Overview SPE Tech Talk Sponsored by Jereh

Jereh sponsored the Society of Petroleum Engineers (SPE) Tech Talk on 19 January 2023.

Jereh is a global oil and gas equipment manufacturer and oilfield services, provider. The company was founded in 1999 and listed publicly on the Shenzhen Stock Exchange in 2010. Its market capitalization reached around $6 billion in 2022. Jereh Energy Equipment and Technologies Corporation (JEET) is a subsidiary of Jereh in North America, which opened its office in 2008. JEET has an office and manufacturing facility in Houston, USA, and an office in Calgary, Canada.

Jereh in North America manufactures and supplies oilfield equipment that minimizes emissions and is ESG compliant. The IntelliFrac is Jereh's Electric Fracturing Unit, which can be powered by the grid or with Power2Go. Apollo, its Direct-Drive Turbine Unit, generates power independently with 100% natural gas or diesel. Power2Go - Mobile Gas Turbine Genset (35MW) is Jereh's mobile power generation solution for electric fracturing fleets. Power2Go converts natural gas – wellhead gas, LNG, or CNG – to electricity, which is then used to power an entire electric fracturing fleet.

JEET's Vice President of Business Development, Lyoid Fussel, was featured as the guest, and Joe Sinnott, the moderator of the Tech Talk. The topic of discussion was ESG Focus Leads to Technology Improvements.

Joe Sinnott: Can you give us a background on the transition to natural gas as a primary fuel supply for fracturing operations?

Lyoid Fussel: Around 2012, Haliburton pushed to initiate natural gas as an alternative fuel source for fracturing operations. They converted many fleet vehicles and operating equipment to DGB and their fleet to compressed natural gas. Additionally, they did a lot of press, handed out little Hot Wheels at conferences, advertised that they had converted their fleet vehicles to natural gas, and partnered up with Chesapeake. However, the industry quickly discovered that it needed more time to prepare for that transition.

There wasn't enough available fuel-quality natural gas to deploy to the field in 2012, so they were using LNG at the time. However, there weren't enough LNG facilities near the actual work, so transportation and access to an adequate fuel source - natural gas- became an issue. Regardless of the challenges, there was a strong push. The results they had, whenever they had access to a fuel source, demonstrated that it was a good alternative fuel source. It reduced emissions and was less expensive if we could figure out how to get it closer to where we were working.

That initial push by Halliburton led to developments in transportation, more facilities where you could access compressed natural gas, and conditioning field gas. At the time, field gas wasn't appropriate as a fuel solution. While their initial push didn't go the way they had planned, it led to many advancements in the industry. It made people recognize that natural gas could be our solution to a clean burning fuel source.

Joe Sinnott: Please give us some color on the existing technology using natural gas for both direct￾drive turbines and e-frac.

Lyoid Fussel: Initially, the first use for it was with CAT conversions on diesel burning equipment to DGB, so they made it so you could cut up to like 65 to 70 percent of your diesel with natural gas. You were displacing diesel at that point.

One of the best engines for burning natural gas is a turbine engine. Greenfield deployed direct drive turbine equipment that could burn natural gas. It was an early development. However, turbines proved to be very efficient at burning natural gas and producing much more power than a standard compression engine.

So direct-drive turbines started being developed. Instead of getting a couple of thousand horsepower out of a pump, you could get 3000 to 5000 horsepower out of a pump. That started to shrink the footprint—a situation where you're getting more condensed horsepower per unit. Since the turbines are efficient, we had a turbine on every pump.

With the development of electric frac pumps and electric motors, we could get 5000 to 7000 to even unlimited horsepower out of an electric motor. Still, you needed a considerable amount of electricity to do that, more than what you could get straight out of the grid.

So we started looking at large turbine generators, 30-megawatt generators. These generators could power up to 10 or 12 electric frac pumps. And that's how we got to where we are now. Since the turbines could burn natural gas more efficiently, turbines moved in as the new solution to the industry's future.

