The Permian Basin is gradually becoming a hatchery and laboratory for some forward-thinking green initiatives.

Posted in: Factoring Companies, frac, fracking, Invoice factoring, Oilfield Business Financing, Oilfield News, Permian Basin Financing News, Staffing Factoring- Sep 09, 2013 No Comments

The oil business has always been about turning black gold into green—but the shade of green has begun to change in the last few years. While still representing money, “green” is a term that now denotes a mindfulness of the environment. It’s a direction some in the industry are embracing, while others seem to be getting dragged along, leaving heel prints in the sand.

“Green” thinking takes many forms, including reduction of the volumes of fresh water used in fracturing and other procedures, as well as the practice of recapturing vented hydrocarbons, capture of waste heat, and use of compressed natural gas in fleets.

Jared Blong, president and CEO of Octane Energy, a drilling startup, is among those who are enthusiastic about greening up the oilfield. Blong, who is the son-in-law of recently deceased PBPA Chairman Mark Merritt, is a 33-year-old entrepreneur who sees himself as new enough to the industry to think outside the box yet savvy enough to know which green initiatives are as yet impractical. The common fallback statement, “We’ve always done it this way,” is Blong’s least favorite expression. “I live to make that statement sound foolish,” he declared. “We’ve got to start behaving differently if we want the public to continue to allow us to do what we do—instead of just feeling entitled as oilmen, which is our general propensity,” he added, with a chuckle.

It was through his conversations with industry veteran Dr. Richard Erdlac, an expert in geothermal energy and other environmental concepts, that Blong learned of a way to capture waste heat and convert it to electricity. “When I heard that I said, well gosh… why hasn’t anybody ever done that before?”

Erdlac is connected with Gulf Coast Green Energy, based in Bay City, Texas, which markets a product called the Green Machine. The device, developed by ElectraTherm in Reno, Nev., collects waste heat from a variety of sources and uses that heat to generate electricity.

Basically, the Green Machine operates by transferring heat from a hot liquid, such as produced water or fluid from the radiator of a diesel generator, over a refrigerant whose boiling point is 53° F. The now-hot refrigerant turns the twin screws in an expander, which operates an induction generator. The incoming hot liquid is cooled in the process.

Octane Energy plans to use AC drilling rigs, which run 100 percent on electricity, all of which is generated on the well site by “almost locomotive-sized diesel engines running almost 24 hours a day,” as Blong describes it. The best diesel engines use only around 40 percent of the energy burned to do their work—the other 60 percent is ejected as heat. Blong wanted to recapture at least some of that other 60 percent, thereby reducing diesel fuel use and cutting CO2 emissions.

“What it looks like we’ll be able to do is to power all the ancillary trailers on the location, like the company man’s trailer, our pusher’s bunkhouse, and our crew houses,” he noted. “All of our jobs are camp jobs because the folks that we’re employing, we want to bring in from outside the Permian Basin because we’ve got a labor shortage.” Blong looks forward to furnishing electricity to those facilities for just the cost of the equipment.

He also believes that, because the producer is usually the one paying for these things, his company will be able to offer this as a value-added proposition for its own customers.

Octane is also looking at running a dual-fuel operation, which could use some wellhead gas to generate that electricity. This, in Blong’s view, would both keep the gas out of the atmosphere and save on the use of diesel in the generation process.

His vision in all this is to establish credibility as an environmentally sensitive company and to invite producers to join them in that vision. Heat capture, dual-fuel use, and other efforts do create an extra investment cost, but Blong feels it shows corporate responsibility and, “It’s the right thing to do.”

A startup, Octane plans to begin building rigs in the fourth quarter of 2013, to start drilling by the end of January 2014, and to have four more rigs operating by the end of 2014.

Meanwhile, Erdlac, no less a visionary himself, is excited about this and other uses for the Green Machine, especially its ability to generate electricity from flares. A typical unit generates 65-80 KW of electricity and, Erdlac noted, “A really large flare could require multiple units.”

Erdlac said there is interest in this technology but, as is common, people are hesitant to be early adopters. “We really need to get people off dead center on this,” he urged.

Water use is a huge issue, and there are more and more companies getting involved in the process of treating produced water for reuse in hydraulic fracturing or other uses.

