00:00:03 Russell Stewart
This episode of the Energy Pipeline is.

00:00:05 Will Kernan
Sponsored by Caterpillar Oil and gas. Since the 1930s, Caterpillar has manufactured engines.

00:00:11 Russell Stewart
For drilling, production, well service and gas compression. With more than 2100 dealer locations worldwide.

00:00:20 Will Kernan
Caterpillar offers customers a dedicated support team.

00:00:23 Russell Stewart
To assist with their premier package, power Solutions. Welcome to the Energy Pipeline Podcast with your host, Russell Stewart. Tune in each week to learn more about industry issues, tools and resources to streamline and modernize the future of the industry. Whether you work in oil and gas or bring a unique perspective, this podcast is your knowledge transfer hub. Welcome to the Energy Pipeline. Hey everybody. As always, thanks for listening and thanks to Caterpillar Oil and Gas for. For making this podcast possible today. My guest on the show is someone from Caterpillar, got Will Kernan on the show today. Will, thanks for coming on.

00:01:11 Will Kernan
Thanks for having me, Russell. It's good to be here.

00:01:13 Russell Stewart
Okay, so Will, you're with Caterpillar Oil and Gas, is that right?

00:01:20 Will Kernan
Yes, it is.

00:01:21 Russell Stewart
And your title is?

00:01:24 Will Kernan
So I'm our strategy manager for power generation in oil and gas. So it's a lengthy way of kind of saying I kind of guide and understand our market used of how all of our generators are used and what kind of the power needs for the oil field are and what products Caterpillar needs to develop and use to meet our customers needs.

00:01:48 Russell Stewart
Okay, well, you just said a mouthful there, but that's what we hope to fill up the next 30 minutes with. I'm excited to hear hear some of that. Are you in Houston?

00:01:59 Will Kernan
Yes, yes, I am.

00:02:00 Russell Stewart
And are you from Houston?

00:02:03 Will Kernan
No, I'm originally from Chicago. Moved down to Houston about eight years ago or so now. Time, time flies. I can't believe it's been that long already.

00:02:13 Russell Stewart
Okay, so you came down to Houston, what, transferred with Caterpillar or how'd you get down here?

00:02:20 Will Kernan
Yeah, yep. Moved down here with Kat and just been working here ever since.

00:02:24 Russell Stewart
Okay. All right. So where'd you go to school?

00:02:27 Will Kernan
I started up in the Midwest, University of Iowa. So go Hawkeyes.

00:02:32 Russell Stewart
There you go.

00:02:34 Will Kernan
Since around there, since I'm from Chicago, you know, started in the Midwest.

00:02:38 Russell Stewart
So I'm not exactly sure when this podcast will. Will air, but as we're talking right now, we got the college football season coming up starting this weekend, I believe so. So you're. So how's your team looking this year?

00:02:54 Will Kernan
Like most years, you know, our defense is going to be awesome and our offense is going to be more questionable, let's say. So it's going to be another slog of A season, I think.

00:03:06 Russell Stewart
Okay. All right, well. Well, good luck to you. So, okay, so strategy management in power generation, I think for a lot of the audience, you know, and it's 99% oil and gas, but even at that, it's amazing to me how many people are in oil and gas and they're in offices and that sort of thing. And, and they've actually never been out on a. On a drilling rig. And they don't understand it takes a lot of power to, to make a drilling rig operate. Right.

00:03:48 Will Kernan
Yeah. And, you know, drilling rigs frac spreads, gas compression. When, when you really start to think about how many different elements of the oil field that there are, I think the, the power numbers that are used in oil and gas, they. They creep up and stack on top of each other a lot faster and a lot higher than a lot of people think about, Especially when, you know, everyone's got a lot going on. We tend to focus in on either just our drill rig or just our frac. Our individual frac spread.

00:04:23 Russell Stewart
Okay, so you don't just plug in. You just, you just don't plug it into the wall outlet, huh?

00:04:30 Will Kernan
No, as. As much as we. I think we'd all love to do that, but then I'm pretty sure our utility, the utility grids and everything will have quite the. They'll still have something to say about that or that wouldn't quite work so well.

00:04:45 Russell Stewart
Well, and so you mentioned utility grid and of course, especially in Texas and you know, all across the country, I guess we're kind of worried about our power grid. It's under a lot of stress, isn't it?

