US oil drillers are going electric—and hitting speed bumps
Frackers can’t connect to the electric grid fast enough as they seek to reduce emissions and save costs.
MARTIN COUNTY, Texas—In the country’s busiest oil field, frackers are devouring nearly as much electricity as four Seattles every day—and they are clamoring for more.
Diamondback Energy, a major producer in the Permian Basin of West Texas and New Mexico, has increasingly relied on the electric grid to power its crude harvesting. But as the driller’s oil production has grown nearly 50 times in the past 10 years, the grid has struggled to handle this new demand, prompting Diamondback to set up its own power network to cut its use of natural-gas-fired generators.
“The grid has to catch up with the industrials and what’s going on here," said Hunter Landers, the company’s vice president of completions.
As drillers have faced investor and public pressure to cut greenhouse-gas emissions, they have ditched polluting diesel-power generators and plugged into the grid at breakneck speed. Sourcing electricity increasingly generated by wind and solar power allows the companies to cut their carbon footprint. On top of making companies greener, utility-scale power means savings on fuel costs and more efficient operations, oil and gas executives say.
But the trend is sending electricity sales soaring in Texas, New Mexico and North Dakota. Like other kinds of businesses trying to electrify, drillers have hit a bottleneck, finding there is only so much capacity on the grid. Many operators who can’t wait for infrastructure to catch up have built it themselves.
Consumers haven’t felt much of an impact yet, though investments in grid infrastructure or new generation will be needed across much of the U.S. as more industries electrify. The cost of the investments is huge, and consumers will eventually bear some of that.
Much is at stake: The International Energy Agency said in a May report that using electricity to power equipment instead of diesel or natural gas could halve the 700 million metric tons of carbon emissions from global oil and gas production by 2030.
“From one perspective, we’re early innings," Ryder Booth, vice president of Chevron’s midcontinent business unit, said of the Permian’s increasing electrification efforts.
While U.S. electricity sales rose just 5% in the past decade, some states with large oil and gas fields have seen some of the largest jumps in power usage in the country. In New Mexico, the amount of electricity sales in megawatt hours has jumped 16% in a decade, largely driven by the Permian oil patch in the southeastern corner of the state, according to government data and regulatory filings.
In North Dakota, which boasts oil production of around 1.3 million barrels of oil a day along with a growing network of bitcoin miners and data centers, electricity sales have jumped more than 58% overall and 120% for industrial customers in the past decade, the biggest such increases in the country.
In the shale boom’s early days, unruly frackers quickly overran the existing pipeline and power infrastructures. Companies flared the natural gas they couldn’t sell, and employed fleets of diesel generators to power a swath of their field equipment.
Some drillers have since moved to cut flaring and put field gas to work to produce local power. They are increasingly connecting heavy machinery such as drilling rigs to high-power lines.
While the oil patch has never been more grid-connected, the congested power network is falling further behind ballooning crude production, threatening to stall companies’ progress on curbing emissions.
Northwest of Williston, N.D., one of the Bakken oil field’s boomtowns, Basin Electric Power Cooperative broke ground in September on about 580 megawatts of natural gas-fired power generation, citing the need to serve growing oil and gas development. Chief Executive Todd Brickhouse said that even when oil prices fall, pumps and compression stations keep operating.
The project is among the largest for the co-op in 40 years.
The Permian produces nearly 6 million barrels of oil a day, up from just 1.3 million barrels about a decade ago, according to the U.S. Energy Information Administration. Sales to industrial customers in New Mexico doubled between 2017 and 2022 for Xcel Energy subsidiary Southwestern Public Service, the utility for a swath of the oil field in New Mexico and Texas.
But of the 16 gigawatts of industrial power Permian oil-and-gas companies currently need, less than a third comes from the grid, said Curtis Smith, an analyst at S&P Global Commodity Insights.
If these producers are to meet their emissions targets, they will need to receive grid-provided power more than three times the amount New York City uses in a day by 2032, according to Smith. Some analysts doubt that this much new capacity can be brought online that quickly.
The oil field is both growing and trying to electrify while oil-field communities and other industries like data centers are also growing, said Adrian Rodriguez, Southwestern Public Service’s president. Across both states, the utility estimates it needs to build 5 to 10 gigawatts of new power generation in the coming years to meet growing demand and replace some older power plants.
In the past few years, power-hungry Permian producers have erected their own electric substations—essentially building parts of the grid themselves.
They have also successfully lobbied the Texas legislature for more infrastructure. Last year, Texas lawmakers passed a bill mandating the state’s Public Utility Commission to develop a reliability plan for electrification in the Permian and beefing up the grid there.
Where Diamondback has found the power network lacking for some big developments, it has developed its own microgrid. About 23 miles northeast of Midland, the company has joined with energy startup VoltaGrid to develop a system built around four bus-size, natural-gas engines that generate enough electricity to power about 13,000 homes. In deafening noise, the motors produce electricity that flows through roughly 18 miles of distribution lines.
“It could be a two- to five-year bridge before infrastructure catches up," said Diamondback’s Landers.
Some machines consume a lot of energy, operate intermittently and are mobile, making them especially difficult to connect to the grid. This includes most 5,000-horsepower fracking pumps companies use to blast underground rock with sand and water.
To lower emissions, operators are switching from diesel to natural-gas generators.
Sam Sledge, chief executive officer of fracking company ProPetro, said that about two years ago, the company’s frack pumps almost all ran on diesel. Since then, it has spent about $350 million to replace about two-thirds of that equipment with pumps that run on electricity generated by burning natural gas and pumps that run on a blend of natural gas and diesel.
“The near-term story is a natural-gas story," Sledge said of electrifying frack pumps. “Long term: more grid in more places."
Write to Benoît Morenne at benoit.morenne@wsj.com and Jennifer Hiller at jennifer.hiller@wsj.com
