00:00:00 Jordan Yates
This episode of The Energy Pipeline is sponsored by Caterpillar Oil& Gas. Since the 1930's, Caterpillar's manufactured engines for drilling production, well service, and gas compression. With more than 2, 100 dealer locations worldwide, Caterpillar offers customers a dedicated support team to assist with their premier power solutions.

00:00:26 Speaker 2
The Energy Pipeline is your lifeline to all things oil and gas, to drill down deep into the issues impacting our industry. From the frac site to the future of sustainability, hear more about industry issues, tools, and resources to streamline and modernize the future of oil and gas. Welcome to The Energy Pipeline.

00:00:49 Jordan Yates
Hello, everybody. Welcome back to another episode of The Energy Pipeline. It is me, your host, Jordan Yates, and today, I'm here with Jamie Stewart, the president at EnQuest Energy Solutions. Jamie, how are you doing today?

00:01:02 Jamie Stewart
Doing great. Thanks for having me on.

00:01:04 Jordan Yates
Absolutely. Guys, we are recording live from PBIOS. I, for the longest time, kept calling it PIBO, so I'm glad I finally got it down before I got here.

00:01:14 Jamie Stewart
I've heard it called many different things, from PBIOS to the Permian Basin Oil Show. It goes by many names, but PBIOS.

00:01:22 Jordan Yates
That's where we are.

00:01:23 Jamie Stewart
Is what we're supposed to be calling it, yeah.

00:01:24 Jordan Yates
All right, I'll try to stick with it. So you guys are a company that has recently been integrating this eFrac technology. It's very hot in the market, it's hot in just a conversation, it's a cool thing to be doing. Can you tell us how long you guys have been doing eFrac technology?

00:01:45 Jamie Stewart
Yeah. So we started with our electric frac offering back in August of 2020 when there wasn't much going on at all. We were in the height of COVID, and we needed something to do, and we had a client come to us and say, " Hey, we want to be ready for when this thing turns," and we think now is a great time to invest in our NextGen technologies, so they said, " We would like to partner with you and have you guys do all the engineering, and then do the manufacturing for us, and take our feedback, and build it in the vision that we would like you to build it for us," and that's how we wound up in the electric fracturing business. It just so happened that another bright, shiny, new electric frac offering came out in the middle of our joint project with this client, and they needed to get to the field faster. They were probably six months ahead of where we were, and so we amicably broke up, and we wound up with all the technology.

00:02:49 Jordan Yates
Wow.

00:02:49 Jamie Stewart
Today, that client and EnQuest were back together again.

00:02:55 Jordan Yates
Wow, you guys must be very capable for someone to come up to and be like, " I need your engineering resources, your manufacturing, and all of that, and here's my vision. Make it happen." What else do you guys do at EnQuest? Like how are you involved in the oil and gas industry?

00:03:10 Jamie Stewart
So electric frac is a new and exciting area. Another new and exciting area for EnQuest is power generation. We package two different generator sets, and mobile is really our forte. We don't really compete in the stationary world, although we can build a stationary unit, but we compete in the mobile power gen space with the G3520, a CAT product, a gas engine. It's a two and a half megawatt mobile generator set. Then, we also have a Vericor turbine. It's about a four megawatt gas turbine- driven generator set, and so you've got electric frac, you've got our conventional fracturing products that are actually built around the Tier 4 DGB. We were one of the early adopters of Tier 4 DGB technology, and we've made a living out of delivering more Tier 4 DGB engines than anybody else in the market.

00:04:08 Jordan Yates
Wow.

00:04:08 Jamie Stewart
Something I'm very, very proud of. So we have Tier 4 DGB, we have power generation, we have electric, and one that's in its infancy, but something we're very, very proud of is battery energy storage.

00:04:19 Jordan Yates
Yeah, that is definitely coming up. I can't wait to see a year from now what the conversation's going to be around that and all of the innovation in that space. It's awesome you mentioned the CAT engine because now this is a podcast sponsored by Caterpillar. If you guys are watching the video, you'll see we have a ginormous engine right behind us. It is so, so big. What do you guys do with this engine? What is your contribution to it?