You could 100% replace diesel when burning natural gas in a turbine. With a compression engine combustion engine, you could only displace about 70% of your diesel consumption.

Joe Sinnott: What are some of the challenges or disadvantages of these technologies? Can you offer some insights on the pros and cons?

Lyoid Fussel: The pros initially for diesel were that it was readily available. We had plenty of supply and transportation networks built in, and diesel has been proven a reliable fuel source for decades.

One of the drawbacks of converting to natural gas as a fuel source is that not all the natural gas available in the field is fuel-quality natural gas. Turbines can burn a wide range of BTU, but they don't like liquid hydrocarbons and water. So while they can burn a large BTU range, you have to make special efforts to ensure that all of your gas stays in the gas phase and you're not putting liquids into the engine. So you have to think about your fuel source more; you can't just fill up a tanker and bring it to the location. If you're going to use field gas, you've got to condition that field gas properly. You have to do some analysis and studies to ensure you understand your BTU range, condensates, and liquids and adequately address all those things.

Regarding advantages, the natural gas you have in the field will be your least expensive fuel source since it's your product. So it's cheaper than purchasing and transporting diesel. Another benefit is that the turbines have a high power rating, so the amount of energy they can produce from natural gas as a fuel source can significantly reduce your footprint.

In a traditional diesel fleet, you're looking at 16 to 25 pumps, depending on the rates you're pumping on location, for a 50,000 to 60,000 horsepower fleet. For electric frac, you're looking at 8 to 10 pumps, and with Direct-Drive, you're looking again at 8 to 12 pumps replacing 16 to 25 pumps, so you significantly reduce your footprint.

The electric fracturing equipment requires a large natural gas turbine generator to power it unless you can connect to the grid if you have the grid capacity to power the e-fracs. But if you have to use the large generator, yes, the large generator does have a footprint, but it's still not quite as big as conventional diesel fracturing. The generator can be transported away from the location; it doesn't have to be in the exact location of the electric fracturing equipment.

Joe Sinnott: What do you think is the future of fracturing operations? At least here in the US.

Lyoid Fussel: Electric fracturing equipment is more popular through publicity, public opinion, etc. The grid can power electric fracturing units; they're very quiet and run environment-friendly operations without disturbing the community. Plus, there is an extremely high horsepower rating that you can get out of the electric equipment. In addition to that, the electric equipment can fine-tune injection rates and pressure. They have a lot of control ability because no gears and lockouts are required. You can set down to the decimal point exactly how much rate and pressure you want to produce with the pump. Electric frac pumps will be one of the leading technologies in the future.

The future of e-frac operations is also microgrids or sub-grids, where instead of putting your generator right on location. You stack some generators off-site, transfer that power through power lines, and build a temporary grid to run the equipment. That's the direction most companies are trying to move.

Joe Sinnott: What is the primary consideration that operators or companies have when deciding between an electric fleet, direct-drive turbine fleet, and DGB fleet?

Lyoid Fussel: So if you're moving into using natural gas as your fuel source, DGB is the easiest to implement because it's the most familiar. It's the same compression engine that you've used in the past. You're just displacing some of your diesel with natural gas. So DGB is absolutely a viable alternative, and it does improve your emissions and your environmental footprint. It's one of the easiest to implement. You can put it in a conversion kit on your standard diesel equipment, and soon you're burning 60 to 70% natural gas.

One of the benefits of direct-drive turbines is the footprint. Because in a direct drive turbine scenario, what that means is that every hydraulic fracturing pump has a turbine associated with it. So you have a lot of smaller turbines on location. So if you have 10 hydraulic pumps in our scenario, you have 10 smaller turbines. So you don't need a big generator separately. Each one is independently powered - by its engine. If you're in a very remote location with a minimal footprint, say you're in a mountainous area where you cannot make a large footprint pad. You can get a lot of horsepower in a small space because those units are smaller and individually powered.

