Oil and Gas

Drilling for Hydrocarbons with Sun and Wind

In both the macrocosm of the state of Texas and the microcosm of the drilling projects of the Permian basin, in the west of the state, there is a remarkable trend toward the use of the stereotypical ‘green’ energy sources, solar and wind. Some might find irony where others see only managerial pragmatism as the hydrocarbons are taken out of the ground with electricity increasingly produced by means that don’t involve the use of hydrocarbons.

The graph below shows, in a single curve, the steady increase in the demand for electricity in Texas. The bars for each year show the break-down of the supply of that power by year.

Natural gas (the dark blue bars below) has been consistently the most relied-upon fuel, and after a decline in the relative significance of natural gas in 2015-17, it has come roaring back in 2018-19.

Coal and the Greens

Coal is a strikingly different story. It was nearly the equal of natural gas in 2011, but it has suffered consistent decline since.

Meanwhile, the stereotypically ‘green’ energy sources, solar and wind (treated together here) provided less than 10% of the state’s electricity in 2011. But the green share, shown as the gray bar, has grown consistently, and in 2019 it provided 20% of the electricity. Its number has been rising as coal’s has been falling, and their shares are now equal, as if representing the left half of an “X”. 

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As it appeared in Reuters, “The Permian Paradox: Texas Shales Players Go Green to Drill More.”

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Why solar and wind? There is an obvious reason: Texas gets a lot of sunlight, and endures a lot of wind. It also has a lot of wide-open spaces for solar panels and windmills.

Sometimes Small is Beautiful … and Flexible

Perhaps less obviously, and more germane to the exploration and drilling underway in the western part of the state, activities that consume considerable amounts of electricity: wind and solar farms are more flexible in providing power in small increments as a project is ramped up., The other fuels mentioned (nuclear and others) may be superior to solar/wind when they can take full advantage of economies of scale, but that fact itself suggests inflexibility at smaller scales.

If an exploration company is preparing its energy mix with an eye to matching its operations, it might want to build something at a small scale and save the expense necessary to reap those economies.

ExxonMobil and Royal Dutch

The trend isn’t driven solely by the small speculative firms that often serve as pioneers. In late 2018, no less a giant than ExxonMobil signed up for 500 megawatts of green power.

Likewise, just last year Royal Dutch Shell began using solar energy to power its Permian operations.  A spokeswoman for the company said that although there are tax incentives for doing so, they are not decisive. “Whether more oil and gas companies decide to transition into renewables likely hinges more on overall corporate strategy than a single tax provision,” in the words of the spokeswoman, Anna Arata.

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