SOURCE: Zeus Development Corporation

Zeus Development Corporation

June 12, 2013 10:10 ET

Natural Gas Penetrates 6% of Land-Drilling Market, Zeus Conference Concludes

HOUSTON, TX--(Marketwired - Jun 12, 2013) - Proponents of natural gas as replacement for diesel have achieved the greatest penetration with drilling rigs, according to an investor conference hosted by Zeus Intelligence, June 4. The chief executives from American Power Group, Inc. (OTCQB: APGI) and Prometheus Energy reported that about 70 of America's 1,200 land-based rigs are now powered with gas from LNG, pipelines or wellheads.

The electricity to power these rigs is commonly supplied by large reciprocating engines, according to Lyle Jensen, CEO of American Power Group, a manufacturer of diesel-engine conversion kits. He explained that each rigs is commonly powered by three units, ranging in size from 750 hp (0.6 MW) to 1,500 hp (1.1 MW).

Increasingly, contractors, such as Ensign Energy Services and Patterson-UTI Drilling, are converting these diesel engines to dual-fuel natural gas. The dual fuel systems, like those offered by APGI, enable about 50% gas consumption, but revert to 100% diesel should supplies be interrupted. Prometheus Energy and Linde have aligned with companies like APGI to offer complete LNG solutions.

Prometheus Energy CEO Jim Aivalis said the volume of LNG his firm supplies has been doubling every twelve months. Prometheus liquefies gas and markets the fuel for third parties to drillers and other industrial consumers, like mines and power producers. He estimates demand from these markets is about 12 truckloads per day (120,000 gallons per day), climbing to 160 truckloads (1.6 million gallons per day) by 2018. Most demand will come from rigs and hydraulic fracturing pumps in the Marcellus, Eagle Ford, Permian, Rockies and Mid Continent production regions.

"We've gone from six power units in 2011 to now 115," Jensen said. "It's a now multimillion dollar market with 90- to 120-day paybacks."

Demand has been so strong that Caterpillar, a major supplier of rig engines, has entered the market. The company began marketing its conversion kit last year.

"We're glad they're here," Jensen told the audience. "They legitimized the market, and we're listed as their number-one competitor."

On June 25-26, Zeus will host back-to-back workshops in Houston to review methods to expedite LNG fuel supply. David Hill, VP of Encana, and Brian Murphy, engineering manager, Ensign Energy Services, will describe the latest in drilling markets. Information online at http://www.zeusintel.com/ZeusEvents/ISO2013.aspx.

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