Roadmap to Building North Dakota s Natural Gas Fueling Network

Transcription

1 CO 2 and N 2 LNG and CNG Transportation and Logistics Roadmap to Building North Dakota s Natural Gas Fueling Network Philip Fusacchia GE Oil & Gas Program Manager Last Mile Fueling

2 North Dakota Natural Gas Network Drilling & Completion Demand (200,000 DGE/Day) 2 On-Road Trucking Demand (1,000,000 DGE/Day) Flare Gas Supply (250,000 DGE/Day) 1 1 Equivalent volumes from existing NGL stripping units > 1000 mcfd 2 Based on 74 rigs and 12 frac fleets active in basin

3 CNG Partnership-Last Mile TM Fueling Solution 50/50 Joint Venture-Operated by Ferus Natural gas expertise and solutions, capital and commercial investment Energy services, expertise in supply and delivery of off-road cryogenic and gas products (CNG/LNG) Reliable, fully-integrated natural gas fueling solution for E&P and other high horsepower industries

4 Ferus in North Dakota Operational: October ,000 DGE/Day Capacity Base Opened: October 2014 Williston Base Flare gas capture Contracted CNG fueling Planned Flare Gas Capture Ferus Hess CNG Station Pipeline Outage Service Total Gas Captured: 370,000 Mcf 3.1 Million DGE 50,630 DGE/day CNG capacity by 4Q15

5 Last Mile Flare to Fueling Turnkey gas capture service (Example) 1 Gas Supply Gas Treatment 2 3 Gas Transport NGL 1-2 MMSCFD 3 12 month period Sales Gas NGL storage & transport Locally marketed product Eliminated CNG > BTU 500-1,100 MCFD available for CNG 2-4 GPM NGL s Rig & frac fuel Gas lift primer 3 rd party sales Pipeline Outage

6 Tons/Year Tons/Year Tons/Year Last Mile Flare to Fueling Emission Benefits The Last Mile approach to flare gas mitigation captures nearly all of the natural gas and natural gas liquids (NGLs), and uses that natural gas to displace diesel in end-use applications, resulting in significant incremental emissions reductions compared to NGL stripping alone. Case Study Flare gas capture site handles 2mmscfd, 30% of volume becomes NGL, 5% of volume powers system, 65% of volume becomes fuel or flared (Comparison includes emissions for the equivalent fuel for 10 rigs or 2 frac fleets) 20,000 15,000 10,000 5,000 - NGL stripping only & diesel for fuel NGL stripping & natural gas for fuel Smog Emissions Smog (O3) 98% reduction 100,000 80,000 60,000 40,000 20, CO2 Emissions 55% reduction GHG (CO2) Particulate Matter 97% reduction Respiratory (PM2.5)

7 Natural Gas Fueling Potential Current Upstream 5,788 mcf/day (or 8,905 mcf raw gas) 1,016 1 Upstream Converted & On-Road Trucking (Estimate 2020) 30,360 mcf/day (or 46,707 mcf raw gas) 3 1,760 3,012 6,625 Upstream Fully Converted 24,074 mcf/day (or 37,036 mcf raw gas) 2, ,031 11,144 11,144 10,560 10,560 1 currently 20 rigs & 2 frac fleets utilizing existing dual fuel engine tech in basin 2 assumes 74 rigs & 12 frac fleets 3 assumes 74 rigs & 12 frac fleets and 5% of daily state diesel over the road diesel sales converted to natural gas fuel Rigs Frac Spreads Water Heaters On-Road Trucking

8 Barriers to Natural Gas Adoption 1. Conversion technologies are burdensome for operators and service companies in capital constrained environment while diesel fuel pricing has decreased along with oil prices 2. Current NDIC gas capture plans do not incentivize use of natural gas fuel beyond natural gas liquid (NGL) stripping while natural gas fueling infrastructure is nearly absent in the state 3. Gas is high in BTU and needs to be treated from field for efficient operational and technical use

9 1 Barrier: Nat. Gas fuel economics challenged Scenario Current diesel pricing not allowing return on investment of nat gas conversion Minot, ND Diesel Rack Avg Price + Delivery & Taxes 20-40% savings required for NG conversion kit payback to rig and frac Almost all of 2015 would not have met investment criteria savings for operator or service company Only 33% of rigs in basin are equipped to use NG fuel (all converted w/ >$1 savings to diesel) Proposed Solution Provide state grants for nat gas conversion from 1-time severance tax holiday Conversion Costs Drilling Rig: $300,000 Pressure Pumper: $1,200,000 Desired payback: 2 years Assumes: 3 engine rig, 8 pump spread Funding Mechanism Tax credit for oil and gas produced using natural gas rather than diesel fuel E&P example (50,000bpd operator) 6 (rigs) X $300K (rig conversion cost)/ 2 (yr payback) = $900K / $100M (production tax) = 0.9% severance tax credit Tax credit available for any conversion between Jan 2010 Dec 2017

10 2 Barrier: No credit for going the Last Mile Scenario Current gas capture plan doesn t incentivize use of nat gas fuel, beyond NGL stripping Net Cost to price -10 to 10 /gal >60% C3+ capture, 100% flare captured Net Profit to diesel price > $1.75/gal >99% C3+ capture, 100% flare captured 47,000 mcfd of gas that could be used as fuel today from NGL recovery units enough to fuel all drilling and completion activity in Williston Basin (Est. 25 units > 1000 mcfd in basin) Estimated > 3000 tons of GHG emissions/day from flared residue gas produced by NGL systems Equivalent emissions to an additional 260,000 cars on the road per year Proposed Solution Provide gas capture credit for methane used as fuel from NGL stripping unit NGL only NGL 2 mmscfd Gas 4000 gal marketed per $0.10/gal 1300 mcfd flared 100% Captured (30% of resource utilized) NGL & NG fuel NGL 2 mmscfd CNG 4000 gal marketed per $0.10/gal 1300 mcfd fuel ~150% Captured (95% of resource utilized)