Costs and grid access are major challenges for U.S. oil drillers and producers aiming to electrify their operations, according to the latest Dallas Fed Energy Survey released this week.
The survey revealed that more than half of the exploration and production (E&P) companies in Texas, northern Louisiana, and southern New Mexico have either adopted or plan to adopt electric technologies in their oilfield operations.
In contrast, service companies are less inclined to electrify compared to both small and large E&P firms, the survey indicated.
Despite the intention to electrify, U.S. operators face significant hurdles. The high costs of transitioning to electric power, concerns about the stability of the grid, and access issues rank as the top challenges. Electrification has the potential to decrease diesel consumption, reduce emissions from oilfield activities, and lower noise and pollution from rigs and fracking equipment.
As of now, 18% of executives in the survey reported that their companies’ oilfield operations are fully electrified. An additional 6% plan to completely electrify their operations, while 31% aim for partial electrification. However, 45% of respondents stated they do not plan to electrify at all. Small E&P firms, producing fewer than 10,000 barrels of crude oil per day, have a higher electrification rate, with 28% fully electrified compared to 9% of support services firms and 6% of larger E&P firms. Moreover, service companies are more likely to indicate they do not plan to electrify their operations.
Among those seeking to electrify, 29% of executives focused on the Permian Basin identified uncertainty regarding future grid access as their primary challenge. Another 17% cited concerns over future grid stability.
For firms operating primarily outside the Permian, costs were reported as the biggest hurdle by 30% of executives, while 26% pointed to long equipment lead times as their main concern.
Among executives from Texas, New Mexico, and Louisiana who do not plan to electrify, 48% cited high costs as their top challenge. This was followed by worries about grid access and stability.
One executive from a service firm commented, “Most of our rigs can run on grid power, but the logistical hurdles—like regulatory and permitting processes—are formidable and expensive.”
Another service firm executive expressed that the additional costs required to electrify equipment necessitate higher prices or reduced operational costs for returns, which is currently not the case in their segment.
A third executive noted that their firm’s operations are too mobile and fast-paced to accommodate the necessary electrical infrastructure, also mentioning a lack of electrical options available from suppliers for various types of machinery.
Electrification can potentially reduce emissions from production facilities by up to 86% by using renewable electricity or capturing natural gas that would otherwise be flared, according to a recent report from Rystad Energy. Even partial electrification could lead to significant emissions reductions.
“As the world faces the urgent challenge of climate change, the oil and gas industry is increasingly pressured to reduce its carbon footprint and adopt sustainable practices,” said Palzor Shenga, vice president of upstream research at Rystad Energy. “Where feasible and economically viable, electrification holds great potential for lowering emissions while sustaining production levels.”
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