00:05:03 Will Kernan
Yeah, it's an interesting, I'll say, transition time for the power grid right now. It's. And a lot of it's, you know, to be honest, not being driven by the oil and gas. We're obviously adding load is more electrification and efforts on that front from oil and gas. But you know what everyone, what's everyone's been talking about, right, is AI and data centers and that big boom that's kind of happening right now. But when you think about the utility grid, everyone uses it and it's all produced for everyone the same per se, right. So if you have a sector like AI data, data centers that are adding a significant amount of capacity and load to the utility grid, all of a sudden your. Our oil and gas side of the world, you know, is all of a sudden having to compete, if you will, for more for the priority of getting that electricity or the poles and wires and everything. And also, you know, building grid scale power plants is not a simple thing. Right. They're pretty large projects and they take time. So it creates this bit of a crunch time we're in right now of everyone's trying to get more power and expand their operations. And of course, that's before you even touch on economics and affordability and all those other secondary things that are pretty important too.

00:06:30 Russell Stewart
Yeah. And things like bitcoin. I think that's adding a lot of stress on the power grid and that sort of thing. So you mentioned, you mentioned electrification. So run me through what Caterpillar is doing in upstream and midstream oil and gas operations as far as power generation goes. Give us, I guess, kind of an overview or whatever.

00:06:57 Will Kernan
Yeah. And. Well, we can fill our entire podcast just talking about that.

00:07:02 Russell Stewart
Okay.

00:07:04 Will Kernan
It's, you know, we're trying to, I'll say, look at each of the individual parts of oil and gas and expand and meet those needs where they are. Right. So, you know, on the drilling front, they've electrified 20 years ago where they moved to fully electric rigs. Right. But, but now we're seeing more and more on how do you tie the utility into drilling rigs. Right. Drilling rigs are a very difficult electrical profile to use with utility and generators and mixing all this together. So we're spending a lot of time in that space around integrating those controls utility with our generators and our battery systems and trying to make all that kind of seamlessly work together. And then as you even get farther down with, you know, into the frac space, we've been offering EFRAC engines with our G3520 for some time now and continuing to support kind of all those platforms. And you know, when it gets to, I would say your more production type areas is really helping on the power generation side. Right. Of people in oil and gas, we've got a unique situation where we have an abundance of natural gas or flare gas, field gas, you know, take your pick of, of what we have. And in Caterpillar's got the, the generators and the engine expertise to convert that excess energy, you know, whether we're constrained by pipelines or flaring or something like that, and convert that to usable electricity that we're talking about right now as we're in short supply of. So it's kind of a, it's a wide gambit across the entire industry. But we are trying to, you know, meet all the ass and needs across the board.

00:08:49 Russell Stewart
Okay. So we're, we're getting away from, I guess what Back in the old days and I'm old was just diesel generators. Right? Yes, and. Go ahead.

00:09:08 Will Kernan
I'll say yes. No, we've. There's a pretty strong shift away from diesel just due to high cost of diesel fuel and high emissions to that natural gas. And also driven by again, natural gas is much cheaper. Emissions are lower. And part of that cheaper point is it's so abundant.

00:09:27 Russell Stewart
Yeah, it's so abundant that you mentioned flaring. You know, we just burn it off. And that's of course that's not good for emissions and it's, it's a waste. And so actually I think caterpillars kind of led the way in that and being able to, to capture that and run it in your engines. Right.

00:09:51 Will Kernan
Yeah, we have, you know, we kind of started that really focused on in our compression space with the G3600 product line. Right where it really is one of the most fuel flexible engines. I mean, that's really the challenge when we're talking about flare gases. You know, not all natural gas is the same. And so being able to burn kind of that, those weird constituents or weird mixes of different fuels is really can be a challenge on the, on the design side of the engine. So. And, and we're kind of continuing to carry that expertise where that started with compression and now it's. How do we move that expertise into the power generation space so that, you know, we can enable new projects that before would have never considered generating electricity. They. Because what generator could ever burn this very weird flare gas or particular composition to now it can open up new doors for new projects to convert something exactly like you said is a pure waste product that you don't know what to do with and convert it into something, electricity that is now a very desired commodity today. Right. We need more of it.

00:11:02 Russell Stewart
Exactly. And approaching it from that angle, it throws the economics into the thing. And. But you know, the old ideas were that, you know, you're talking about environmental and that's like at odds with, you know, our operations and that sort of thing. But what you're, what you're really, what we're really learning to do is we're really, we're learning to be environmentally friendly in an economical way. And that's really going to, you know, pave the way to better environmentally friendly type operations and that sort of thing. I'm curious, you mentioned about natural gas. Not all natural gas is the same. So how do you, how do you deal with that as far as your engines goes? I mean, what, what are the reliability requirements Those sort of things.

