Case For LNG As A Fuel: Developing New Opportunities

Case For LNG As A Fuel: Developing New Opportunities

Reaping the harvests from horizontal drilling, the nation has been reveling in lower prices at the pump and a seemingly limitless supply of oil and gas. The success of U.S. independent oil and gas producers has come through unlocking the resources from shale rock. This process and its prolific oil production have simultaneously created an abundance of natural gas—such that supply is in excess of current demand. This exceptional situation is an open door to creating new markets using this excess supply.

The largest market potential is for the displacement of diesel fuel for LNG. This market stretches from on-road long-haul transportation to railroads to marine—and is inclusive of off-road mining and energy. Notably, such a transition in transportation markets would be predicated on creating and building the infrastructures to support such a change—vehicle and engine development as well as a fueling infrastructure and distribution systems capable of covering a large geographic area. This creates the proverbial “chicken-or-egg” situation.

However, the off-road mining and energy market is ready now. It takes a lot of energy to find and extract energy. Drilling requires 11,350 l/d to 18,930 l/d (3,000 gal/d to 5,000 gal/d) of fuel, and completions require closer to 37,850 l/d to 56,780 l/d (10,000 gal/d to 15,000 gal/d). Cleaner-burning dual-fuel engines allow displacement of up to 60% of diesel with no degradation in performance, and mobile fueling distribution and fueling solutions have already been established.

The only remaining variable, true with all these market potentials, is the necessity for additional LNG production.

Prior to the recent drop in oil, the potential fuel savings from LNG use could be between 30% and 35% compared to diesel in the energy industry alone. Although fuel costs do not drive drilling and completion (D&C) programs, keep in mind the larger picture: It’s not about the economics, it’s about growing a market.

Building an LNG production and distribution infrastructure to support energy D&C will support other market sectors, effectively paving the way for complementary and interrelated industries.

Bi-fuel infrastructure to support E&P is the first ripple in the pond, supporting future adoption by on-road transport, marine and rail markets. As the demand for more natural gas is created, the gates will open up for more resource plays for development.

As such, the E&P sector can directly influence potentially significant gas demand. Despite the current situation, oil/diesel prices will recover aggressively, reinforcing the demand for LNG in the transportation sector. High horsepower demand will remain stable and likely grow when renewed drilling is driven by even more top-drive AC rigs.

By using LNG to fuel its operations, the energy sector can build out the infrastructure that will seed the demand in other markets and increase the overall market demand for natural gas.

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