April 2012, Vol. 239 No. 4

Features

GE, Chesapeake Move Forward On CNG Plan

GE and Chesapeake Energy Corporation announced March 7 a collaboration to develop infrastructure solutions they said will help accelerate the adoption of natural gas as a transportation fuel.

To formalize the agreement, GE and Chesapeake have signed a memorandum of understanding on a product and services development partnership, representing a multi-year collaboration between the two companies to develop and bring to market compressed natural gas (CNG) and liquefied natural gas (LNG) transportation and natural gas home-fueling solutions.

Chesapeake Energy is one of the nation’s largest natural producers, especially in the Marcellus Shale, and GE has been busy increasing its energy portfolio, particularly in regards to natural gas.

By improving access to CNG, which is most commonly used in light- to medium-duty vehicles such as pickups, vans, SUVs, taxicabs, transit buses, refuse and delivery trucks as well as consumer vehicles, along with LNG, which is commonly used for heavy-duty industrial purposes, dependence on foreign energy sources can be reduced while simultaneously lowering fueling costs and vehicle emissions.

The collaboration is designed to leverage GE’s global Oil & Gas technology portfolio with Chesapeake’s expertise in developing innovative fueling solutions to lower the ownership and operational costs of natural gas vehicle (NGV) fueling stations. With the development of shale resources dramatically increasing the amount of low-cost natural gas in North America, the GE-Chesapeake collaboration can provide incentive for operators to put more NGVs on the nation’s highways.

CNG In A Box
As part of the collaboration, beginning this fall GE will provide more than 250 modular and standardized CNG compression stations for NGV infrastructure. These units, also known as “CNG In A Box™,” have gone through GE’s ecomagination-qualification process and will provide the core infrastructure to enable expanded access to CNG at fueling stations and other designated installations. 

A vehicle using CNG can reduce annual fuel costs up to 40%, assuming 25,700 miles per year driven, gasoline priced at $3.50/gallon and CNG at $2.09/gasoline gallon equivalent. This represents savings totaling as much as $1,500 per fleet vehicle per year. In total, for each fleet vehicle using fuel provided by CNG In A Box instead of gasoline, a fleet operator can reduce CO-2e emissions from fuel combustion by about 24% or 2.2 metric tons per vehicle annually, assuming an average fleet vehicle travels approximately 25,700 miles per year.
 
“Both GE and Chesapeake are known for taking on tough energy challenges and putting the best minds and technologies to work to develop solutions,” said Aubrey K. McClendon, Chesapeake’s CEO.

“The partnership between GE and Chesapeake’s affiliate, Peake Fuel Solutions, combines Chesapeake’s natural gas expertise with GE’s extensive global manufacturing capabilities and will bring transformative products to industries and individual consumers across the U.S. These products and services will allow customers to enjoy the clear advantages of natural gas at about half the cost of gasoline,” he said.

Said GE Energy President & CEO John Krenicki, “GE is fundamentally committed to natural gas — our technologies help extract it, move it and turn it into power, whether it’s highly efficient gas turbines delivering electricity at the utility scale or, in the near future, a vehicle at a refueling station. What makes this project particularly exciting is that it paves the way to taking the immense reserves of natural gas being discovered in the U.S. and using them right here in the U.S. That paves the way for faster economic growth, energy security, more jobs and reduced environmental impact.”

Peake Fuel Solutions
This CNG technology will be brought to market by Peake Fuel Solutions — a Chesapeake affiliate — which has extensive experience with natural gas vehicles, vehicle emission controls and natural gas market dynamics. Chesapeake also brings considerable in-house expertise in CNG market development to the GE collaboration, including retail station relationships, fleet outreach and education programs and policy engagement.

CNG In A Box takes natural gas from a pipeline and compresses it on-site at an industrial location or at a traditional automotive refilling station to then turn it into CNG. A CNG vehicle, such as a taxi, bus or small truck, can then refill its tank using a traditional fuel dispenser, much like those used for diesel or gasoline refueling.

