Industry urged to use natural gas in operations

Efforts to boost the use of natural gas in the US should begin with the industry producing the fuel, according an executive of a large independent gas producer.

“Is there anything that can do more for our economy and the environment than natural gas?” asked Mike Bahorich, chief technology officer of Apache Corp. at the Decision Strategies Oilfield Breakfast Forum Mar. 22. “I doubt it.”

But Bahorich said less than 5% of US drilling rigs are configured to use natural gas for power, and of those rigs not all are using gas because of delivery problems. Diesel powers most rigs. Among frac fleets, the Apache executive estimated gas use is even lower: less than 1%.

He said a service company recently told Apache managers that gas use in fracing would be applicable only in pad locations. But a month later the firm returned with an invention that accommodated gas use.

By laying gathering lines ahead of drilling in areas where it’s confident it will have gas production, Apache is able to displace diesel with gas early in a drilling program. It’s also beginning to use compressed natural gas and LNG in frac jobs. Using field gas for drilling, Bahorich said, the company saves about $125,000/well.

Yet the continued dominance of diesel as a rig fuel indicates the industry isn’t pursuing the savings or other benefits.

“Clearly, we haven’t been thinking about this,” Bahorich said.

Another speaker at the forum predicted “compression” of the spread between US and European price markers for crude oil. A large discount of West Texas Intermediate crude to Brent has skewed the market in response to transportation bottlenecks at Cushing, Okla., the pricing hub for WTI.

The differential began this year at $17/bbl and is about $15/bbl now, said William Herbert, managing director and cohead of securities at Simmons & Co. International. As transportation capacity increases between Cushing and the Gulf Coast, he predicted, the price spread will narrow to $12/bbl by yearend.

Herbert said oil and gas prices generally are tracking Simmons predictions for the year: $95-115/bbl for Brent, $85-100/bbl for WTI, and $3.50-4.50/Mcf for US natural gas.

Contact Bob Tippee at bobt@ogjonline.com.

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