The use of natural gas in high-horsepower oilfield applications has developed momentum of late but is still a few years away from an inflection point. Think of it in biblical terms. The spirit of interest may be willing among operators and contractors, particularly when talking to investor groups and trade associations, but the actual flesh of implementation is weak.

Hart Energy surveyed engine manufacturers, drilling contractors, and oil and gas operators at year-end 2013 to develop a sense of the market for natural gas as a fuel in oilfield endeavors.

Among findings, demand for dual-fuel engines will expand in 2014 thanks to the recent introduction of conversion kits by large engine manufacturers like Caterpillar Inc. and Cummins Inc. Those conversion kits signify key original equipment manufacturer support at reasonable price points and should accelerate the move to dual-fuel engines in the near term.

The overwhelming consensus among survey respondents is that demand for dual-fuel units will grow faster over the next few years than demand for dedicated natural gas engines powered by field gas, LNG, or compressed natural gas (CNG).

But don’t count dedicated natural gas engines out just yet.

Dedicated natural gas engines offer cost savings over dual-fuel engines but are currently hindered by limited fuel availability. LNG is likely to edge out CNG because of versatility, but growth in LNG use will lag until significant infrastructure for LNG generation is developed. Third-party plans are on the drawing board to do so, but the execution of those plans makes LNG a post-2015 event.

In the meantime, most of the 80 to 100 newbuild rigs forecast for 2014 will be equipped with dual-fuel engines.

Currently, less than 5% of the US land rig fleet is equipped with dual-fuel engines. Less than 2% of the US land fleet is configured to run on dedicated natural gas engines.

On the pressure pumping side, market share for dual-fuel engines is estimated at slightly more than 3% of the US fleet, with less than 1% of the fleet using dedicated natural gas engines. Pressure pumpers have been slower to adopt natural gas as a fuel because of concerns over technical failures while performing well stimulation and worries about inadequate infrastructure that limits fuel availability in many domestic markets.

It appears, according to survey respondents, that dual-fuel engines have an edge over dedicated natural gas in mindshare. Survey respondents noted that dual-fuel engines are the less expensive way to enter the market, with conversion kits costing US $100,000 to $150,000 per engine vs. $600,000 to $800,000 for a new dedicated natural gas engine. And, if there is a disruption in gas supply, dual-fuel engines can run on standard diesel, providing an important safety net.

However, in a market with adequate natural gas infrastructure, respondents noted that dedicated natural gas engines provide greater cost savings over time and offer environmental advantages as a clean-burning fuel.

That said, fuel availability remains the key hurdle in most regions, which adds additional costs through transportation and increases risk from supply disruption.

For dedicated natural gas engines, field gas has an edge. Outside of field gas, survey respondents favored the versatility of LNG, at least for drilling rigs, with CNG a distant third.

  • Dual-fuel engines have edge short-term on lower cost and fuel flexibility
  • Dedicated natural gas engines provide faster payback and greater savings but are hampered by lack of infrastructure
  • Dedicated natural gas engines gain momentum after 2015 as LNG infrastructure grows in Texas and the Midcontinent
  • Both still a niche application with low market penetration in 2014
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