Key features include:
* The gas compression, storage, cooling, drying and controls are easy to ship and maintain due to its compact “In Box” design. 
* The units come in two configurations: an 8-foot x 20-foot container or 8-foot x 40-foot container, depending on the site’s need.
* Its modular and intuitive design makes it “Plug & Play” on-site. 
* The offering includes GE Wayne-branded dispensers with credit card capability and provision for “Point Of Sale” interface.
* The fuel dispenses at a rate of about 7 gasoline gallon equivalent per minute.

Other elements of the new collaboration include:
* Aftermarket services for natural gas fueling infrastructure.
* GE’s LNG fueling plants, which adapt GE’s proven large-scale LNG liquefaction technologies to smaller-scale operations. Using LNG as a substitute for diesel or fuel oil can reduce combustion emissions up to 25%.
* Development of home refueling technologies.
* Co-marketing of products and services resulting from the partnership.

Encana Opens LNG Fueling Station In Louisiana
Encana Natural Gas Inc. recently opened the first LNG fueling station in Louisiana. Located at The Relay Station in Frierson, the station which will serve the fueling needs of heavy-duty truck fleets, is open for public use (to those with am LNG vehicle and proper safety training) and will be accepting all major credit cards. The station is used by Heckmann Water Resources (HWR), an Encana partner in water sustainability in the natural gas industry.

HWR has ordered 200 new LNG big-rig trucks, 50 of which have been deployed to date. California-based Heckmann Corporation, parent company to HWR, provides water management services to Encana and other producers in the Haynesville resource play. An Encana spokesman said this opens the door for more natural gas fuel use in the large freight vehicle industry.

Encana has secured a contract with Pivotal LNG, a subsidiary of AGL Resources Inc., which owns and operates a major liquefaction facility. This contract enables Encana to provide LNG to consumers and will create more opportunities for natural gas in the transportation sector.

“We are very pleased to be part of an innovative Canadian and American solution to expand the use of LNG,” said Eric Marsh, Executive Vice President, Encana Corporation & Senior Vice-President, USA Division.

Encana also owns and operates four mobile LNG fueling stations (two in Louisiana) and six CNG stations. Encana has converted nearly half of its fleet field vehicles in Louisiana operations to CNG. It has also retrofitted drilling rig engines to run on natural gas in their U.S. operations, four of which run on LNG.

Chesapeake In Deal With KKR
On March 6 Chesapeake announced it would partner with Kolhberg Kravis Roberts & Co. LP on oil and gas mineral interests and overriding royalties. That partnership would initially be worth $250 million, with Chesapeake bringing in 10% and “source, acquire and manage the royalty investment opportunities,” the companies said in a joint statement.

“Driven predominantly by the recent advancements in unconventional oil and gas technology, we continue to see attractive opportunities to invest behind the domestic exploration and production of oil and gas. Royalties represent an important extension of this opportunity set and offer an attractive risk/reward for our investors in the current environment,” said Robert Antablin, a director at KKR who leads the firm’s royalties investment strategy.

McClendon said, “As the largest oil and gas leasehold owner and most active driller in the U.S., we are uniquely well-positioned to leverage our operating footprint to pursue profitable and related business opportunities. We are delighted to partner with KKR, a leading investor and partner to the energy industry, to expand our royalty acquisition business. During the past 10 years, we have acquired $900 million in royalties, and now we look forward to accelerating the pace of our acquisition of royalties by combining our unparalleled acquisition skills and unique information base with KKR’s capital and business structuring expertise.”

KKR has been investing in the energy sector for more than 20 years, starting with its investment in Union Texas Petroleum in 1985. The KKR Global Energy & Infrastructure business invests across the entire energy supply chain and multiple asset classes. Recent examples include oil and gas investments such as the firm’s acquisition of Samson Resources, one of the largest privately held oil and gas companies in the U.S., formation of the KKR Natural Resources platform, a partnership with Premier Natural Resources to acquire producing oil and natural gas assets, and recently exited investments in East Resources and Hilcorp Resources.