00:12:05 Will Kernan
Yeah. And that's, that's a tricky one, I'll say. But a lot of it does come to that. You know, when we say natural gas, I think a lot of people default to methane. Right. That's what we burn in our homes and everything like that. But you know, other gases that people might be familiar with. Right. Is propane. Right. A lot of people have, especially in more rural areas, have propane tanks for their heat and stuff like that. Right. Those two gases will just simply burn differently. They have much different energy contents in them. You know, how much fuel you actually need to put in the engine to get a certain amount of power out of it, things like that. So on the engine design side, it really comes down to making sure that we, I'll say tune combustion and tune the engine to burn different types of fuel, control the fuel. And it does come down to, again, I'll say some pretty basic of how we design engines. Right. That's what Caterpillar has an expertise on. But you know, and when we, from our view, when we're designing it there, the whole point is to not impact what you mentioned, reliability or durability, that's an important part of when we think of oil field operations and power generation is that that reliability is one of the most important things that you can have. You know, again, to use your, you know, we mentioned drill rigs and stuff earlier. Those generators are the only thing powering that drill rig most of the time. If they have problems, that rig is going to black out. You're introducing obviously the production risk, but even more important than that, the safety risk and everything like that. So, you know, when we look at all these different types of, you know, I kind of mentioned new opportunities and new projects, that reliability durability piece still stays first and foremost.

00:13:51 Russell Stewart
Okay, so grid alternatives compared to the utility grid, where are we there on that?

00:14:02 Will Kernan
I would say it's an interesting mix right now. There's a couple different ways when I think people look at the grid versus a grid alternative. First is obviously the lead time to get that connection right. As more and more people are trying to put on large loads, again kind of referencing data centers. But as well as that's a lot of oil and gas projects too, your utility is going to tell you, start telling you longer and longer times to get that connection in there. Right. It's no longer, hey, we'll be there in six months. It's got. Now you're talking multiple years.

00:14:39 Russell Stewart
Oh, wow.

00:14:40 Will Kernan
Yeah, they can get pretty long for some of those projects. And again, remember that you're competing against data centers, right? They've got a lot of pull too, in their ability to kind of get. Get connections. So you're talking that that's obviously one element. The second, the reliability portion, people are starting to have more questions about where. And I think this is still a little bit of an unknown is, you know, we're having a bigger renewable shift in our utility grid. Right. With. With typically a lot. If you look at the US Grid, coal continues to kind of drop off, natural gas continues to grow and renewables continue to grow. Those are kind of the main sources that we're using these days. You know, what's that reliability with renewables look like backed up by natural gas? So I think there's questions there. And then when you look at the alternative sides on the reliability, you know, obviously you've got, you know, if you're talking like a reciprocating engine or a turbine, you know, realistically, you know, they're going to have maintenance, they're going to have downtime, that they're, that it's expected. You know, how do you accommodate that? Do you have extra units on site or rental units that get kind of wheeled up? You know, there's a couple alternatives. You can do that to fill in those gaps. But there are, you know, there, there's no silver bullet, right. There's no perfect option. So it kind of becomes a mix.

00:16:05 Russell Stewart
Okay, so let me make sure I understand this. So we're, we're getting away from diesel, but we're not completely away from diesel. Right.

00:16:19 Will Kernan
You'll see diesels are really being moved back into now the standby market. Right.

00:16:24 Russell Stewart
Okay.

00:16:24 Will Kernan
Yeah.

00:16:25 Russell Stewart
So what I thought was, and I'm sorry to interrupt you here, but I'm trying to get my head around this thing. So I know Caterpillar is, because I've interviewed and talked to several other people from cat. You have what are called these dual fuel engines. And I thought that was combination diesel and natural gas, is that not right?

00:16:50 Will Kernan
No, that's correct.

00:16:51 Russell Stewart
Okay. And then you mentioned batteries a while ago. So you've got an electrical aspect to that other than, you know, the traditional diesel fuel or natural gas. Is that right?

00:17:10 Will Kernan
Yes. You know, batteries bring a, bring another dynamic into the power space. Right. Of they obviously batteries don't generate energy. Obviously, they store.

00:17:22 Russell Stewart
You have to. Yeah. Okay, so how does that work?

00:17:26 Will Kernan
Well, and often we're looking at, you know, where are you charging that battery from? Right. Whether it is when electricity is cheapest from a utility grid or Using it to load up your generators. Right. When, you know, run your generators at a more efficient loading load point where you're charging and then able to use that discharging later when you're, for instance, shutting off a generator, you know, you can. There's a bunch of, I'll say, economic models that you could kind of run to use that battery to save yourself money or use that battery as a performance enhancer. Right. Batteries can respond to a change in load much faster than any engine can. So it can also enable again, new applications that traditionally a. A generator may have had a lot of challenges meeting. Right. Keeping the electricity a stable batteries can help be a solution to that.

00:18:22 Russell Stewart
Oh, wow. Okay. So, you know, one of the things about diesel is, I mean, everybody knows who, who drives a pickup truck. You know, you got a gas engine, you got a diesel engine, you expect probably you're going to get two to three times the mileage out of a diesel engine than you are gas engine. So how do all these alternative fuel sources impact engine performance and capability?

00:18:55 Will Kernan
I would say the biggest difference you'll typically see between your diesel engines and your natural gas engines is power. Your power will get less on a natural gas or you'll be using a larger engine to a larger natural gas engine compared to a diesel, which does get purely down to power density of the fuel. Right. Which, you know, there's a lot more carbon molecules to burn in combustion in diesel than there is in natural gas. Right. So it kind of, I'll call it, it's chemistry to kind of see that difference. But again, when you still shake down the economics and, you know, fuel consumptions, you know, you're going from gallons to, you know, mcf or some type of flow and gas, it still comes out much cheaper on the gas side is kind of the bottom line. Now, again, we mentioned that diesels are still in the standby market. There are still benefits to that. Right. Like it's much easier to store a gallon of diesel. Right. Than it is to have a pressurized tank of natural gas. There's a lot more safety and challenges around that. So, you know, there are still to be clear fits for the diesels. But when we're really looking at kind of, we're talking about these power challenges, we're looking at the majority of operations, right. That are going to be operating for a long period of time and you're going to be using these generators a lot. That's really what starts to lean into the economics of gas.

00:20:25 Russell Stewart
Okay. And you guys supply all the aftermarket Support for that, right?

00:20:31 Will Kernan
Yes, for all of our products. We have a full aftermarket support network set up through our dealerships that cover the entire, you know, entire world. And so we can basically have local boots on the ground anywhere our products are.

00:20:47 Russell Stewart
Okay. And so what's, what's new or what's coming up? What strategies are you, are you planning here?

00:21:00 Will Kernan
Oh, you know, given how busy we are these days, there's, there's lots going on really. I would say the, you know, the focus is trying to get, as we're seeing all these changes happen and increase and I think we all see the demand increasing, is getting the right products out for everybody. So recently, I think it was just Last year, the G3520K model was a brand new release from us at 2.5 megawatts, offering our most efficient engine yet, but also starting to really move into why it's still very efficient but not having to compromise on some of the traditional things you would think about for high efficiency engines like core transient capabilities. So really taking that step of reducing compromises but also seeing that, you know, people are needing, you know, bigger power than even, you know, a 2.5 megawatt unit. So we're also in process right now of introducing, based on our gas compression engine, a G3616 Genset which will be rated for 3.9 megawatts. And you know, we were talking about fuel flexibility early, bringing all the fuel flexibility that we've learned from compression into the power gen space, being able to burn some truly, I'll say atypical gas compositions while not compromising on that durability piece of keeping that strong durability reliability that our 3,600 engines are known for intact and bringing it into the power gen space.

00:22:36 Russell Stewart
Okay, so the, you know, all the major drilling contractors or drilling companies, they're your customers, but you mentioned there's, there's more to it than just drilling. You know, you've got production and you've got, so you work with the operators on this to develop and design these non grid power solutions or how does that work?

00:23:10 Will Kernan
Yeah, a pretty significant amount of work goes into understanding what the use case is going to be. Right. As I mentioned that if this is your main focus on power, how you're going to use it's very important. So understanding, there's a lot of work that goes into understanding how the power is going to be consumed. Right. What performance do you actually need out of the, out of the engines and the generators and then also understanding what are Those maintenance practices going to be, how are you going to be servicing these engines and what, what do you need the engines to do? You know, where's our focus need to be about? You know, there's improvement, there's always improvement to be had. Where do we need to be spending our time improving the, I'll say, operation side of the engines. But yeah, there's a lot of conversations that happen to understand that and develop and our understanding current as, as times.

00:24:05 Russell Stewart
Are changing and that's the value Caterpillar oil and gas adds is that kind of expertise besides just, you know, the fact that you make the best engines.

00:24:17 Will Kernan
Exactly. You know, we, we spend our time focusing on the oil field. Right. There's a lot of other places that need power. Right. Hospitals, data centers and you know, everywhere else. But for cattle and gas, we're going to focus explicitly on the oil field and to our customers that are servicing the gas industry.

00:24:36 Russell Stewart
Well, and we certainly, we certainly appreciate that and we appreciate the critical role Caterpillar is playing in the impact they're having on the power landscape. Before we check out of here. Anything else you want to mention that I missed?

00:24:55 Will Kernan
No, it's, I think, you know, I appreciate you having me on, Russell. It was a great conversation and it's going to be an interesting topic to stay, I'll say, stay in touch with on. Right. The, the power gen and power market is going to continue to be very dynamic for at least the next couple of years. And after that, how many years? Everyone's got a crystal ball to try and figure that out. But I think as we'll continue to Caterpillar, we're going to make sure that we continue to meet our customers needs and stay at the forefront of making sure our engines have all the reliability, durability, support that all of our customers need to meet their power needs.

00:25:35 Russell Stewart
Okay. So I appreciate that, but what you just said made me want to ask one other question here. Okay. So. So you know, we're talking, we're talking grid alternatives compared to the utility grid. Are these grid alternatives going to in the future support the utility grid?

00:26:04 Will Kernan
I would say that that's probably. There's a, it becomes an increasingly likely chance of yes. Right. As we deploy these, you know, assets and Caterpillar engines are known for their longevity, it becomes a natural use case to say, well, why are, if you have excess power, you could supply the grid, why not? Right. There's a, there's some economic questions in there obviously, but I'll put it this way, there's no reason they can't.

00:26:32 Russell Stewart
Well, the reason I think that's significant because we talked about at the beginning the strain on the current utility grid and there's been some questions. I'll just leave it that way. Especially here in the state of Texas, you talk about, you know, renewable sources and whatnot. And you know, we, we, we found that to kind of come up lacking here two, three years ago when we had a tremendous winter freeze all across the state that we don't generally have. And I'm, I'm just thinking this is, is another source that we ought to be thinking about and it seems to make sense to me.

00:27:26 Will Kernan
Yeah, no, it's, it definitely, it can get, you know, tricky when you get to actual, you know, I'll say the utility connection elements, right. That it's not as simple as just plugging it in. But like you said, it's definitely possible. And I think these will be things that will continue to be explored as time goes on as, as people, you know, get their, their installed power base larger and larger.

00:27:52 Russell Stewart
I'm sorry, Will, that makes me think of another question and you, you mentioned it earlier in the, in the, in the podcast when we're talking about hooking these engines up to, instead of flaring the natural gas now we're going to, we're going to take that natural gas and we're going to, we're going to run that engine off of it. And you talked about safety concerns and that sort of thing. And so you just now mentioned that there's, you know, you can't just take this alternative power and just plug it into the utility grid. So how difficult is it on the production side or the drilling side or whatever, how's that work to take that natural gas and facilitate it for the engine?

00:28:48 Will Kernan
You're talking kind of on the, just getting it basically from the field into the engine.

00:28:54 Russell Stewart
Right, right. Is that difficult? Is that dangerous?

00:28:57 Will Kernan
Is that overall, No, I don't think so. And just the, you know, I'll say the consumption side of the fuel, that's pretty established and kind of how all these different indust industries work. You know, a couple of years ago when hydrogen was a very interesting topic that one brought, I would say a lot more safety risk just due to the nature of hydrogen. But you know, when it comes to natural gas and I'll say the traditional carbon gases like, you know, methane, butane, propane, all those, those are very well understood and that's very standard. You know, and I was referring to earlier about like safety, you know, when you do have storage of natural gas. That's where you kind of have to introduce some questions. Right. Just to, you know, if you have pressurized fuel, basically. But when you're just consuming from the oil field or flare gas or especially in a flow type setup, there's. They're minimal.

00:29:57 Russell Stewart
You guys got that down pat. Been doing it a long time.

00:29:59 Will Kernan
Yeah, I think the industry does okay.

00:30:02 Russell Stewart
Well, I really enjoyed this conversation and as you said, since the landscape keeps changing, we'll have to, we'll have to maybe hook up down the line here and see, see what actual changes and progress has been made.

00:30:22 Will Kernan
No, that would be great. And I'm sure that we'll have a lot more to talk about. And like I said, I appreciate the time. Thanks, Russell.

00:30:28 Russell Stewart
Okay. All right. And as always to everybody out there, we appreciate when you leave us reviews and posts on LinkedIn and tell your friends to listen to us and we' see you next time.

00:30:40 Will Kernan
Thanks for listening to oggn, the world's largest and most listened to podcast network.

00:30:45 Russell Stewart
For the oil and energy industry.

00:30:46 Will Kernan
If you like this show, leave us a review and then go to oggn.com.

00:30:51 Russell Stewart
To learn about all our other shows.

00:30:53 Will Kernan
Don't forget to sign up for our weekly newsletter. This show has been a production of.

00:30:57 Russell Stewart
The oil and gas.