Chesapeake venture aiming toward gas, away from OPEC

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, July 12 -- Chesapeake Energy Corp. has formed Chesapeake NG Ventures Corp. (CNGV) to invest in technology promoting the use of compressed natural gas, LNG, and gas-to-liquids fuels in the US.

CNGV’s investments are intended to help offset US demand of gasoline and diesel derived primarily from oil provided by members of the Organization of Petroleum Exporting Countries.

Chesapeake outlined plans on July 11 to redirect 1-2%/year of its forecasted drilling budget toward projects that will stimulate gas demand.

CNGV plans to invest at least $1 billion during 10 years, starting with investments of $150 million to Clean Energy Fuels Corp. and $155 million to Sundrop Fuels Inc. during 3 years.

Clean Energy Fuels, Seal Beach, Calif., is working to provide an LNG fueling network for trucks along US interstates. CNGV’s investment will underwrite 150 LNG truck-fueling stations, increasing by more than tenfold the number of US publicly accessible LNG fueling stations, Chesapeake said.

Sundrop Fuels, Louisville, Colo., is a privately held cellulosic biofuels company in which CNGV plans to acquire a 50% stake.

Aubrey K. McClendon, Chesapeake’s chief executive officer, said the company analyzed the US transportation system for 4 years to figure out how to stimulate widespread adoption of CNG, LNG, and GTL fuels.

He said the goal was “to create the best pathway to move our country away from dependence on OPEC oil and the resulting yearly transfer of more than $400 billion of American wealth to foreign countries, many of them often unfriendly to US interests.”

He outlined a three-pronged plan aimed at promoting greater US energy independence and enhanced national security during the next 10 years:

• Increase US onshore oil and NGL production of 8 million b/d by 3-4 million b/d by accelerated horizontal drilling and hydraulic fracturing to develop unconventional oil and NGL resources.

• Invest in publicly accessible CNG and LNG fueling stations so that vehicle manufacturers become confident to increase production of CNG and LNG vehicles. The investments also are intended to provide US businesses and consumers with a cheaper fuel option than current gasoline and diesel offerings.

• Deploy scalable GTL processes to convert gas into a room temperature, tank-ready, liquid fuel that can be blended with gasoline and diesel or used as a stand-alone replacement product.

McClendon said Chesapeake plans to accelerate converting all its 4,500 light-duty vehicles and 400 of its heavy-duty vehicles to run on CNG. He estimates a savings of $15-20 million/year.

Chesapeake also plans to convert at least 100 of its drilling rigs and all of its planned hydraulic fracturing equipment to run on LNG. By doing so, McClendon said, Chesapeake will cut its diesel fuel consumption by 350,000 gpd and save $230 million/year.

Contact Paula Dittrick at paulad@ogjonline.com.

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