Maybe they were not producing enough oil and gas previously to justify the infrastructure investment, or maybe the wells in the area were located too far away from established processing facilities to make sense for operators. Whatever the reason, until recently there was simply not a market for products from many of these regions.
As demand for domestic oil and gas has grown in recent years, however, that has begun to change. The market has developed to such a point as to support even small production facilities in far-flung areas. The end result, then, has been a bumper crop of new and expanded wells in U.S. basins and a growing need for engineered solutions to manage, transport and process these oil and gas products. As a result, operators are now partnering with innovative engineering firms to develop their new and existing assets for efficient performance and profit.
In 2014, an independent energy company (“The Client”), which oversees production facilities and produces natural gas in the Western United States, approached Halker Consulting LLC (“Halker”) for help retrofitting a dormant facility that it had recently acquired in western Colorado. Specifically, it needed to engineer a way to dial down the volume required to run the
plant economically in order to better match the gas levels currently being produced in the area.
Built in 2001, the plant came with a nameplate processing capacity of 24 million cubic feet per day and was designed primarily to remove carbon dioxide and nitrogen from natural gas streams. But at the time of conversion, the plant was grossly oversized for the amount of production that was available to go to the plant to be processed, estimated to be no more than 5 million cubic feet per day. The Client needed to “turn down” the processing level to fit with this new reality.
That said, there were already a number of existing wells in the area that had been lying dormant since the processing facility was shut down. The challenge for The Client was reimagining the plant in order to efficiently access all of the shut-in gas in the area and provide it with a cost-effective path to market.
Lacking the in-house expertise needed to engineer a solution to this problem, The Client asked Halker to come in and retrofit the facility with new equipment, new processing technologies and a new operational mandate, adding helium production to the plant’s processing services. Most importantly, the retrofit had to make sense economically, both a today’s low production levels and potentially higher levels in the future.
The first step in developing an efficient, scalable facility for The Client was to take a high-level look at how the existing site was set-up in order to identify areas where it could be improved. Halker’s engineers accomplished this by taking an “as-built” approach to the facility as it stood. Then, using that information, they came up with a new design for the plant that would integrate new processing equipment – required for the new helium system, as well as the scaled-down nitrogen and carbon dioxide processing – with the existing facilities. From there, Halker performed a hazard analysis on the new design, prepared construction drawings and ordered the necessary equipment.
The addition of helium processing at the plant is what made the whole process economically viable. If The Client had simply retrofitted the existing system to simply remove nitrogen via a different method, but at lower levels, it would still have been uneconomic. The helium system, as implemented by Halker, offers a new product stream that makes the whole plant work on a cost basis, supporting what The Client expects to be a gradual ramp-up of local well production over the next several years.
The reality is that helium is an extremely scarce element, especially in the U.S. There are only three places in the country that currently produce it—Amarillo, Texas; the Hugoton gas field in Kansas and Oklahoma; and Southwest Wyoming. It has long been known that Western Colorado also has helium in its gas, but the way that helium is traditionally removed from natural gas streams—a cryogenic process that takes the gas temperature below -300 degrees—is highly capital and energy intensive. It rarely has made sense for operators in Colorado to process it via this method.
The system that Halker implemented at The Client’s plant, however, is more efficient and cost-effective. It can also be easily scaled as processing loads increase. As a result, The Client was able to add this valuable new gas to its product mix.
Halker also worked to bring The Client’s updated facility into compliance with state and federal regulations, obtaining the necessary helium processing agreements from the Bureau of Land Management and obtaining additional gas gathering contracts for the site. Halker also helped The Client obtain additional utility power to the facility to support the new processing systems.
As a brownfield project, meaning it wasn’t a brand new facility but instead a retrofitted system, Halker not only had to bolt on new pieces of equipment to an existing plant, it had to change the entire operating parameters of the facility. This involved significant regulatory compliance hurdles at both the state and federal levels, all of which Halker managed for The Client.
The Client’s facility retrofit project in western Colorado began in July 2014 and the plant was running at full capacity, with all of the new systems operational, as of November 15 of that year.
After incorporating Halker’s system recommendations at the plant, The Client saw a range of economic and production benefits.
Local Processing—The Client owns a number of wells in the immediate area – drilled between the 1960s and as recently as 2008 – that had been sitting idle since the plant was shut down in 2009. Now, with the retrofitted processing plant up and running, those wells are coming back online, adding to the region’s production flow and improving The Client’s bottom line.
New Products—By adding helium to the plant’s processing mix, The Client now has a new, in-demand product to take to market at a minimal capital outlay. A new, scalable nitrogen processing system also allows The Client to enjoy more cost-effective processing of all natural gas streams in the area, further lowering its production costs.
Land Use—By reducing the optimal level of daily gas processing at the plant, The Client is now able to better serve the oil and gas production needs of western Colorado as they are now. The location also means that The Client can now access local wells that, until recently, had been left idle due to the lack of processing facilities in the area.
Scalability—The plant is also now better equipped for future adjustments to these needs, as more and more wells come back online over the next several years. The system Halker designed for The Client can easily be scaled up or down as needed.