* Apache converting first rig to run on gas
* Chesapeake sees 40 conversions in 2012
* Move saves money, cuts emissions
By Anna Driver
HOUSTON, April 11 North American oil and gas
companies are trying to take the sting out of low natural gas
prices by using it instead of costlier diesel fuel to drive
their drilling rigs.
Oilfield technology such as horizontal drilling and
hydraulic fracturing have unlocked record supplies of natural
gas in North America, pushing prices to a 10-year low and
cutting profits. The oversupply has prompted gas producers to
actively promote the fuel as a low-cost, cleaner burning means
of fueling vehicles and other equipment.
Apache Corp, the largest U.S. company focused solely
on oil and gas exploration and production, is in the process of
converting its first rig to run on power generated by liquefied
natural gas (LNG). Canada's Encana Corp's already has
15 of its more than 40 rigs driven by gas, and plans to convert
"What we need to do is increase the amount of natural gas
demand in this country," Steve Farris, chief executive of
Apache, said in a recent i n terview in New Orleans. "From an
economic standpoint, it's a no brainer."
Two years worth of fuel savings can cover the cost of
conversion, according to Encana.
U.S. natural gas producers including Chesapeake Energy Corp
and Apache have long touted compressed natural gas as a fuel for
truck and vehicle fleets. Now, more energy companies are looking
to natural gas as a means of powering their drilling rigs.
"We've seen interest just kind of explode in the last six to
eight months," said Ron Bertasi, chief executive officer of
Prometheus Energy Group Inc, which provides LNG and services to
energy companies to run drilling rigs.
So far Prometheus, owned by Cargill Inc backed-Black River
Asset Management and Royal Dutch Shell's technology fund,
service about 10 rigs that have been converted to run on natural
gas. Inquiries are pouring in, Bertasi said.
Prometheus, which Bertasi said was first and is so far alone
with its technology, has five customers and opened an office in
Houston to grow its energy business.
By switching to natural gas, companies can reduce fuel bills
and cut greenhouse gas emissions by up to 20 percent, according
to Encana and Prometheus. Natural-gas generators are also less
noisy than diesel engines.
Prometheus completed its first conversion only 18 months
ago, so the business is not yet big enough to service all the
shale basins in North America because the LNG is delivered by
truck. The company so far has natural gas rigs in south Texas,
Louisiana and Rocky Mountain states and is working to expand in
other areas, Bertasi said.
And because it costs $1 million to $1.5 million to convert a
rig, smaller exploration companies might find the process too
costly in the current environment where natural gas prices are
Chesapeake Energy Corp, the most active U.S.
driller, is working to convert its rig fleet to run on diesel
natural gas (DNG). Chesapeake aims to have more than 40 rigs
running on DNG by the end of the year.
"To our knowledge, this will by far be the largest rig fleet
utilizing natural gas," Kent Wilkinson, vice president of
Chesapeake Natural Gas Ventures, said.
Anadarko Petroleum Corp is also looking into
powering its drilling rigs with natural gas and is converting
its vehicle fleet to run on gas, the company said.
There was an average of about 1,979 rigs drilling for oil
and gas in March, according to data from Baker Hughes Inc.
EVERY BIT HELPS
U.S. natural gas supplies are so vast, converting drilling
rigs to run on LNG is not likely to make a huge dent in supply
Still, oil and gas companies are not sitting idly by.
Andrew Coleman, an oil and gas analyst with Raymond James in
Houston said the cost savings are a big benefit of using natural
gas to power drilling and wide-scale adoption of LNG in the
oilfield may be meaningful.
"The biggest consumer of power in West Texas are the oil and
gas companies," Coleman said. "To the extent that they can use
natural gas from the well head, it will certainly help."
Encana operates its gas-fueled rigs in the Haynesville shale
region of Louisiana and Horn River and Jean Marie regions of
British Columbia, Encana spokeswoman Carol Howes said.
Some were fueled by field gas and others by trucked-in LNG.
Oilfield services companies are also eying the use of LNG to
fuel their massive hydraulic fracturing fleets.
Halliburton Co and Baker Hughes Inc are
owners of some of the largest fleets of trucks in the United
States, and also leading providers of the hydraulic fracturing
technology that has produced the North American gas glut.
Halliburton said it was "exploring all options" on how best
to fuel its truck fleet. Baker has a small test program in
Oklahoma where it has converted some of its light-duty vehicles
to run on natural gas.
"As natural gas infrastructure develops, we will look at
similar pilot programs in other areas," a Baker Hughes