Apache Corp. (NYSE: APA) is testing an innovative technology using natural gas to power hydraulic fracturing.

It’s already made believers out of two industry heavy hitters: Halliburton (NYSE: HAL) and Schlumberger (NYSE: SLB).

Both companies are working with Apache on trial projects that would advance the technology for using natural gas as a fuel. Both companies put in bids to work with Apache at zero cost, Apache, a global exploration and production company, said.

“That’s almost unheard of, and it shows you how much they wanted to do this,” said Mike Bahorich, Apache’s executive vice president of technology.

The incentives, however, are still there and still lucrative.

In 2012, the industry used about 700 million gallons of diesel to pump sand and water during fracture stimulation. The tab at average gas prices was $2.38 billion. Converting field gas to fuel could cut 70% of fuel costs, down to $1.67 billion, Bahorich said.

“By using field gas, the United States would import 17 million fewer barrels of oil each year to make the diesel to fuel these fracs,” Bahorich said.

Schlumberger is testing a system using compressed natural gas (CNG) while Halliburton is using liquefied natural gas (LNG). Their goal is the same: Use field gas to power the massive engines used to pump sand and water into the ground for fracing.

Fracing is one of the most energy-intensive processes in the industry. Currently, only 1% of drilling rigs and zero full frac spreads are powered by natural gas, Bahorich said.

Bahorich approached Halliburton about Apache’s plans, and they told him the reason that frac spreads did not run on natural gas came down to the complexity of natural gas supply and support infrastructure.

But Halliburton and Schlumberger both told Bahorich it could be done.

Halliburton invented a system that quickly connects natural gas to pumping engines, making natural gas a viable fuel for rapid, routine job movements. The system uses a simple gas line that connects from the natural gas source to an engine using a quick-connect jumper to link the natural gas line between trucks.

Still, there were challenges, among them how to get powerful diesel engines to use natural gas as fuel. The team wanted gas to run the engines at high RPMs but not while idling.

To solve the problem, they turned to U.S. engine manufacturer Caterpillar Inc.

“Caterpillar was able to develop dual-fuel kits that would allow the engines to run on diesel while idling, and natural gas when they are throttled up for pumping,” said Brian Erickson, Apache senior production engineer, E&P Technology, who is leading the field trials along with Sam Goswick, a drilling engineer for the company’s Central Region. “This has been a key factor that is allowing us to move forward to make this a reality.”

Apache, Halliburton and Schlumberger have had several successful tests in Oklahoma in the Granite Wash using up to eight engines running on the dual-fuel kits. A full complement of 12 engines could be used sometime in January at a frac near Elk City, Okla., the company said.

A single fracing site in the Granite Wash Stiles Ranch might play out like this:

  • Typical fracing consumes 36,290 gallons of diesel.
  • Fuel costs $123,386 at mid-December prices.
  • Deploying the dual-fuel engine cuts cost nearly 40% to $74,473.
  • Diesel consumption drops down around 22,000 gallons.

“This is a real trend and it’s happening now,” Bahorich said. “We’re witnessing a sea change in the industry that will have a great impact not only on how much less oil is imported but also will help keep our air clean.”
Apache has long been a proponent of expanding use of natural gas and publicly supports CNG vehicles. In July, Apache said that it planned to convert 350, or about 35%, of its fleet to CNG vehicles by the end of 2012. By 2015, the company expects to have about 80% of its 1,000-plus fleet in the U.S. converted.

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