00:04:46 Jamie Stewart
So we're the ones that add value to the engine. Caterpillar does all the beautiful engineering and manufacturing of the engine, but the engine alone doesn't do anything. So we add the transmission, we add the air cleaners, the exhaust, the dual- fuel system, the rest of the natural gas fuel capability, your diesel fuel capability, and then we add the pump, which in many cases, can be the SPM Caterpillar Oil& Gas pump as well.

00:05:19 Jordan Yates
Wow, sounds like you guys are doing quite a bit with such a already intense product, so I imagine your engineers are very hard at work.

00:05:28 Jamie Stewart
They are some of the best in the industry and we're proud to have them.

00:05:30 Jordan Yates
I love that. So back to eFrac and your THOR, the trademarked technology. I'm curious to see how this technology has been accepted by the oil and gas community, and has it been hard to implement it? Are people excited about eFrac? Could you tell us more about that?

00:05:50 Jamie Stewart
Yeah, that's actually a really good question. It has not been easy. You've got a lot of skepticism, a lot of people not wanting to be the first. They want to see other people go and do it, and either succeed or fail. There have been many successes, but there've also been some failures. So our rollout has been overall a long period of time. There's also a huge capital commitment that has to be made in order to build out a fleet of electric equipment.

00:06:23 Jordan Yates
Yeah.

00:06:23 Jamie Stewart
In the era of capital discipline, there are very, very few companies that actually can afford to implement and go and apply an electric fracturing fleet. So it's taken more time than we would've liked, but THOR has been out in the wild now for over a year. It's on a long- term lease, and I believe the plan is for it to be purchased at the first of the year when the new capital becomes available for the 24 budget year, and then we're in the process of getting all the material together to build some more.

00:06:55 Jordan Yates
That's exciting. So like you said, it is a little bit of hesitation to get people to adopt it, but once it's out in the field, what's the reaction like? How long does it take people to get used to it? Do they like it once they are?

00:07:09 Jamie Stewart
It's a beast of a pump. It really is. It's 5, 000 horsepower on a single motor pump combination, and it runs, and runs, and runs. So the adoption has been great. Just getting it into the field, getting into somebody's hands that could run it, run it hard, put it through its paces, has been what we really needed and we've now got that with our current client.

00:07:35 Jordan Yates
Have you guys gotten sort of like the case study of they're telling you, " Hey, this is what's working, this is what could be improved, and are you taking that feedback and applying it?," or are you still in the works of discovery?

00:07:46 Jamie Stewart
Absolutely. We are taking feedback. That's part of the lease agreement that we have with our client, is hearing from them what they like, what they don't like. So we know some things that when we do 2.0 here in 2024, there will be some differences, but minimal differences. We really like the single motor pump combination compared to some of these big, huge, heavy two- pump, two- motor combinations. Those units run 180,000 pounds down the road and our unit runs at about 130,000 pounds down the road, so a huge savings and weight, and a lot more steerable when you get to locations. So we've taken their feedback and we intend to make some changes, but minimal. The feedback has mostly been excellent.

00:08:32 Jordan Yates
Wow.

00:08:32 Jamie Stewart
One of the great things about this client is they have two other solutions within their electric frac offering, so it's a really good test. We're right next to our competition, and by their accounts, we're outperforming the competition, so happy about that.

00:08:50 Jordan Yates
Ooh, that is awesome to hear. Sorry for the competitions lost, but I'm very happy for you. Something that, of course, is always a very important topic is environmental impact. So the electric fracturing technology is known for the reduced emissions, as well as from what I've heard, major cost savings. We'll get to the cost part in a minute, but can you enlighten us on the reduced emissions aspect?

00:09:15 Jamie Stewart
Yeah, so the oil and gas industry is vilified the world around because of past grievances with emissions and with our footprint in the world. Fossil fuels are the things people love to hate, but they're absolutely 100% necessary to life, to human flourishing, and we recognize that we can do better from an emission standpoint, and we know that natural gas is a cleaner burning fuel than diesel, and so any chance we can get to replace diesel with natural gas, EnQuest is going to design a solution to do that.

