The Impact of Natural Gas on Energy Production

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The Impact of Natural Gas on Energy Production

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Natural Gas Production on the Rise

The increase in domestic natural gas production has caused underground storage inventories to hit the mark of 3.929 Tcf (trillion cubic feet), and prices to hit a 10-year lowest mark of $1.82 /MMBtu (per million Btu). It is not as unthinkable as it once was to consider natural gas as a competitor of coal, oil and diesel. Many industries are looking for natural gas powered alternatives for their operations, which have historically been run on fossil fuels.

Natural Gas for Energy Production

Natural gas may be used either as field gas or liquefied natural gas (LNG).

Field gas is acquired through in-field piping and requires some treatment before finally combusting in the engines. Use of field gas obtained from the wellhead offers economies although steady supplies can vary.

Liquefied Natural Gas (LNG) has been converted to liquid form so it can be transported and stored at -260 degrees Fahrenheit in insulated vessels.

Machinery to Support Natural Gas Usage

Engine manufacturers, like GE and Caterpillar, have introduced engines compatible with natural gas as fuel. These include natural gas engines, which use spark ignition mechanisms, and dual fuel engines, which employ compression mechanism for ignition and can run on both natural gas and diesel.

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Natural Gas Use Decrease the Cost of Energy Production?

While the machinery and alternatives are all in place, the real factor behind the decision about whether or not to use natural gas in energy production operations is the cost. The case of Canada’s largest natural-gas producer, Encana Corp. illustrates the potential benefits of converting to natural gas. In 2012, the company saved 47% fuel cost (approximately $830,000) just by switching out their diesel powered machinery with natural gas powered counterparts at a shale gas drilling facility in Haynesville formation, located at the Texas-Louisiana border.

Today Encana is running 30% of their pickup trucks and half of their drilling rigs on natural gas, and is saving $200,000 to $1.5 million per annum. According to Doug Suttles, the Chief executive officer of Encana; if the company uses natural gas supplied directly from well, the annual fuel cost savings can be as high as $1 million – $1.5 million. Whereas the savings could be between $200,000 and $250,000 if liquefied natural gas (LNG) is transported and used for the operations.

In addition to the fuel cost savings, the company is also reducing their greenhouse gas emissions, an added benefit of the transition from diesel to natural gas. The U.S. Environmental Protection Agency reports that natural gas emits 20% – 30% less carbon dioxide than oil-based fuels and has a fraction of the emissions of nitrogen oxides, sulfur oxides and particulate matter, which are linked to respiratory health problems such as asthma.

Replacing diesel powered equipment with natural gas driven counterparts is particularly cost effective when the natural gas source is field gas. Field gas, obtained from wellhead directly, eliminates the need for transportation of fuel from the production facility to rig site. For Encana, using conditioned wellhead natural gas from their Jonah Field located in Wyoming, saved the company $115,040 in fuel cost per well and allowed them to keep diesel as a backup fuel.

There are several other companies working in the oil and gas sector adopting a similar approach. For example, Antero Resources and Patterson-UTI Drilling have installed General Electric’s 100% natural gas fired Waukesha engine, and are enjoying enormous fuel cost savings.

These success stories prove the use of natural gas as a fuel for the energy production industry can significantly reduce production costs, while at the same time cut greenhouse gas emissions.