you can have a general reference based on facility design of what you should have on location,” he said. “But there's still a general duty to get out there and analyze your facility to understand what you have.”

Budgets

Meanwhile, companies with smaller budgets are looking for other ways to cut emissions from pneumatics. Appalachian Basin pure-play CNX Resources — which has a planned budget of $470 million-$500 million this year compared to Chesapeake’s $1.75 billion-$1.95 billion — is choosing to install lower-cost vent-capture devices on its pneumatics instead of replacing them altogether.

“That way we can do more projects and actually reduce more overall emissions, as opposed to, say, a 5% goal reduction at a super-high cost,” Ravi Srivastava, President of New Technologies at CNX, told Energy Intelligence last week. “You have to be smart about some of these things.”

CNX has also recently formed a group within its staff to focus on regulatory reporting to verify and validate the emissions data it sends to various agencies.

“We understand there are a lot of a lot of complexities out there, and having the right inventory is one huge part of it,” Srivastava said on the sidelines of the recent Hart Energy ESG conference in Houston. “We want to make sure that we have confidence in the numbers that we're reporting to the second decimal point. We’re not there yet. This group is in early stages, but we have deployed the people and the resources to get to that point.”

Topics:
Methane Emissions, CO2 Emissions, Corporate Strategy , Capital Spending, Independent E&Ps, ESG
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