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Goldman: Go Long On Fracking

Goldman Sachs is advising its…

Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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Electric Fracking Could Take Over The Permian

Shale production in West Texas continues to boom--so much so that shale oil and gas producers in the Permian Basin have more than they know what to do with. As production continues to outpace the expansion of sorely needed pipeline infrastructure, local operators in the Permian are letting approximately 104 billion cubic feet of natural gas go to waste each year by flaring, what is essentially just burning the gas away, instead of putting it on market.

For many producers in the Permian, this has led to diminishing profits. One such company is Houston-based oilfield service company Baker Hughes. The company’s first quarter profit also took a nosedive, clocking in at $32 million--less than half of its profits for the same period a year earlier, when Baker Hughes reported a profit of $70 million. On top of this major decline in profits, last month the company “ reported negative free cash flow for the first quarter at a time energy investors have been pushing companies to aggressively shore up capital for dividends and buybacks, sending its shares down as much as 8.5 percent” according to Reuters.

However, despite these dismal numbers, things are looking up for Baker Hughes. CEO Lorenzo Simonelli told investors in a call on Tuesday that he sees all of the burned off natural gas wasted by his company and so many others as a byproduct of their oil drilling as a major business opportunity. The company is debuting a new, cutting-edge technology that will harness this otherwise wasted gas to power their hydraulic fracturing equipment in the Permian Basin in West Texas.

Simonelli announced to investors this week that his company will be forging a new path in fracking by introducing a revolutionary fleet of “electric frack” turbines that will “use excess natural gas from a drilling site to power hydraulic fracturing equipment — reducing flaring, carbon dioxide emissions, people and equipment in remote locations” according to reporting by the Houston Chronicle. During a Tuesday call with investors Simonelli characterized the new strategy as an across-the-board win for their customer base, saying, “We’re solving some of our customers’ toughest challenges such as logistics, power and reducing flare gas emissions with products from our portfolio.” Related: Rosneft Sees No Oil Deficit Looming As Iran Sanction Waivers End

One of these logistical sticking points concerns the high volumes of diesel required to power hydraulic fracking rigs. “Electric frack enables the switch from diesel-driven to electrical-driven pumps powered by modular gas turbine generating units,” Simonelli told investors on this week’s call. “This alleviates several limiting factors for the operator and the pressure pumping company such as diesel truck logistics, excess gas handling, carbon emissions and the reliability of the pressure pumping operation.”

According to the Baker Hughes’ research as reported by the Houston Chronicle, most standard hydraulic fracturing fleets are powered with diesel engines mounted on trailers. Each of these fleets--an estimated 500 approximately, spread across shale basins in the United States and Canada--use up over 7 million gallons of diesel each year, supplied by 700,000 tanker truck loads which have to be transported to the often-remote shale basins, resulting in an average 70,000 metric tons of carbon dioxide emissions. This poses a major problem, not just environmentally, but all for Baker Hughes specifically, seeing as the company has pledged to halve their carbon dioxide emissions by 2030 and achieve the even loftier goal net-zero carbon dioxide emissions by the year 2050.

These new “electric frack” turbines are a good start. The approximately 500 traditional diesel-powered hydraulic fracking fleets scattered across the U.S. and Canada consume about 20 million horsepower of energy altogether according to calculations by Baker Hughes. This means that there is a massive market--about 15 gigawatts--for electricity generated by using the new gas-fired turbines. Instead of adding new carbon emissions these turbines will be powered with gas that is currently being burned off anyway instead of adding diesel emissions on top of the carbon dioxide from those flares.

To date, eight of these groundbreaking “electric frack” fleets have been deployed in the Permian Basin, but if they are as successful as Baker Hughes seems to think they will be, we can expect a lot more in a hurry.

By Haley Zaremba for Oilprice.com

 

 




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Leave a comment
  • Bob on May 05 2019 said:
    Mistake in this article, EACH rig uses 7 mln Galina a year!
  • RICHARD RINGGOLD on May 05 2019 said:
    Just like pipelines, large gas turbines do not appear overnight. This is just another bottleneck not planned for.
  • John Smith on May 06 2019 said:
    "... use up over 7 million gallons of diesel each year, supplied by 700,000 tanker truck loads"

    This means each tanker truck load is 10 gallons. Maybe they could improve efficiency by using larger tankers?
  • Bill Simpson on May 08 2019 said:
    Brilliant idea which will save a lot of oil and reduce pollution. North Dakota is probably next, if they can keep the liquids in the gas from freezing in the extremely cold winter temperatures.
    If the turbines can handle the fuels mix, it could go worldwide for fracking fast.

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