News Release 26 May 1999

FOR IMMEDIATE RELEASE

EUB AND PETROLEUM SOCIETY ARRANGE PRESENTATION ON WELL TEST FLARING

Calgary, Alberta (26 May 1999) The Alberta Energy and Utilities Board (EUB) and the Petroleum Society of CIM's Well Testing and Production Optimization Group have arranged a presentation for industry representatives and other interested parties on changes to EUB Guide 40, Pressure and Deliverability Testing Oil and Gas Wells. The presentation will focus on flaring in conjunction with well testing, and will take place from 11:45 am to 1:30 pm on May 27 in the Pekisko Room of McDougall Centre, 455-6th Street SW, Calgary.

Flaring is allowed in some circumstances such as to test initial well production rates, which are important to assess for reserve estimations, economics, conservation and future developments. The presentation provides an excellent opportunity to learn about updated EUB well testing requirements, and additionally will include references to new technologies, alternatives to flaring, and conclude with an open discussion forum. Presenters include representatives from industry, the Petroleum Society, and EUB staff. EUB Board Member Frank Mink will also provide some introductory remarks.

A second identical presentation has been scheduled for 11:30 am on 10 June 1999 in the Pekisko Room of McDougall Centre. To register telephone Vera Wright of CIM at (403) 750-5457.

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This news release and Backgrounder are available on the EUB website at http:/www.ercb.ca

For more information, please contact:

MR99-7

BACKGROUNDER

FLARING

Flaring has always been an important issue from an EUB perspective. In fact, the EUB's evolution was in many ways based on reducing flaring and the conservation of solution gas. For the future, the EUB will continue to work with all stakeholders towards the goals of reducing and even eliminating flaring wherever possible.

Q: What is flaring?

Flaring is the burning of natural gas directly to the atmosphere.

Q: Why do companies flare natural gas?

There are valid reasons for allowing flaring in some situations and the regulations recognize this. As a general rule, the Board requires operators to conserve all gas that can be recovered economically. However, sometimes gas is flared:

• as a safety precaution for the public, industry workers, facilities and/or the environment during emergency or process upset conditions.
  
  
• to test initial well production rates, which is very important for economic reasons, conservation and the assessment of future developments.
  
  
• because the volumes produced are too small to be economically brought to the marketplace (building required pipelines over long distances).

These reasons relate to the three basic types of flares in Alberta today: flares at processing facilities, flares that are active for only a few days while testing a new well, and longer term flares used to burn "solution gas." Solution gas is gas produced along with crude oil similar to the fizz in a bottle of soda pop. Solution gas is flared because there is no pipeline close by to accept the gas.

Q: How many flares are there in Alberta?

The majority of flares are of the solution gas type, and there are about now about 4,400 of these flares operating, which is a significant decrease from the 5,400 that existed in 1996. There are around 600 gas plants that have flares. In 1998 there were 1,350 new exploration gas wells drilled in the province, and most of these would have flared gas over a period of five to 10 days.

Q: What happens when gas is burned at a flare?

Under ideal conditions, where high combustion efficiencies are achieved during the burning process, water and carbon dioxide are produced. However, recent research has shown that some flares do not burn gas as completely as was once thought. One study conducted by the Alberta Research Council in 1996 showed combustion efficiencies ranged from about 65% to 85% for the two flares examined in the study. This incomplete combustion of produced gas can be addressed by ensuring the appropriate design and operation of flares. Advances in new technologies are also expected to have a positive impact.

Q: How much gas is flared?

In 1998, approximately 7-8% of produced solution gas was flared. About 93% of the solution gas produced in Alberta was "conserved" or captured for other uses and NOT flared. Alberta produces more than 131 billion cubic metres of marketable natural gas, of which more than 22.5 billion cubic metres is solution gas. Of this, about 1.8 billion cubic metres is flared.

The public, the industry, the EUB and other government agencies all agree however, that further efforts are necessary to reduce flared volumes.

Q: What is being done to reduce flaring?

For well-test flaring, there is an alternative called "in-line testing," whereby gas is flowed into an existing pipeline for testing purposes rather than being flared. However, there must be an appropriate pipeline nearby that can be used safely for this purpose, along with other operational factors that must be addressed before this method can be used. Recently, a number of experimental processes such as incineration have also been advanced that should offer improvements to flaring during well tests.

In reference to solution gas flaring, grouping several gas sources may improve the economics of collection. This requires careful analysis of the total amount of gas that will be produced and the length of time production will last. If this analysis supports gas conservation, the EUB requires companies, either individually or collectively, to install facilities to capture and market this gas.

Petroleum Technology Alliance Canada (PTAC), a non-profit association to promote collaboration on technology development in the energy industry, currently has several projects related to flare technology research. In addition, new technologies may be able to use gas previously flared to create smaller scale electricity generation units. In December of 1998, the Alberta Department of Energy announced changes to gas royalties to encourage this productive use of flare gas.

Improvements and innovations have occurred through on-going efforts from the EUB, the Clean Air Strategic Alliance (CASA), and Industry/Government working groups. Targets for reductions of flared volumes have been set and agreed to by multistakeholder groups. The new EUB Guide 60, Flaring Guide for the Upstream Petroleum Industry in Alberta, will also have a significant impact on reducing flaring in the province of Alberta.

For more EUB information on flaring, please contact: