Wednesday April 2, 2014 0 comments
By Curt MacDougall
DENVER - These are boom times for U.S. oil production. In fact, some estimates say America will become the top oil producer in the world by 2020.
But as more drilling rigs appear, one sight you may not see any more is the constant flame that accompanies many of those rigs. It's called "flaring," when the excess, unusable gases are lit and burned away.
And it was something that had been on Peter Mueller's mind for some time.
Having spent more than three decades in the oil-and-gas industry, even serving on the Colorado Oil and Gas Conservation Commission, Mueller had seen more than his share of flaring at well sites. So when his son, Hans, recently graduated from the Colorado School of Mines, Peter asked him to put his brand-new engineering degree toward finding a way to capture and make use of those gases instead of simply burning them off.
From that request came EcoVapor Recovery Systems. As Ben Turner, VP of business development for ERS, puts it, "We turn a waste-stream for an oil-and-gas operator into a revenue source, while at the same time improving the environmental compliance of the operator."
And while that "in a nutshell" explanation may sound simple enough, the process itself is a bit more complicated.
Excess gases are a natural byproduct of oil wells. Turner says it's similar to opening a can of soda.
"The CO2, the bubbles come out of the soda...the same thing happens when you bring oil to the surface. When you relieve the pressure the oil's been under for millions of years, a lot of gas comes out of it."
Some of those gases are separated from the oil early in the process, but others collect while the oil sits in the storage tanks. Then, as the tanks are opened to transfer the stored oil to a truck, any gases present are contaminated by the oxygen and can't be sold, leaving few options but to burn them off.
That was the challenge facing Hans Mueller. Dad Peter was instrumental in the early stages of development, providing not only financial backing but letting Hans move into the basement while tinkering with prototypes in the garage. And eventually, Hans came up with an economical way to remove the oxygen and then compress the gas for sale.
EcoVapor Recovery Systems incorporated in February of 2010, with headquarters in Denver and a field office in Greeley. They currently operate at 22 locations in Weld County, and expect to add three more sites by the end of May.
Until now, growth has been intentionally slow, according to Turner. "We wanted to make sure the systems were working before we really expanded," he said.
All of ERS's business was initially with Noble Energy, who Turner called "a great partner" because they allowed the company to work out many of the inevitable kinks as it was getting started.
One of those kinks was how to get paid. At first ERS asked to take custody of the recovered gas (since it was considered a waste-stream anyway) and sell it for whatever profit they could.
But due to ownership issues over the oil (and what's extracted from it), they decided it was easier to simply lease their equipment to the operator.
"We make sure our lease amount is less than the value of the gas we're capturing, so that we come out ahead in our lease and the operator comes out ahead by selling more gas than they're paying us. That way, it's a win for everybody," Turner says.
And just last month, ERS was awarded a $250,000 grant from the Colorado Office of Economic Development and International Trade to build a gas-recovery unit that can be pilot-tested for different operators.
In a press release, Colorado Governor John Hickenlooper said the Advanced Industry Accelerator Grants Program is designed to "...help entrepreneurial companies to compete globally, encourage faster commercialization of technologies and create Colorado jobs."
Now they've decided to actively pursue growth. Turner came on in January of this year, and says before that the company had no active sales or business development effort. But with new drilling efforts underway, the timing couldn't be better.
"The regulatory winds are at our back as well," he added, "with some of the things that have come out of the Legislature recently, with the passing of new air regulations for oil and gas...it certainly helps that people are a little more focused on making sure that methane emissions are decreased in Colorado."
But EcoVapor Recovery Systems is already looking beyond the borders of the Centennial State, according to Turner.
"We're really open at this point to evaluating other basins for expansion," he says. "We'd like to grow with other operators in Weld County first because that was our core area, but this is a technology that we think is applicable across the industry and we're looking forward to growing in other states."
One of those being North Dakota, with its booming Bakken oilfields.
It's safe to say ERS has come a long way from dad's garage.