The Most Sensible Trend in Natural Gas Drilling

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The natural gas industry has always seemed to get a bad rap when it comes to their environmental sensibilities or their perceived lack thereof.  Whether it’s the chemicals in the fracking fluid or the issues with ground water, the industry’s environmental record has always been questioned.  Operators have countered by touting the economic and environmental benefits of using natural gas.  This is what makes it all the more refreshing to now see the industry is finally practicing what they preach, so to speak, by using it to fuel their own drilling operations. 

Contract driller Baker Hughes (NYSE: BHI) for example has converted a fleet of its biggest gas guzzlers to be run at least in part on natural gas.  The company is converting pressure pumps into biofuel units that run on both natural gas and diesel which will allow the company to cut their diesel use by up to 65% while also taking advantage of lower natural gas prices.

Of course it should be noted that this is more of an economic move than one with an eye to the environment.  These pressure pumps which are used to force millions of gallons of fluid into the shale is a very fuel intensive process and one which consumes 1.2 billion gallons of diesel annually across the industry.  With diesel more than $5 a gallon in some areas there is quite the cost savings without sacrificing any operational power.

Still according to Baker Hughes, “the environmental benefits are significant. We’re reducing emissions from the engines driving the stimulation pumps and less fuel is needed to keep our pumps going.”  That’s why when companies like EQT (NYSE: EQT) say that they “want to be a leader in reducing the environmental impacts related to drilling” it makes a lot of sense to convert to natural gas rigs as they’re now doing.  When compared to diesel these rigs emit 20 percent to 30 percent less carbon dioxide which when spread industry wide is a substantial environmental benefit. 

Several other drillers are converting with National Fuel Gas (NYSE: NFG) announcing that subsidiary Seneca Resources will be the first in the Marcellus to operate 100 percent dedicated liquefied natural gas fueled drilling rigs.  The company cited that certain emissions could be reduced by as much as 95% while the rigs operated much quieter, were virtually odorless and could save the company as much as 65% in fuel costs. 

Others such as CONSOL Energy (NYSE: CNX) are running the dual-fuel systems for now as “operators are hesitant to switch to 100 percent natural gas because the availability of the fuel is questionable” according to Alan Grosse of GE (NYSE: GE) Energy which manufactures gas generators.  That’s because rigs like the one operated by Seneca run on LNG which currently needs to be transported to the rig site.  The company does however envision a future where rigs will be connected to natural gas from nearby producing sites but that’s still a longer-term project.

GE, the company behind the gas engines used in the Seneca rigs is providing them with a fuel-flexible Jenbacher gas engine which they believe is a model for other operators in the Marcellus Shale region.  The engine actually has the capability to run on non-pipeline gases such as landfill gas which gives you a glimpse of its future in the industry. 

This trend toward using natural gas in the drilling process is not just sensible but is long overdue.  As Seneca's Resources manager for stakeholder relations, Rob Boulware, put it, "We're bringing this product to market. We need to use this product as a country, and we want to set an example as Seneca Resources for using this product.”  I couldn’t have said it better myself.

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