For example, Halliburton recently announced its H2O Forward frac fluid, a product that utilizes water that is much dirtier than was previously usable. Company officials point out that water still may need to be treated, but to a lesser degree than before, which will save producers money on the treatment side.

Instead of injecting produced water into the ground, as has been the practice for decades, the alternative of using it for fracturing solves two problems. It reduces the amount of fresh water for frac jobs that can require supplies in the millions of barrels, and it eliminates the need for injection.

In the last two years the costs of treating water have come down to a generally affordable level, say those in the treatment industry. They point out that treatment reduces the cost of fresh water, which is rising in the prevalent drought conditions, plus it reduces the need for trucking fresh and waste water back and forth.

Every new idea has its own challenges, and one of those with water treatment is storage. Huge ponds, many reaching several acres, are now needed to hold water. When treated water is in those ponds, producers have to worry about two things: losing thousands of gallons to evaporation, and the possibility of pit liners tearing and allowing this still-less-than-pristine water to leach into the ground and possibly into the water table.

This has created a couple of new tools to deal with these issues. Double pit liners with leak detection systems are growing in use, as regulators and communities express concerns about treated water getting into their municipal water systems.

On the evaporation side, pit covers are being developed and marketed that, marketers say, float on top and greatly reduce water loss out the top side.

Speaking of regulators, that is the other side of the push toward green initiatives, especially regarding air quality. Tom Larson is Principal in Charge of the Midland office of Conestoga-Rovers and Associates, an environmental company based in Canada. Their primary focus is on environmental remediation, but they are in touch with other aspects as well.

New EPA air quality regulations, known as “Quad O” or by their formal name, 40 CFR Part 60 Subpart OOOO, are taking effect in full force this fall and, said Larson, are changing the way companies plan and execute their drilling plans.

“Folks used to not worry about the emissions but now, because of the regulations, the awareness of the release of greenhouse gases—when operators do their wells, part of the planning process includes some surface equipment that’s designed to capture those emissions, to reduce them,” he said.

A number of equipment makers, such as Hy-Bon Engineering, OTA Compression, and others are finding a big market for vapor recovery units (VRUs) and related devices as producers rush to meet the new standards.

So far, Larson noted, regulations are less of an issue for water use than for air quality. He pointed out that the main concern for water issues is the drought, especially in Texas.

“In Texas, the water rights are held by the landowner, and then in New Mexico the water rights are with the state,” he said. Therefore, in Texas any landowner can sell as much water as can be pumped without regard to water table restrictions. In New Mexico, he said, a state permit is required to pump water.

A few water districts are found in Texas, he explained, but most oversee an area no bigger than a county.

In general, in the oil industry, “They’re trying to do the right thing in trying to develop these best management practices” by using treated frac water and other conservation methods.

Doing the right thing also includes, for some, use of brackish groundwater that is not suitable for city or irrigation use anyway. With a small amount of cleanup, water in the Santa Rosa formation and others can be used without disturbing public water. Even a golf course in Midland is using Santa Rosa water for its golf course irrigation, cleaning it up with a treatment system supplied by STW Resources.

Green energy is also a focus for the industry, Larson said, pointing to Apache’s web site that lists that company’s growing count of compressed natural gas (CNG) fueling sites and its plan to convert up to 80 percent of its pickup truck fleet to CNG. Larson noted that CNG is currently cheaper than diesel or gasoline and it releases less CO2 than either of the other fuels, but that building the infrastructure is the main challenge to converting it to popular use. Fleets, on the other hand, are the ideal way to expand CNG use because fleets require fewer fueling stations.

Overall, the number of “outside the box” thinkers such as Blong and Erdlac is increasing. Last year, PBOG carried a cover story on the numerous “green initiatives” conceived and implemented by the Midland-based mud company known as Mudsmith. Their renovated and expanded plant is a model of how to operate environmentally while getting some economic incentives, to boot.

As these individuals interact with the Apaches and other producers of the world, perhaps the industry is indeed starting to get off “high center” and move forward to improving its image and its record of corporate responsibility.

Already, no one thinks of dumping sludge in an unlined pit as was the practice in past decades, so things are indeed changing.

Article Source:PB Oil & Gas