Many exploration and production (E&P) companies have indicated their sincere interest in at least partly weaning themselves away from diesel—and onto natural gas, much of it from LNG—as their fuel of choice for the engines that power their drilling rigs and hydrofracturing pumps. But there has been some hesitance in making the switch, in part due to concern about whether the LNG-supply infrastructure is sufficiently reliable. The same is true for railroads, trucking companies and ship owners—they too see potential savings in moving to engines fired partially or entirely by LNG, but they need assurance that their new fuel source will be plentiful and at hand. Today we detail all the new liquefaction capacity being developed specifically to serve these new markets.
In Part 1 of this series, we explained why diesel’s dominance as the engine fuel for the E&P and heavy-duty transportation sector may be threatened over the next few years by natural gas. It comes down to economics and environment. Diesel prices are based on the price of crude oil, and US natural gas is selling at roughly one-quarter the price of crude on a per-BTU basis these days. Even when the costs of liquefying gas and transporting LNG to customers are factored in, natural gas from LNG is consistently less expensive than diesel. Also, rules regarding diesel and shipping fuel emissions are tightening. The key question becomes, how quickly can fuel-cost savings justify the investment required to retrofit diesel engines to burn a mix of diesel and natural gas (or buy new engines that burn only gas), as well as the cost of adding LNG storage and re-gasifiers? In Part 2, we pointed out several calculators that can help address the should-we-switch conundrum, noted some pretty big E&P names already testing the potential for dual-fuel and gas-powered engines, and listed the seven existing liquefaction plants (totaling about 580 Mgal/d) that are not utility-focused “peak-shaving” facilities.
This time we examine the far greater amount of liquefaction capacity being planned to provide LNG to the domestic E&P, mining and heavy-duty transportation markets—and, with Canadians being so friendly and all, we are including their projects in this as well. A reminder: As we said in our last episode, a 100 Mgal/d liquefaction plant—pretty typical for what is being planned—would require about 8.3 MMcf/d, or about 3 Bcf a year of natural gas.
Spectrum LNG owns an existing 65 Mgal/d liquefaction facility in Ehrenberg, AZ (see Part 2). In April 2014 they started construction of a 150 Mgal/d plant in Stroud, OK (midway between Oklahoma City and Tulsa) that is expected to start producing LNG in July 2015. The plant could be expanded over time to as much as 500 Mgal/d. The Stroud site (yellow star in Figure #1) is within what Spectrum calls “economic reach” of several shale plays where gas from LNG could be used to help fuel engines that power drilling rigs and fracking pumps, including Anadarko, Ardmore, Arkoma, Barnett, Fayetteville and Woodford. It is also close to several interstate highways, a big plus for sales to long-haul trucking lines.
To access the remainder of You’re as Cold as Ice—New Gas Liquefaction Plants to Serve US Drillers and Frackers you must be logged as a RBN Backstage Pass™ subscriber.
Full access to the RBN Energy blog archive which includes any posting more than 5 days old is available only to RBN Backstage Pass™ subscribers. In addition to blog archive access, RBN Backstage Pass™ resources include Drill-Down Reports, Spotlight Reports, Spotcheck Indicators, Market Fundamentals Webcasts, Get-Togethers and more. If you have already purchased a subscription, be sure you are logged in For additional help or information, contact us at firstname.lastname@example.org or 888-613-8874.