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PetroScout Published by Enverus

With an abundance of cheap natural gas being produced across the U.S., oil & gas operators are considering utilizing the clean-burning fuel as a fuel source for hydraulic fracking fleets. Electric frac, or e-frac, fleets use electric-driven pumps that are most commonly powered by natural gas turbine generating units, according to Baker Hughes CEO, Lorenzo Simonelli.

E-frac units have a number of benefits compared to diesel-powered setups. Fuel costs are reduced substantially, with costs per well starting at $100,000. E-frac is quieter and has significantly lower combustion emissions, with reductions of 35%-40%, according to EOG. E-frac is also considered by some to be more reliable and have a longer field life than conventional units.

The current trend of improving infield efficiencies (more frac stages per day), has reduced the lifespan of frac equipment and thus more durable equipment is needed, according to U.S. Well Services. “We believe electric fleets are better suited to withstand harsh operating conditions and rising service intensity. This should result in lower cost of ownership as well as a longer equipment useful life,” CEO, Joel Broussard said.

U.S. Well Services aims to become a leader in the space and is shifting its equipment portfolio over time toward electric frac fleets. It is also maintaining its well-utilized conventional fleet.

The company believes demand for the e-frac units will far exceed supply, resulting in fully utilized fleets. Given the demand, customers have been willing to sign longer-term contracts. For example, U.S. Well Services will deploy a fleet for Shell in 2020 under a two-year contract. Other providers of e-frac spreads include Baker Hughes and Evolution Well Services.

On the operator side, EOG has been the largest adopter of e-frac technology. The company piloted e-frac in the Eagle Ford in 2018 with great success and is now also using it in the Delaware Basin. About 25% of the frac fleet EOG utilizes is electric, and the company estimates it has contracted ~30% of the available units on the market.

“As far as the e-fracking goes, we got into the idea of utilizing the electric frac fleets mainly because we’re attracted by the efficiency gains, as well as the cost reduction,” EOG COO, Lloyd Helms said on an Aug. 2 conference call. “The efficiency gains is what really we view as being sustainable to help lower our cost long term. And that has continued to get better with continued use. We’ve got four of those frac fleets operating today in the Eagle Ford and the Delaware Basin. And we’re always looking for ways to continue to utilize our infrastructure to enable that to be spread into other plays. So, I think as you look forward, we will look for opportunities to continue to put those in new plays.

EOG estimates cost savings at around $200,000 per well, primarily on the fuel side. It is also considering utilizing solar panels to generate electricity for natural gas compression.

Also in the Permian, Apache is trialing an electric fleet. As of Aug. 1, it had fracked 11 wells on four different pads with the fleet. On a single-well basis, the company realized more than $250,000 in diesel savings and a 90% reduction in emissions. EP Energy is also using an e-frac fleet in the play.

A number of large public operators in Appalachia have embraced e-frac, including Range Resources and CNX Resources. CNX highlighted its contract with Evolution Well Services in a Q3 presentation. The company signed a three-year deal for natural gas-powered, disruptive frac technology. The Evolution pads compared to conventional pads have a 60% reduced footprint, are 25% quieter, have less truck traffic, and eliminate the dangers of hot fueling.

SRC Energy is using the technology in the DJ Basin. The company says that in terms of efficiency, the e-pump seemed to last a little longer and create a subtle increase in efficiency. The company is currently using compressed natural gas, so it is not experiencing the pronounced fuel savings as that of operators who are using their own natural gas. SRC is still in the evaluation phase and has not decided if it will use e-frac in 2020. Should it move forward and invest in such a setup, using its own natural gas would reduce some of the natural gas processing needs on its operations in a region where natural gas processing is currently underbuilt.

Not everyone is doing it though. SM Energy has opted out. “We talked about electric motors on the frac,” CEO, Javan Ottoson said on a June 10 conference call. “In order to do that, you really have to have an established electrical grid or you’ve got to have a way to burn gas to generate power, and the liquid-rich gas that we make on location is not amenable to that. Frankly, we bid electric fracs against standard diesel, big frac engines in South Texas and they were more expensive…When you’re out in the middle of South Texas or in the Midland Basin where power is, frankly, we’ve got a lot of generators running because the power companies can’t keep up with us anyway, electric frac spreads really don’t make a lot of sense.”

Pioneer Natural Resources CEO, Scott Sheffield said that while he’s watching the technology evolve, it’s currently expensive. “I think you’ll definitely see savings from switching…to gas from diesel, as cheap as natural gas is. Now the question I don’t know, is the cost of the entire chain by switching to an electric frac fleet. I think that those costs will have to come down to make it economical,” Sheffield said at a Sept. 4 conference.

Not all oilfield services companies currently want to be in the electric frac business either. Halliburton has tested the technology but doesn’t want to promote it since the major costs are incurred by the service firm, not the customer. Patterson-UTI has resisted. “If we want to do e-frac, we can do e-frac. But I’ll tell you today that for us, the math just doesn’t work. The higher capital cost, building extra capacity into an industry that already has plenty of capacity just doesn’t make sense to us,” Patterson-UTI CEO, William Hendricks said Sept. 3.

“I think we’ve always said from the e-frac standpoint, it’s a technology we continue to keep an eye on,” Liberty Oilfield Services President, Ron Gusek said during a May 1 earnings call. “And I think when we see the right set of circumstances come together that makes sense for us, we will be prepared to roll out an electric frac fleet. But at this point in time, just given what we see the trade-offs as, I think we still feel we’re far better served by running dual fuel.”

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Erin Faulkner joined Enervus in 2018 through the company’s acquisition of PLS. She is an editor in the Operator Intelligence division and focuses on U.S. upstream activity. Erin holds a master's degree in Research Design and Analysis from Creighton University.