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Growth in electric-fracking fleets stunted by tight producer budgets

Oilfield services companies are considering whether spending to convert legacy hydraulic-fracturing fleets to run on electricity makes good financial sense as producers slowly embrace the technology.

EOG Resources Inc. CEO William Thomas said during an Aug 2 earnings call that the company wants to lead the industry on environmental, social and governance issues. The company has several new initiatives that reduce its environmental footprint while lowering costs and earning strong returns, Thomas said.

Oil and natural gas producers are increasingly using electric-fracking technology as they work to lessen the impact of oil and gas production on the environment. Electric-fracking cuts down on the emissions, noise pollution and silica dust buildup associated with hydraulic fracturing, compared to conventional fleets that typically operate on diesel fuel.

EOG is the first mover and possibly the largest user of electric-powered fracking fleets, Thomas said.

"Our experience with this new technology has been very positive. We estimate electric fleets save up to $200,000 per well and reduce combustion emissions for completion operations by 35% to 40%," COO Lloyd Helms said.

SNL Image

Electric-fracturing fleets are slowly replacing conventional diesel-driven fleets as operators increasingly embrace the technology.
Source: Associated Press

CNX Resources Corp., faced with the challenge around environmental stewardship, is also turning to electric-fracturing fleets. In its 2018 corporate responsibility report released in July, the company outlined a three-year agreement with Evolution Well Services LLC for a 100% electric-fracturing fleet.

As Halliburton Co. plans its 2020 capital budget, the company is considering adding electric fracking to its fleet offering, President and CEO Jeff Miller said.

However, capital scarcity is driving decision-making behaviors across the industry, Miller said during a second-quarter earnings call, and Halliburton will also act with capital spending in mind.

Miller said the frack-fleet space is already oversupplied, so when Halliburton considers its choices around fleet replenishment and replacement at the end of each year, capital spending is at the forefront of the decision.

Halliburton knows a lot about electric-fracking fleets. The company has been testing them and using them in the field "for some time," Miller said. While he anticipates an evolution around electric fracking, "we don't see customers willing to pay more for that today," he said. "So that's kind of how we frame electric [fracking] right now."

Emanuel Ozuna Vargas, IHS Markit rig analyst, said there are two options available for companies considering natural gas usage for hydraulic fracturing.

In addition to electric fracking, which uses gas as a feedstock for generation, oilfield services companies may also choose to convert diesel fleets to run on both diesel and natural gas simultaneously, Ozuna Vargas said in a July 29 email.

Dual-fuel fleets offer both cost-saving and emissions reduction. Well-completion company FTS International Inc. said in 2018 that a typical diesel engine on a hydraulic fracturing unit will burn 90 gallons of diesel fuel per hour. Using dual-fuel technology and substituting 70% of diesel fuel with natural gas could reduce diesel fuel usage by 63 gallons per hour. Approximately 132 cubic feet of natural gas is required to maintain the same power as a diesel engine that burns 90 gallons of diesel fuel, FTS said.

Converting to a dual-fuel fleet would require retrofits to a company's fleet, which FTS estimated could cost $2 million per fleet, Ozuna Vargas said.

On the other hand, electric-fracking fleets consist of natural gas-powered turbines to provide electricity to run fracking pumps.

This electric-fracking option often requires more expensive equipment, Ozuna Vargas said. ProPetro Holding Corp. recently listed the cost of its fully deployed electric fracturing fleet at about $60 million, he said.

Both options would produce lower emissions, improve operational efficiency and safety, reduce noise and cut fuel costs by sourcing feedstock from field gas, the IHS analyst said.

He said that despite the fuel savings opportunities and the resulting operator interest in both dual-fuel and electric-fracking fleets, most fleets continue to run on diesel fuel. According to estimates, natural gas fuel capable fleets make up only about 5% to 10% of the 25 million high-horsepower hydraulic-fracturing market, Ozuna Vargas said.

Ozuna Vargas said the biggest challenge to either the dual-fuel fleet or electric-fracking configurations will be the large oversupply of hydraulic-fracturing equipment now on the market. Given the upfront costs of either choice, service companies will have difficulty justifying the added expenses faced with low pricing power.