00:09:59 Jordan Yates
Yeah, absolutely. And so I've done some research on your technology, but I get a little confused. There's a lot of big, powerful things going on. Is the natural gas powering some of the eFrac, or is that more in the DGB engines, or are they together? Can you differentiate those two for me?

00:10:16 Jamie Stewart
Yeah. So natural gas is by far the most widely used fuel for eFrac, because what you have to have is you have to have a generator, and diesel generators are less efficient than natural gas generators in terms of you can make some really, really big power with a lot lower emissions if you go with natural gas as your fuel. You also, and something that we'll probably get into here in just a second, you'll wind up with far lower fuel costs. The more gas you burn, the less fuel cost you're going to have.

00:10:52 Jordan Yates
That's pretty cool. I mean, we love environmental efficiency, but we also love saving money in this industry too. I know it's more trendy to talk about the environmental impact, but I do want to focus in on the cost savings that this provides because, I mean, the bottom line's important. So can you kind of get into how this is saving customers' money and maybe some of the examples of how that's happening?

00:11:17 Jamie Stewart
So we're in the era of capital discipline. All these public companies spout it. They live it every day, and to be capitally disciplined, you have to be capital efficient. A way to be capital efficient is not spend your money as fast as you possibly can.

00:11:33 Jordan Yates
That's new.

00:11:35 Jamie Stewart
Yeah. So fuel cost savings is one of the big drivers of efficiency. One of the last, probably big drivers of efficiency is converting the massive amounts of diesel that were burned to drill and complete wells, and turn that over into clean, burning, cheap natural gas.

00:11:55 Jordan Yates
Yeah. No, I mean, that's such a big deal. I heard a figure, I think, that it seems like 25 million per frac station. I don't know the exact digits, but is there any numbers that you've put on, like if you do a eFrac versus like a regular one, or is that still sort of ambiguous?

00:12:14 Jamie Stewart
So if you can burn 100% natural gas, and actually, if you can get to field gas versus trucked in CNG, that is the holy grail in terms of cost savings. So there have been some cost studies by several of the industry folks out there, and we do believe that there's 20 to$ 25 million a frac fleet per year in fuel savings if you convert to 100% natural gases of fuel.

00:12:47 Jordan Yates
Is it possible to convert to 100% natural gas? Is that seem like a reality these days?

00:12:53 Jamie Stewart
Electric frac makes that a reality because there are these natural gas generators, like we were talking about before, whether they're gas turbines or they're gas recip engines, that they only burn gas. In the case of the DGB, you might be able to get to 75 or 80% natural gas versus 20% diesel, but you will never get to 100% in a dual- fuel engine.

00:13:18 Jordan Yates
Yeah, that's pretty cool, though. I mean, the fact that you're displacing diesel at all and being able to see these cost savings, I think that's amazing and exciting that Caterpillar's in there and a part of it. I'd love to give them a shout- out. Not that they need it, because everybody already knows who they are, but...

00:13:32 Jamie Stewart
It's a CAT world. We're just living in it.

00:13:34 Jordan Yates
Amen. All right then, let's move on to operational efficiency. So how does the eFrac technology enhance the operational efficiency of the fracking operations?

00:13:50 Jamie Stewart
So it enhances it probably two ways. One way is controllability. You have far more fine control over your frac pump with an electric motor than you do with a diesel engine and a transmission. So from an operational standpoint, you have that just fine motor control where you can pump very specific rates to the extent that you need to do that. The second way that you get efficient in terms of your operations is that the motor is far more reliable than a diesel engine and transmission. A motor may last 40,000 hours before overhaul, where a transmission and an engine, you might be looking at 15,000 hours before overhaul, 20, 000 if you've really taken good care of your stuff.

00:14:45 Jordan Yates
That's an insane difference. Another thing I heard you talk about on a separate podcast you were on about a year or two ago was how these are a lot quieter than the typical diesel engine, so you guys are able to use them closer to cities without being very noisy and loud. Can you tell us a little bit more about that, because I imagine that's extremely helpful?

