With China seeking to boost its production of unconventional gas supplies to meet Asia's growing energy needs, GE Power & Water's Distributed Power business (NYSE: GE) and China's leading drill rig manufacturer HongHua Group (HK 196) today signed a three-year agreement for GE to supply its Waukesha VHP gas engines that will power drill rigs used in new shale gas projects in China. The announcement was made at the Offshore Technology Conference being held in Houston.
In recent years, GE's gas engine factory in Waukesha, Wisconsin, has seen orders steadily increase as more countries seek to develop their domestic natural gas resources to increase their local energy independence.
"GE's proven Waukesha gas engines have earned industry-wide recognition for their high levels of efficiency and reliability in powering successful shale gas projects in the United States," said Zhang Mi, chairman and president of Honghua Group. "Our agreement with GE strengthens our ability to sell more drill rigs by offering them Waukesha gas engines as a more cost effective on-site power solution."
For GE, the agreement with HongHua---which also is the world's second largest drill rig supplier---illustrates GE's successful strategy to collaborate with local companies in China's oil and gas sector in support of the country's efforts to diversify its energy supplies.
"Our agreement with HongHua strengthens our position as a leading gas engine supplier for drill rigs in Asia as GE continues to expand its role in the global unconventional gas sector in China and other key markets around the world," said Darryl Wilson, vice president and chief commercial officer of GE's Distributed Power business. "Our Waukesha gas engine technology is an important part of GE's Unconventional Solutions portfolio of products that benefit critical segments of the gas value
The Waukesha gas engines will be fueled by on-site field gas or with commercial grade gas to generate 2.8 to 3 megawatts of on-site power. By utilizing this field gas, drill rig operators will be able reduce their fuel transportation costs and optimize the availability of the rigs. With Waukesha gas-powered engines, users have the option to run almost any gaseous fuel from 950--2600 BTU. That includes everything from hot field gases, commercial grade gas, LNG, CNG and up to HD-5 propane.
GE plans to begin shipping the Waukesha units to China in May 2014, and the first pilot rig is scheduled to begin operation in September 2014.
Typical drill rigs use three diesel engines for power. GE's Waukesha gas engines can help drill rig operators achieve significant improvements in operating efficiency and lower greenhouse gas emissions by switching from conventional diesel to cleaner-burning natural gas. For example, the utilization of gas-fired engines at gas extraction sites can save drilling operators as much as 80 percent in fuel costs compared to diesel (calculation is based on natural gas at $3/mcf and diesel at $2.65/gallon). Additionally, NOx emissions can be reduced by as much as 95 percent when powered by GE's Waukesha VHP 7044GSI or a GE Jenbacher J320 gas engine running on 100 percent natural gas compared to a typical diesel engine.
GE Power & Water's Distributed Power is a leading provider of power equipment, engines and services, focused on power generation at or near the point of use. Distributed Power's product portfolio includes GE's aeroderivative gas turbines and Jenbacher and Waukesha gas engines, which generate 100 kilowatts to 100 MW of power for numerous industries globally. Headquartered in Cincinnati, Ohio, Distributed Power employs about 5,000 people around the world.