CanElson Drilling has announced that its wholly owned subsidiary CanGas Solutions has signed a three-year natural gas delivery agreement with the Bayhurst Energy Services Corporation (BESCO), a subsidiary of SaskEnergy, Saskatchewan’s Crown-owned natural gas utility.
Under the agreement, SaskEnergy will develop a high-capacity compressed natural gas (CNG) facility near Weyburn, allowing CanGas to become the first commercial supplier in Western Canada of trucked CNG for diesel engines on oil and gas drilling rigs.
“With this agreement we can start rolling out our plan to substitute diesel fuel with clean and inexpensive natural gas in our own fleet of mobile drilling rigs in Saskatchewan,” said CanElson president and CEO W. Randy Hawkings. “We expect this agreement will serve as a regional model under which we can quickly expand our CNG road transport services business to supply drilling rig engines and other equipment in markets across North America.”
As a result of the agreement with SaskEnergy, CanElson will focus $9 million of its previously announced $20 million investment in CanGas to establish a fleet of 30 Saskatchewan-based truck-hauled CNG delivery trailers, and to convert the primary diesel engines on all of its 14 drill rigs in Saskatchewan to bi-fuel capability, so that the engines can operate on a mixture of natural gas and diesel fuel.
“This agreement demonstrates how SaskEnergy can strategically use existing infrastructure to offer a new service in a region where more than 40 per cent of Saskatchewan’s oil and gas drilling occurs,” said SaskEnergy president and CEO Doug Kelln.
“CanElson and SaskEnergy have developed a business relationship that not only supports continued growth of the oil and gas sector, but also provides a viable way for that industry to significantly reduce emissions when drilling rig engines are converted to use cleaner-burning natural gas.”
The three-year agreement with CanGas is projected to generate $2.3 million in revenue for SaskEnergy. The permanent CNG cardlock loading facility, located at SaskEnergy’s Weyburn Town Border Station, will not impact SaskEnergy's ability to provide natural gas services to its residential, business or industrial customers in the Weyburn area.
CanGas will use a portion of the Weyburn CNG facility’s capacity, allowing SaskEnergy to pursue other customers in this region.
When completed, SaskEnergy’s Weyburn CNG loading facility will be the first commercial station in Western Canada designed to quickly and efficiently load trailer-sized CNG containers for truck-haul delivery. CanElson expects the station will be partially operational before the end of the third quarter of 2012 and fully operational next year.
CanGas will be the initial and anchor customer for the Weyburn station.
With significant cost savings presently between natural gas and diesel fuel, CanElson has plans to negotiate more CNG supply agreements in other Canadian locations, as well as Texas and North Dakota, where CanElson operates drilling rigs.
Once SaskEnergy’s facility is operational, CanElson expects that CanGas will be able to offer conversion and CNG delivery services to other contract drillers in the area, as well as other types of applications, such as diesel engines used to generate electric power; drill rig boilers; and fracturing equipment at drilling sites.