Electric frac would be the best solution in an open space with a strong grid. If you remove the generator from the location and run off the grid, the power and cost savings you can get from the electric frac are unmatched. The cost savings will be unmatched if you're connected directly to the grid.

Each one has a unique application solution where it fits the best. DGB is the one that people go to first because it is the easiest to implement, and you can convert some of your old equipment into DGB equipment. But if you're looking to move into the turbine or the e-frac market. You'll have to upgrade your pumps because a 2500 or 3000-horsepower pump is not going to be enough to get the full utilization of a direct drive turbine or an electric frac unit.

Joe Sinnott: What about maintenance costs?

Lyoid Fussel: The exciting thing is whenever you have a new development, and you have your cost￾benefits analysis - for every benefit you get, there's a negative that you get. That's not the case with this new equipment. In traditional diesel equipment, everybody knows the maintenance required with your oil changes and filters. There are lots of fuel injection systems that need to be maintained and things like that.

With the direct-drive turbines, they're low maintenance. No oil and filter changes are required if you provide them with clean fuel, unlike traditional diesel engines, which require constant maintenance.

Concerning the electric pumps, the maintenance moves over to the gas turbine generator. So if you can use an ideal grid scenario, our grid in the US isn't quite to the point that it needs to be to operate electric frac equipment. So you will have to use the gas turbine generator initially until we upgrade our grid or our infrastructure to where it can handle e-frac operations. But if you don't have a generator on location, the electric frac equipment maintenance is almost nonexistent. You still have to do maintenance on your fluid end and your pump and your valves and seats, but the actual power system for the pump, the electric motors, has thousands of hours before they need any service whatsoever. And there are no liquids to change and filters to change. So, believe it or not, the maintenance goes down significantly on direct tribe turbines and electric frac compared to a traditional diesel fleet or a DGB (Dual Gas Blend) fleet.

Joe Sinnott: One thing you shared is the waste stream that ultimately goes into a landfill. How do companies factor in a reduced waste stream and some things that might be more challenging to quantify as fuel savings and smaller footprints?

Lyoid Fussel: The waste stream involved in the maintenance is overlooked. However, operators across the board are starting to focus on ESG. It's been pushed by the public and by some regulatory facts but also been proven over the last decade that if we focus on that, it is achievable. We first started talking about trying to reduce emissions and protect the environment. Our industry tends to stay the same because what we're doing works, and we are familiar with it. Focus on ESG has led to an increase in horsepower and a reduction of footprint; it reduces the number of people you need on location and the number of truck moves on the highway. The ramifications expand beyond just the fuel we're burning and our emissions. Because we no longer have the emissions from 20 diesel trucks to move the frac equipment to location, we only have 10 now to move 10 pumps.

Joe Sinnott: The reality is humans, by nature, especially in our industry, can be skeptical. So as a parting comment, I'd love you to address that one lone skeptic who just listened to you for the last 30 minutes and isn't convinced that this new technology and everything you just described is all that.

Lyoid Fussel: I can see where the skeptics are like, "This all sounds good. Why hasn't everyone converted yet?"

Well, it costs money. It's not cheap. You know you have to invest in doing the conversion. If you look around at the companies that have started to make the change ask how many have changed back. That's what I say to the skeptics, so the guys that started with diesel converted to DGB. How many of them are uninstalling their DGB kits to return to diesel? Ask yourself how many companies have added e-fracs to their fleet and sold off their electric fracturing only to keep their diesel fleet. The answer is none. The guys that have implemented both end up selling off their diesel equipment and keeping the electric.

The same is true for the direct drive turbine. There are a few companies out there that are doing the direct-drive turbines, and you'll notice that whenever they change their structure, that's what they keep. And they get rid of the diesel. So that's what I would say to the skeptics.

The proof is in the pudding because it's a learning curve. There are things that you have to understand to move into the business. But if you just look out at the industry and see what's happening, you can see more and more of this equipment rolling out. And fewer people are interested in old diesel equipment. So for the skeptics, I recommend looking at the people that have done it and seeing how many are retreating.