As volatile market conditions buffet oil and gas exploration and production (E&P) companies, the entire industry is searching for ways to manage operating costs and maintain margins. Investment capital to build more efficient operating infrastructure is in short supply, especially for smaller producers.
For many years, small E&P companies dominated holdings throughout the various shale plays. Because of their small and nimble nature, these E&Ps often have not had the capital to invest in equipment and infrastructure that would lower their lease operating expenses (LOE). Today, capital budgets are being slashed even more to keep a handle on operating expenses and to maintain a healthy cash flow.
Organized Chaos
Operating a network of fracking wells in shale plays can be challenging and complicated. Wellfields can be congested with the logistics and trucking required for transport of oil, fuel and wastewater in addition to all the resources required for patch-level-quality maintenance and ongoing repairs of infrastructure that frequently could be described as shoddy.
As larger E&P companies have moved into these spaces to stake their claims and buy capped well assets in good shale-play acreage, capital investments in pipelines and processing facilities have been made, allowing product and wastewater to be moved in pipes instead of hauling by tanker trucks. This has resulted in reduced congestion and pollution from truck traffic as well as reduced flaring and waste of natural gas byproduct.
However, there are offsets for these facility infrastructure improvements, namely in overall increases in energy consumed by wellfield equipment. This increased load is often met by deploying temporary power fixes that often become permanent. This approach is often considered a cost of doing business, but it comes with high LOE, delivers less-than-optimal reliability, and results in negative environmental impacts.
Hidden Opportunities
Energy-related costs for oil and gas production and delivery to midstream refiners typically rank among the top five LOE line items. These costs are driven mainly by utilization of on-site generation and other operations equipment fueled primarily by diesel or natural gas.
Converting equipment and processes to be driven by electrical power and improving electrical infrastructure can represent a hidden opportunity for significant cost savings.
Properly planned electrical distribution infrastructure can do more than support an increase in energy consumption. It can also reduce greenhouse gas (GHG) emissions, improve resiliency and lower operational risks.
Supporting Load Growth
A power distribution system robust enough to support load growth and maintain high reliability and redundancy requires front-end planning and investment. Tacking on circuit after circuit on the fly as an oilfield develops creates compounding reliability problems with electrical infrastructure.
Front-end planning and investment creates many benefits, including a reduction in GHG emissions, less deferred production due to outages, reduction in operations costs, a simplification of logistical support, and real-time data collection and response.
Within specific U.S. geographic regions, the generation mix of resources deployed by utilities and other power providers can cause variations of GHG emitted per kilowatt-hour (KWh). But no matter the emissions level, they still are far less than the GHG/kWh produced by a fleet of fossil fuel-based generators deployed on-site at well pads. They are simply not competitive with GHG emissions per kWh produced by the electric grid.
One large E&P firm operating in the Permian Basin was able to reduce annual GHG emissions by over 150 metric tons one year after an investment to interconnect with utility power, supplying an electric distribution network for processing facilities and individual oil wells. As this E&P company continues to build out its wood-pole power distribution network, more oil wells will be connected to the grid, taking an increasing number of on-site fossil-fueled generators offline and further reducing aggregate GHG emissions. In addition, costs associated with annual emissions permitting are being reduced as fossil fuel-driven machines get replaced with electric fracking (E-Fracs) and electric submersible pumps. It may seem counterintuitive, but as electric load increases, GHG emissions fall.
Reduce Your Outages
Outages of any kind cause deferred production. Planning for a reliable and redundant power supply will reduce both the frequency and duration of outages. Modern power distribution system monitoring technology allows for rapid fault location identification, thus improving technician response times and cutting the time a well may be out of service.
Automation technology, smart switches and reclosers built into a properly designed system reduce outage frequency as power can be redirected to keep oilfield loads energized from alternate sources. Smart devices and data collection in the power system allow for fault tracking, trend analysis and predicting potential impending failures to make data-driven improvements along the way.
Highly reliable grid power also reduces maintenance costs for localized generators that must repeatedly be taken offline. As these generators are replaced by grid power, monthly lease expenses also go down.
Another hidden benefit: The natural gas that is frequently diverted from the wellfield for inefficient use as a fuel source for on-site power generators can be transformed into a revenue stream. Logistical costs associated with resupply of diesel fuel for other rotating oilfield equipment also disappear.
Smart Planning
The prospect of electrifying the oilfield should boil down to a straightforward cost-benefit calculation. Each production area is unique and options to interconnect with the electrical grid can vary greatly. But it still is often the case that the front-end capital costs of designing and building a robust and reliable power distribution system can pay big dividends over the life cycle of the wellfield.
There is no shortage of horror stories around developing shale plays in which poorly designed electric infrastructure caused deferred production, safety hazards to the public and environment, and endless quick-fix costs for a substandard system.
E&P players who wisely plan for and invest in good electric infrastructure continue to enjoy a steady and reliable supply of utility power energizing their oilfields, reduced GHG emissions, and lower operations costs than their competitors.
Electrification can help manage lease operating costs.