GE pushes gas power for drill rigs, Caterpillar's diesel turf


* Caterpillar has dominant position in market for rigengines

* Tighter emissions rules may accelerate switch

* GE says gas far cheaper for drillers than diesel

By Terry Wade

HOUSTON, Nov 12 (Reuters) - General Electric Co istrying to deploy more of its natural gas engines on rigsdrilling for hydrocarbons in the North American energy boom -where Caterpillar Inc diesel engines have long been theindustry standard.

The sales push comes as GE forecasts global natural gasconsumption will rise by a third through 2025 and as it makesstrategic investments in the gas sector - like its 2010 purchaseof U.S. engine maker Waukesha.

Rigs, mammoth machines that bore holes in the earth beforethe extraction of crude oil and natural gas, normally rely onthree engines that burn expensive diesel and operate around theclock.

Engineers at energy and drilling companies consulted byReuters - from Ensign Energy Services Inc toPatterson-UTI Energy Inc and Devon Energy Corp - say that natural gas engines are far cheaper to run thandiesel, which is often trucked in to remote drilling sites fromfar away.

GE says potential savings are significant and that runningcleaner-burning natural gas would help curb greenhouse gasemissions from rigs and reduce tanker truck traffic onoverburdened local roads near drill sites.

"Exploration & production (E&P) companies can save $600,000per engine, per year by switching to natural gas-fueled enginesversus diesel. E&Ps can realize a $1.8 million fuel savings perrig by using field gas versus diesel," GE said in an email.

There are about 1,700 oil and gas rigs actively drilling inthe United States, according to Baker Hughes Inc.

According to several industry experts, at least 80 percentof the diesel engines are made by Caterpillar, followed bysmaller market shares for Cummins Inc and MTU DetroitDiesel.

Caterpillar declined to comment on its share of the rigmarket, but emphasized it has a line of natural gas engines itis also selling to clients.

"In the gas space, we are seeing a big opportunity," saidSteve Igoe, Caterpillar's commercial manager.


The adoption of gas engines has been slower over the pastcouple of years than many in the industry had predicted - inpart because of infrastructure constraints.

But the switch to gas rigs may start to accelerate asstricter diesel regulations from the U.S. EnvironmentalProtection Agency take effect in 2015, more filling stationsoffer compressed natural gas, and newer engines are set up toburn gas from local wells.

Evidence of the pace of change to gas and away from dieselis mostly anecdotal.

Ensign said it has about 300 drilling rigs globally andabout 20 of them can run natural gas, with four those beingso-called dual fuel engines.

Of some 192 rigs in operation, Patterson has four rigsrunning entirely on natural gas and has commitments to powerfive other rigs with gas engines.

"How far and how quickly things will grow is unknown - butit is clear that companies are moving beyond the pilot projectphase," said Brian Murphy, engineering manager at Ensign.

Competition in the market for rig engines between GE andCaterpillar is just the latest skirmish in a pitched battlebetween the two titans - which already compete in the lucrativemarket for locomotive engines and replacement parts.

Both companies say their gas engines can run on gas thatvaries in quality and that may contain liquids. That means a rigcould in theory run on gas produced at local wells.

But relying on field gas can be tricky.

"These wells don't give up a steady supply of gas all thetime so that means you are depending on a well for fuel thatvaries and that becomes a dynamic situation," said MichaelMatlock, a senior facilities engineer with Devon.

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