[Editor's note: This story first appeared in the 2020 Hydraulic Fracturing Techbook. View the full supplement here.]
Historically, the oil and gas industry has been slow to embrace change and modernization. It is understandable—commitment to safety is the bedrock of the industry. With workers exposed to a range of risks every day, safety is deeply embedded in the industry’s culture. But with oil prices battered by a global pandemic, there is an undeniable mindset shift happening.
Instead of saying, “This is the way we’ve always done it,” operators are asking, “How can we do this better?”
This new outlook is broadening minds to what is possible in the oil field. Those who embrace change and a systematic rather than siloed approach are poised to gain unheard of efficiencies.
Change avoidance has been seen as a way to reduce risk rather than a constraint. For too long,
the E&P industry continued to use manual processes that relied on people, pen and paper—even as the Internet of Things took the world by storm. The digital transformation finally took hold in the E&P space as the majors rushed to use new approaches to attack their cost basis for well development. Looking back, many of them are wondering why they took so long to make the leap.
A similar pivot is underway in the oilfield services market as a whole and, more specifically, frac fleets. The pandemic has created a dramatic shift, causing service companies to focus intently on getting their next-generation 3.0 frac fleets built, tested and placed in the field to seize opportunities created by the evolving goals of the E&P companies.
Ensuring long-term viability
As pumping hours have increased to be nearly continuous duty, regularly clocking in 18 to 22 hours per day, the number of challenges operators face also has increased. Managing two long-held fundamental indicators—efficiency and nonproductive time—have typically been make-or-break factors for success and, ultimately, extended contracts. In the current and post-pandemic climate, companies must master two more elements to ensure their long-term viability: lower operating costs and reduced environmental impact.
While operating efficiencies can and do produce cost savings, those efficiencies have not touched on a significant cost driver—diesel fuel costs. E&P companies are driving the move to electric and natural gas power to lower their costs and drive sustainability compliance. As E&P companies reap significant savings by replacing diesel fuel with natural gas, pressure pumping companies investing in new 3.0 next-gen frac systems are uniquely positioned to win more long-term multi-year contracts from the ability to satisfy the sustainability and cost-reduction goals of E&Ps. Given these drivers, pressure pumpers that can burn natural gas for fuel will be the companies that survive the oil patch in the long term.
Reliance on natural gas for fuel opens an additional opportunity for pressure pumpers to have flexibility in the field while reducing costs. Natural gas allows operators to utilize e-frac or turbine direct drive given the horsepower requirements for natural gas. Operators utilizing natural gas are achieving efficiencies previously unattainable—such as a 60% maintenance cost reduction by reducing fleets from 20 pumps with 20 sets of expendables to just eight pumps. Removing diesel engines and transmissions saves an estimated $1.5 million per year on fleet maintenance—the second highest maintenance expenditure on location.
Beyond fuel and maintenance cost savings, natural gas eliminates the soot and noise pollution that is increasingly becoming regulatory targets. Operators unable to utilize natural gas are at risk of losing contracts due to the inability to comply with environmental regulations and operator requirements. Just like companies that could pump longer hours than those using older, intermittent equipment, those with next-gen, natural gas-powered fleets will be the ones positioned to meet the new criteria and remain competitive.
Even with the current saturation of legacy pumping equipment to the tune of 20 MMhp, pressure pumping companies are increasingly prioritizing investments in equipment that runs on natural gas. Operators that are unable to implement complete 3.0 next-gen systems today are bridging the gap with duel-fuel engines that burn 70% natural gas in their legacy footprints. This bridge approach, as well as fully optimized 3.0 frac systems, unlock transformative efficiencies that were previously unachievable due to the inability to use natural gas on a fracturing site.
This transition to greater adoption of these next-gen hydraulic fracturing technologies demonstrates the maturity of the technology and the credibility it holds with E&P companies. Rather than piecing together existing components like fleets running today, pressure pumpers are leaning toward fully optimized systems, such as using the electric SPM QEM5000 Frac Pump, paired with true high-horsepower drive systems. Because fuel costs are among the top three opex on location, running on natural gas via e-frac or turbine direct drive can save up to 85% or $16 million per fleet per year.
High-efficiency e-frac or turbine drive technology is becoming fundamental to satisfy E&P goals for cost reduction and sustainability, which can mean the difference between winning or losing contracts. Broader, new drive technologies are creating system-centric, next-generation pumping platforms.
It is now more possible than ever for service providers to keep pace with E&P companies’ requirements to remain competitive. As operators invest in natural gas and turbine-powered fleets, they are positioning themselves to not only pump more hours per day but to reduce fuel and maintenance expenditures, while also demonstrating a commitment to make a difference from an environmental perspective. The ability to meet the latest requirements enables pressure pumping companies to secure long-term, multi-year contracts.
The silver lining of today’s climate is that it is transforming old mindsets to see and do things differently. The rate of change and acceptance of new technology is accelerating faster than ever in the pressure pumping market. Taking a systemwide approach is the only way to meet future demands. It is what is making 3.0 frac technologies a reality so E&Ps and operators can unlock a new source of savings.
About the author: Bryan Wagner is the director of engineering and product management, pressure pumping, with Weir Oil & Gas.
Supply discipline and rebounding economies are set to give oil a chance to break out of the recent range, Goldman Sachs analysts said in a report.
The upward revision marks a change of tone from previous months, in which OPEC has lowered oil demand forecasts because of continued lockdowns.
A few days before the April 1 meeting, OPEC+ delegates had said the group would likely keep most existing oil output cuts in place. But in the 24 hours before the meeting started, sources said discussions had shifted to a possible output increase.