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Utilities working to expedite power to Permian Basin oil and gas production

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Utilities working to expedite power to Permian Basin oil and gas production

Fast-growing demand for electricity in the Permian Basin in West Texas is creating challenges for electric generation and transmission projects, industry officials said, but grid planners, regulators and industry officials are working to expedite planning and construction, aiming to reduce large grid congestion costs.

During a Gulf Coast Power Association panel discussion Oct. 16, Permian Basin Petroleum Association Executive Vice President Stephen Robertson noted that the Permian Basin, where the first oil well was drilled in 1920, is now producing five times as much oil and gas as it did a decade ago.

On Oct. 15, DeAnn Walker, who chairs the Public Utility Commission of Texas, said that in her discussions with oil and gas producers in West Texas and the transmission and distribution utilities that serve the area, "it became very apparent to me that the two industries don't match up" in terms of the schedules needed to accomplish their work. Oil and gas project demands move much more quickly than power projects, she said.

"My goals for the rest of the year and 2020 … include getting services to the Permian Basin in a more timely fashion," Walker said. "That is now the economic driver in Texas, and we need to get service to them."

Ellen Buck, vice president for business and operations services at Oncor Electric Delivery Co. LLC, Texas' largest transmission and distribution utility, said the biggest challenge is "the difference in timing between oil and gas development and transmission development." Oncor is owned by Sempra Energy.

Johnny Carlock, power engineering services supervisor at Pioneer Natural Resources Co., said the lack of transmission and resulting congestion sometimes result in a large transmission congestion bill that "really disrupts an operation … with some serious sticker shock."

"A lot of that congestion was made worse because utilities were trying to fix those problems while they were occurring," Woody Rickerson, vice president for grid planning and operations at the Electric Reliability Council of Texas Inc., said.

Load forecasting at issue

Carlock said grid planners "have a hard time forecasting our load."

Oil and gas developers have firm information about their power needs "24 months at the outside" into the future, but by the time wires companies can respond by providing service, typically in four to six years, more load has appeared, and "there's not enough capacity."

Rickerson said it is generally a four- to five-year process from the time a need is identified to when a solution is completed to serve the load.

Not able to wait for a grid solution, Carlock said that last year, Pioneer set up a temporary generator to serve a site, but, "We don't want to put a capital expense into a power generator that we are not forced to."

ERCOT is working to shorten the process, eliminating studies that do not need to be done more than once and "being more creative in the load forecasting."

Carlock said planners may be looking at the wrong metrics to determine how much load is coming.

"You can't always look at historical models," he said.

For example, the drilling rig count may be decreasing, but production may be increasing, because the region has a number of drilled but uncompleted wells, Carlock said.

Similarly, if oil and gas production declines temporarily, power demand may remain strong because producers must still pump large amounts of water, he added.

And as oil output decreases in a producing well, a facility is likely to produce more natural gas, for which power is needed for gas processing facilities, he said, adding, "For our purposes, that's a 50-MW load."

Oncor's Buck said the vastness of the territory involved is another factor that impacts wires companies' response to West Texas power demand growth.

"ERCOT's Far West weather zone is about 6% of the energy in ERCOT, but a significantly larger amount of real estate," she said.

Some Permian producers are not waiting for utility solutions and are turning to private parties for infrastructure such as substations.

Competing real estate interests

On the other hand, limits on real estate can slow development of generation near West Texas loads, said Spivey Paup, development director at solar developer Recurrent Energy LLC, a subsidiary of Canadian Solar Inc.

"There's a ton of solar projects in West Texas, in particular, trying to get built," Paup said. "You want to take a piece of land and blanket it with solar panels, but there's not a square foot of land that is not either being operated on [by oil and gas companies] or at least eligible to be operated on."

These limitations impede the ability of developers to get title insurance for the surface area being considered for solar projects, Paup said. "It can be a pretty big challenge in some places."

Nevertheless, solar projects can be established in fairly quick order — about three years, in all — and Paup advocated its ability to energize the Permian Basin.

"No generation is perfect," Paup said. "Solar has its issues. … [But] all of the generation coming online is going to be renewable. I would submit that energy storage is going to be a big part of that."

Mark Watson is a reporter for S&P Global Platts. S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.