US Shale faces challenges in electrifying oilfield operations

Costs and access to the grid are the top hurdles U.S. drillers and oil producers face as they seek to electrify operations, the latest energy survey from the Dallas Fed showed this week.

More than half of the exploration and production firms operating in Texas, northern Louisiana and southern New Mexico have either electrified or plan to electrify all or part of their oilfield operations.

Service firms are less likely to electrify compared to small and large E&P companies, according to the Dallas Fed’s quarterly survey of executives.

While most E&P firms are looking to electrify at least some of their oilfield operations, grid access, grid stability and the high costs of going electric have emerged as the main challenges for US operators.

Electrification reduces diesel consumption and emissions from oilfield operations, as well as noise and pollution from fracking rigs and equipment.

But the cost of going electric, lead times for equipment, and uncertainties about future grid access and grid stability are the primary challenges for the industry to fully embrace electrified oilfield operations.

Currently, 18% of executives said in the Dallas Fed Energy Survey that their company’s oilfield operations are already fully electrified. Another 6% of executives said they are looking to fully electrify their company’s oilfield operations, and another 31% said they are looking to partially electrify operations. The remaining 45% said they did not intend to do so.

Related: US Oil Drilling Declines: Baker Hughes

Small E&P firms with crude oil production of less than 10,000 barrels per day have more electrified operations than large firms and service companies, with 28% of small firms already fully electrified compared to 9% of service firms of oil and gas support and 6% of large E&P firms. Service companies are also slightly more likely than small and large companies to indicate they have no plans to electrify their oilfield operations, the survey found.

Among firms looking to electrify or already electrified, 29% of executives at Permian-focused companies cited uncertainty about future grid access as the top challenge they see in electrification. Another 17% say uncertainty about the future stability of the network is their main concern.

Firms adopting electrification with operations primarily outside the Permian cited cost as the main obstacle, with 30% of executives, followed by 26% who see lead times for equipment as the main challenge.

“Too expensive” is the top challenge of 48% of business executives in Texas, New Mexico and Louisiana who do not intend to electrify their operations. It is followed by concerns about network access and network stability.

“Most of our rigs are capable of running off the grid, but the logistical (regulatory and permitting) hurdles our customers have to go through to bring power to the rig are formidable and expensive,” said an executive at a utility firm in comments. to the survey questions.

Another executive from a service firm commented: “To add the extra costs to electrify equipment, the profits have to be there through higher prices or lower costs. This is not the case in our segment”.

A third manager of an oilfield service company noted that their company’s operations are far too mobile and fast to install the necessary electrical infrastructure. What’s more, suppliers don’t currently make electric options for many of the machine types, the executive added.

Electrification can help companies cut emissions from production facilities by up to 86 percent by electrifying rigs and rigs to run on renewable electricity or natural gas that would otherwise be burned, Rystad Energy said in a report last week .

Even partial electrification will significantly reduce emissions, according to the energy research and information company.

“As the world grapples with the pressing issue of climate change, the oil and gas industry is under increasing pressure to minimize its carbon footprint and align its practices with global sustainability goals” , said Palzor Shenga, vice president of upstream research with Rystad Energy.

“Where possible and economically viable, electrification has great potential to reduce industry emissions while maintaining production.”

By Tsvetana Paraskova for Oilprice.com

More top reads from Oilprice.com