00:15:06 Jamie Stewart
Sure. Drive around Midland- Odessa, and you can see these walls up along the highways and byways, and those walls are there to protect communities from the sound of drilling and completion equipment running 24/ 7. It's a 24/ 7 world out there. So while everybody's trying to sleep and rest for the next day, you'll have drilling and fracturing operations going on around the clock, so we do have to be mindful of our impact on communities, and one of the ways that we can limit the noise is to get rid of conventional engines and radiators, which are the two biggest contributors to noise there are on a frac pump. You do that with an electric motor, which has a little whine to it. It doesn't have that rumble that you hear of the diesel engine, and you don't hear the loud sounds of the cooling fans turning like you do with the big radiators that we need on the front of a Tier 4 DGB engine.

00:16:08 Jordan Yates
Yeah. Has that opened up opportunities for you guys to get closer within city limits of having these operations that you know of, or is it just we're improving our current situations?

00:16:19 Jamie Stewart
I think we're improving the current situation. There are just naturally some fields that are just right within communities, very, very near communities, and it's very disruptive to their daily life. We've tried to go to some extreme measures in order to make it comfortable on the people, because it's a very temporary thing, but it's very disruptive, even temporary. I think a lot of these folks are trying to figure out how we can get a little further away and drill farther with longer laterals-

00:16:52 Jordan Yates
Absolutely.

00:16:53 Jamie Stewart
... but we can also impact it by building quieter equipment like electric.

00:16:57 Jordan Yates
Yeah, and it must be nice for the people actually working out there because, I mean, it hurts your ears after a while. I mean, sure, there's ear protection, but it only does so much when it's like the ground is basically shaking it is so loud. So that's exciting for the people working out there. I'm sure they can hopefully see that as a benefit as it becomes more normalized. I want to ask, and I know you guys are a private company so you may not want to share, but is there some real- world examples of like you've implemented THOR, it's done a great job, and you can kind of walk us through the implementation process and the case study with it?

00:17:36 Jamie Stewart
THOR would be a nice one to talk about, but the implementation, it didn't go to work right away. People want to try it before they buy it. People are skeptical. It doesn't take a bunch of mechanics and hydraulics techs. It takes medium voltage electrical techs, a different skill set than what you would normally find in the oil field.

00:18:02 Jordan Yates
Yeah.

00:18:03 Jamie Stewart
So the adoption just came very slow, but once we were able to go up against conventional pumping equipment, the benefits of electric fracturing became more and more obvious to where people that can afford it are transitioning as fast as they can. Companies like Halliburton have said, " We will never build another diesel fleet again that we're going to... From this point forward, we're going to build electric," and we support that. It's a good thing for manufacturing as well.

00:18:36 Jordan Yates
Yeah. So how does one try it before they buy it with such a robust piece of equipment? What does that actually look like? Do you just drop it off, or do they come to like a site, and it's like a demo? How does that even work? How do you try that out?

00:18:51 Jamie Stewart
Think of like a rental car. We were doing whatever we could do to get our technology out there, get people to try it so they would buy it.

00:19:00 Jordan Yates
Yeah.

00:19:01 Jamie Stewart
And so we had to get creative. We had to structure a longer- term lease, which is essentially a rental, and that at the end of the lease term, they would have the option to buy it, and so that's what we structured. It's not the ideal situation for a manufacturer, you want to build and sell, but it's worked.

00:19:23 Jordan Yates
Absolutely. So are you guys going out there and helping to service as well, or do you do the service side, or is it more that you pass the equipment on, and then they take it and their team deals with it?

00:19:33 Jamie Stewart
Yeah, again, think of the rental car model.

00:19:35 Jordan Yates
Yeah, yeah.

00:19:36 Jamie Stewart
You go and get your rental car, and you're responsible for it until you return it. It's the same with THOR. THOR is a rental unit.

00:19:44 Jordan Yates
Wow.

00:19:45 Jamie Stewart
It's ours until they buy it, and so they have to take care of it like it was their own.

