While players in the oil and gas sector are in the business of producing molecules to power key functions of modern society and industry, they are also increasingly dependent on electrons to run their own operations. Electricity has an essential role in oil and gas operations, from powering pumps for extraction, compressors for processing, and a wide variety of other critical functions.
Electricity is particularly critical in liquefied natural gas (LNG) production, where it is used in the refrigeration cycle that cools natural gas to its liquid state at -260 °F, a process that consumes significant amounts of electricity to power compressors and pumps that circulate refrigerants and fuel through the system. In addition, oil refineries can use vast amounts of electricity on everything from distillation units to catalytic crackers to hydrogen production, not to mention the AI and machine learning applications increasingly being used to optimize these systems. Producers also rely on electricity to operate key systems on offshore platforms such as control systems, pumps, heating, lighting, and much more, with some high-spec rigs burning over 2,000 gallons of diesel per day, equivalent to megawatt-scale electricity demand.
Because it is a major feedstock for electricity production, the companies that produce LNG also have a significant role to play in efforts to meet skyrocketing electricity demand, particularly from data centers, which are getting bigger, denser, and more power-hungry than ever. The rapid emergence and growth of artificial intelligence, which requires far more electricity than traditional data centers, is driving much of this growth. Data center operators will take electricity however they can get it, including from gas generation plants. Interestingly, this creates a cyclical dynamic in the energy ecosystem—LNG production relies heavily on electricity to power its refrigeration systems, while many of the utility-scale power plants generating that electricity are themselves fueled by natural gas.
All this is creating a surge in the need for additional generation sources, expanded transmission capacity, and an overall increase in the need for electrical grid infrastructure to integrate these new power sources, interconnect data centers to the grid, and support the electrification of other energy-intensive industries such as semiconductor manufacturing.
Scarcity and supply chain challenges
Oil and gas operators across North America and beyond find it increasingly difficult to secure the electrical capacity needed to bring new projects online. As a result, energy-intensive industries are grappling with how to obtain the electricity they need, when they need it, to keep pace with demand and avoid costly delays.
These dynamics create intense competition for a limited supply of grid components, most notably transformers, but also switchgear, breakers, and other high-voltage equipment. Just as expectations are being placed on LNG companies to produce more, some of the equipment they need to support their operations is in short supply.
Innovative business models
Overcoming this scarcity requires more than just new equipment—it demands innovative business models and closer collaboration across the value chain.
Some producers have embraced the ‘bring your own energy’ model, an approach that enables O&G companies to meet their own electricity needs, limiting the impact of price volatility and ensuring an uninterrupted supply.
Traditional approaches, where each vendor offers a single puzzle piece, are no longer sufficient. Instead, success hinges on working with partners who can deliver integrated solutions and help navigate the complexities of grid connection. Oil and gas companies can accelerate project timelines and reduce risk by partnering with organizations that understand how to secure, manage, and optimize grid connections efficiently and quickly.
Some larger equipment vendors, such as Hitachi Energy, are redefining their role in bringing electricity supplies online by leveraging their broad portfolios to reduce risk and accelerate project timelines. Creative approaches—such as modular, easily deployed substation solutions—are gaining favor as alternatives to bespoke systems. In some cases, vendors also participate as equity partners to help spread risk.
More progressive electrical equipment OEMs are further transforming the landscape by consolidating their resources and offering innovative approaches. Highlights include grid connection as a service, energy hubs, and the prospect of vendors taking an equity stake—up to and including becoming active investment partners. These models enable producers to accelerate grid connection, limit capital outlay, and foster deeper collaboration across the value chain.
Conclusion
Ultimately, electrifying oil and gas operations in an era of scarcity is not just a technical challenge—it’s a collaborative one. Success depends on forging partnerships with those who understand the full spectrum of project needs, from automation to grid compliance. By embracing new business models and working closely with experienced partners with grid connection and electrical power distribution expertise, the industry can ensure reliable, timely access to the electricity that powers progress.
