Mesa Solutions: Protection Pricing for Natural Gas Generator Customers
Pricing for power generation at the well-head can fluctuate as much as the price of oil the site is producing. Mesa Solutions understands the volatility of our industry and seeks to make expenses as cost efficient and predictable as possible for our customers. Protection Pricing does just that.
Just 24 months ago, WTI crude oil traded at over $100 per barrel. Advances in oil and natural gas production technology and years of high oil prices had jump-started the shale revolution, boosting total U.S. oil production to almost record levels. At the time, many operators gave very little thought to the benefits of associated gas powered products, namely reduced emissions and fuel cost savings. Maximizing production was the top priority, which meant bringing new wells online as quickly as possible. Typically, operators have turned to diesel power generation to fill the gap between the completion of a well and the arrival of line power, a mindset that Mesa Natural Gas Solutions, LLC (Mesa) is committed to changing. See our Natural Gas Generator vs. Diesel Generator: a cost comparison article here. We understand the value of bringing a site to production as soon as possible; however, doing this at the cost of our environment and lands is avoidable.
The economics of oil and gas production can change as fast as the weather. By year-end 2014, oil prices were down around 40 percent to $60 or below. Improved domestic supply led to a decrease in U.S. oil imports, the hangover from the 2008 global economic crisis had yet to wear off and demand to recover, and the world was awash in oil. With U.S. production only recently beginning to fall off and OPEC showing few signs of cutting back its own production, prices have continued to slide. As recently as February 2016, crude oil nearly fell below $26.00 per barrel. In response, oil and gas exploration and production (E&P) companies have announced average capital spending cuts of over 50 percent. Some E&Ps have deferred or cancelled long-cycle projects, others have committed to spending millions to shut down current drilling and completion operations. This can be devastating to all but the largest companies in our industry.
Mesa has always committed to reducing production cost by providing operators with efficient and reliable on-site power generation. By using associated gas as a fuel source, Mesa technology is capable of eliminating the economic and environmental costs of diesel fuel from the production process. But given the severity and extent of the recent downturn, there is clearly more work to be done. When times are tough, we understand that our livelihood depends upon the ability of our customers to produce as cost-efficiently as possible. That is why Mesa is proud to introduce our industry first “Protection Pricing” model. We are not in business to gouge our customers when they are seeing less and less of a return on their investment. Protection Pricing guarantees that the strain of falling oil prices will not be borne solely by our customers, so if the price of oil falls back below $30 per barrel, our rates will fall, too. We believe our new Protection Pricing model can be part of the solution to keeping our customers and us in business; together we will weather the storm.