00:19:50 Jordan Yates
Goodness, that sounds like a lot of responsibility. I get nervous with a rental car. I couldn't imagine one of those, but I assume the people that you are lending it to have the expertise and ability to handle it. They're not like me, renting a car where I hit a lot of curbs and struggle to get it back in one piece.

00:20:06 Jamie Stewart
Yeah, no curbs in the frac industry,

00:20:09 Jordan Yates
Thank goodness.

00:20:10 Jamie Stewart
Thank goodness.

00:20:12 Jordan Yates
So I want to move on to challenges. With any new technology, obviously there's going to be challenges in the adoption, and like you said, one big one has been people kind of accepting it, but on the technology side, more so, what challenges have you guys had to overcome?

00:20:30 Jamie Stewart
The biggest one is making sure that you have a reliable system that can run 24/7. We know that diesel units, dual- fuel units are ultra reliable. As long as you maintain it properly, those things are going to run all day and all night.

00:20:47 Jordan Yates
Yeah.

00:20:48 Jamie Stewart
Well, we had to prove the same thing with electric, that we could do the same kind of reliability, same number of hours a day that our diesel products can do, and that was probably the hardest thing, and I think that's probably everybody's concern, is I've got to be able to pump the same number of hours, even though I'm converting over to electric as I do with my diesel fleets.

00:21:11 Jordan Yates
Yeah, that's intense. I mean, I work in the electronics components industry, and I see that as a big thing. There's overheating, there's a lot more components you have to deal with, and I imagine that getting your ratings to where they need to be, that's kind of a different type of standard that you're meeting for electronic components rather than a typical diesel engine. Is that correct?

00:21:30 Jamie Stewart
That's correct. And remember, we're putting these electric components that are heat- sensitive, they're dust- sensitive, they're humidity- sensitive, and we're putting them out in the oil field out in the West Texases.

00:21:45 Jordan Yates
Yeah.

00:21:45 Jamie Stewart
We're all here right now, it's dusty. It can be really hot in the summers, it can be cold in the winters, and occasionally it rains, and so we've got to make sure that it lasts no matter how hot, how cold, or if it's raining or not. It's got to live, and it's got to keep pumping.

00:22:02 Jordan Yates
Yeah, absolutely. Now that you guys are kind of industry leaders with this eFrac technology, where else do you see it going in the future, and how do you see the industry adapting with it and evolving?

00:22:16 Jamie Stewart
I do think that electric is going to be a huge component of the future of oil and gas, primarily for those cost savings that you can get that you just won't be able to ignore at some point, and that all gets passed through all the way to the consumer.

00:22:31 Jordan Yates
Yeah.

00:22:31 Jamie Stewart
So as we can keep energy costs as low as possible, that'll be because of electric frac, not in spite of electric frac. So I see a larger world where there are a lot more electric fleets out there than there are today. Will it be a third of the active fleets? I think it'll be more. I'll take the over on a third, and probably go with a half or more will be electric, say five, 10 years from now.

00:23:00 Jordan Yates
And if they want to convert, they should come over to you guys, and you can help them out, right?

00:23:05 Jamie Stewart
Come see us at EnQuest. We'll outfit you with a electric frac as quickly as possible.

00:23:10 Jordan Yates
That's awesome. So is this technology most applicable in specific regions, or is this something you see going kind of worldwide? Where do you see it fitting best?

00:23:21 Jamie Stewart
The technology makes most sense right now because of the abundance of natural gas as a fuel in the United States.

00:23:28 Jordan Yates
Okay.

00:23:28 Jamie Stewart
Canada will follow soon. Canada has kind of watched the U. S.. There are some nuances to Canada and there are road laws that make it a little more challenging to operate and move around up there because these are heavy, heavy pieces of equipment.

00:23:44 Jordan Yates
They are.

00:23:45 Jamie Stewart
And eventually, the world will see the electrification, but they're so far away from even Tier 4 diesel fuel as a fuel. They're not even set up for that yet, so to think that we're going to convert from a Tier 2 engine straight to electric, they still need to make the step to dual- fuel, and then after they make the step to dual- fuel, then they can take the step to electric.

00:24:13 Jordan Yates
It's always the fun thing to me is letting the infrastructure catch up to where these new technologies are because we get so excited and we're like, " Let's replace everything," but it's like, " Hold on," you know?

00:24:24 Jamie Stewart
That's right.

00:24:25 Jordan Yates
We need to get there one step at a time, but it's very cool that you are actually getting to be a part of that and that you guys are, like I said, industry pioneers with this, and so I'm excited that you came on The Energy Pipeline. One more slight tangent I want to go on is that for a president of a company, you seem to be very knowledgeable and in the mix with the actual operations going on. That's pretty cool, because sometimes you get to such upper- level management that you guys are a bit more detached, but how do you stay so involved in the operations in what's going on?

00:24:57 Jamie Stewart
So there are public companies and large private entities that you can go become a hired gun, and you can work there, and you have staff and infrastructure. That's not how EnQuest started. EnQuest is an entrepreneurial company. We started from the ground up. There was no... I was actually employee number two in the U. S.. I was not employee number one, but I was number two in the U. S., and we built a team from the ground up with my knowledge of the industry, of the players, of the manufacturing process, of the engineering talent, of the Houston market, of the Texas market, and the U. S. market. We already had a small footprint in Canada, but it was in its infancy too. So being an entrepreneurial company and an entrepreneurial leader, I just have to stay involved in every aspect. We don't have the luxury of overhead, and staff, and SG&A.

00:25:59 Jordan Yates
Yeah.

00:25:59 Jamie Stewart
We have to stay very tight and very focused, and hopefully we'll grow to be one of those big companies one day.

00:26:06 Jordan Yates
I was going to say you still strike me as somebody that even if you had the staff, you would still be in the mix in the operations and get in your hands dirty. You seem to like this industry a lot.

00:26:15 Jamie Stewart
I do. It's what I love. I do think it resonates very well with our customers because our customers know that they can call me, and I will understand what the problem is, and I can fix it.

00:26:25 Jordan Yates
That's very comforting.

00:26:27 Jamie Stewart
Yeah.

00:26:27 Jordan Yates
If I were a customer and I had all this, I would definitely call you, unfortunately, just a girl on a podcast. I won't be a customer anytime soon, but I-

00:26:37 Jamie Stewart
Well, if you do, we'd be happy to have you as a customer.

00:26:39 Jordan Yates
Thank you so much. Guys, you hear that? They would be happy to have me as a customer. Sometimes the listeners, they're like, " Jordan, what are these tangents you go on?," but as we're getting towards the end, I'm curious, is there any bits of advice, the last thoughts, or anything that we haven't talked about that you just want the listeners of The Energy Pipeline to hear?

00:27:01 Jamie Stewart
I really am a big proponent of being a voice for good of fossil fuels and how fossil fuels leads to human flourishing and how we enjoy abundant energy, and it's because of fossil fuels that we enjoy such an abundance of energy in the U. S., and Europe, and Canada, but there's these six billion other people around the world that don't have abundant energy. They may have intermittent energy or no energy at all and have to burn wood, and dung, and things like that in order to heat their homes or cook their food, and we've got to remember that. Fossil fuels are the ticket to their freedom and their energy abundance, like we enjoy over here. Let's not forget all the good that fossil fuels do and focus only on the negatives because fossil fuels, they are necessary for the world.

00:27:57 Jordan Yates
Yeah, I love that. That's why I love this podcast, it gives us a chance to educate people, like how these processes are really happening, like what the leaders in this industry are actually thinking when they're implementing new technologies, and I think it is so much more of a positive industry than people think by first look, but I love that you said that, because I agree very strongly with you, but-

00:28:20 Jamie Stewart
Thank you.

00:28:21 Jordan Yates
Of course. Well, that is all we have for today, guys. Jamie, thank you for coming on. Everybody, thank you so much for listening to another episode of The Energy Pipeline. As always, I'm your host, Jordan Yates, and I'll see you next time.

00:28:34 Speaker 2
Come back next week for another episode of The Energy Pipeline, a production of the Oil& Gas Global Network. To learn more, go to oggn.com.