The oil and gas industry is undergoing a strategic shift in how it powers operations. Once dominated by diesel generators, today’s field sites, compressor stations, and production facilities are increasingly exploring hybrid power systems that combine conventional and renewable energy sources with energy storage, offering a cleaner, more reliable and cost-effective energy model.
This change is driven by necessity. Fuel costs, grid reliability concerns, and corporate sustainability goals are converging to demand new solutions. At the center of this shift is hybrid microgrid technology, including Virtual Utility®, which is transforming how power is delivered and managed in oil and gas.
Here’s a closer look at what’s driving adoption of new solutions and how oil and gas companies can find more reliable alternatives to power their operations.
Because many oil and gas operations are in remote locations, it isn’t always possible to connect to a public utility. Reliance on diesel or natural gas generators for power has become common, but it’s expensive. Energy use is a top operating expense for producers, and converting to electrical power can yield significant cost savings.
For instance, a case study published in World Oil found Hess Corporation expects to reduce energy costs by nearly 70% over the next five years after switching its rigs in Bakken, North Dakota, from diesel generators to utility power with help from the PowerTAP™ Transformer Module by Canrig, a division of Nabors Industries.
Lower fuel consumption also means fewer fuel deliveries to remote sites, reducing logistics costs and risks.
Even where utility power is available, outages and instability frequently disrupt operations.
For instance, Winter Storm Enzo caused power disruptions that forced liquid natural gas exporter Freeport LNG to shut down in Texas earlier this year.
Hurricane Francine also disrupted oil production in the Gulf of Mexico, reducing output by about 50,000 barrels per day, according to Reuters. The costs of power losses can be significant in an energy-intensive industry.
A study by oil and gas market research company Kimberlite found offshore organizations experience losses ranging from $38 million to $88 million annually due to unplanned downtime, which includes downtime due to equipment failures and power outages.
Midstream operations face similar challenges. Compressor stations and pump stations often run 24 hours a day, seven days a week, to push oil and gas through pipelines, so they can’t risk power interruptions. If power from the public utility goes down, so does the pipeline throughput.
Oil and gas operations account for about 15% of all global energy-related emissions, so pressure from regulators and boards to shift to cleaner operations is growing.
One oil production field can use hundreds of megawatts per day, according to Hart Energy, which can translate to nearly 80 metric tons of carbon during that time period per the EPA’s greenhouse gas equivalencies calculator. That’s equivalent to a gas-powered car driving over 200,000 miles over its lifetime!
While a proposed federal fee for methane leaks outlined in the 2022 Inflation Reduction Act was recently overturned, oil and gas operations are still required to report their emissions annually and comply with clean air and water regulations. Other states including Texas, California, North Dakota and New Mexico have their own regulations for reporting emissions and flares.
Oil and gas companies aren't always able to fully electrify their operations due to infrastructure limitations, cost barriers, and operational complexity. Many drilling and production sites are located in remote areas where grid access is limited or entirely unavailable, making it impractical to rely solely on electricity. Building out the necessary infrastructure to support full electrification—such as high-voltage transmission lines, substations, and site-specific electrical systems—can take years and require substantial capital investment.
Even in grid-connected regions, reliability concerns and insufficient power capacity can disrupt critical operations that require continuous uptime, such as drilling rigs and compressor stations. Some legacy equipment is also incompatible with electrification without significant retrofitting, and in certain scenarios, natural gas or diesel remains a more practical or cost-effective energy source. These realities are making hybrid energy strategies more attractive.
Hybrid power systems combine various energy sources, such as solar, wind, and natural gas with battery storage to create a more resilient and efficient energy model. These systems can operate in tandem with the utility grid or independently from it, providing uninterruptible power when and where it’s needed most.
Fuel is one of the largest operational costs in oil and gas, and hybrid solutions can reduce these costs without requiring significant upfront capital investments.
A 45-day simulation e2Companies conducted with a Nabors Industries oil drill rig showed a 50% reduction in power generation, a 50% reduction in carbon emissions, and a 30% decrease in fuel costs.
Hybrid solutions are proving to be a powerful tool for emissions reduction. By replacing or supplementing diesel generation with cleaner energy sources, companies can cut carbon dioxide emissions by 50–80% in many upstream applications. Natural gas generators emit less nitrogen oxides, carbon, and particulate matter compared to diesel—and when paired with battery storage and renewables, they can reduce emissions even further.
e2Companies’ patented R3Di® System is one example of a hybrid solution capable of replacing or supplementing existing generators or on-site renewable energy sources. Based on an independent, third-party review, this combination of an on-site natural gas generator and a battery energy storage system reduces nitrogen oxides and particulate matter by up to 99% compared to a standard Tier 4 diesel generator, while lowering carbon by 88% and volatile organic compounds emissions by 61%. It’s also hydrogen-ready up to 20%, making it adaptable to future fuel sources like renewable natural gas or hydrogen blends.
This isn’t just a trend on paper—major players are already embracing hybridization.
Nabors Industries, for example, is equipping rigs in West Texas and North Dakota with grid and off-grid hybrid systems, including a strategic collaboration with e2Companies to deploy R3Di® Systems to support hybrid solutions for oilfield operations.
Chevron is building a 20 MW solar farm in the Permian Basin to power electric compressor stations and production facilities. This approach is expected to cover approximately 70% of the energy the company’s operations in this area uses during the day, minimizing grid load, reducing emissions, and stabilizing long-term energy costs.
Enbridge, a leading midstream operator, has been adding solar power to its compressor stations and is now adding electric-powered compressors to reduce emissions and make its operations quieter.
These initiatives underscore a broader shift toward energy autonomy and sustainability, even in traditionally fossil-fueled sectors.
However, many companies looking to adopt similar solutions often have to develop them in-house or hire engineering and consulting teams. Even when the solutions are built, they need to obtain an interconnection agreement to connect these new energy sources to the grid, which can take years.
Virtual Utility®, the first utility-grade, on-site network, is designed specifically for mission-critical environments like oil and gas.
It features a self-contained, modular R3Di® System capable of delivering up to 1 MW of power per unit of continuous, conditioned electricity. Unlike traditional diesel generators, which require a lag time before reaching full output, the R3Di® delivers instantaneous power while smoothing out voltage sags and surges.
This is particularly valuable for oilfield equipment like pumps and compressors, which require substantial startup current, and can experience volatile inrush currents during the drilling process.
Oil and gas companies can use the system behind the meter or in front of the meter and seamlessly switch from being connected to a public utility and running independently when it’s most economical. The Grove’s energy monitoring software and team of experts monitor weather conditions, market prices, and grid performance to help companies determine the best times to use the R3Di® and when to use public utilities.
This results in substantial fuel cost savings and lower charges due to using power during peak hours.
And because it doesn’t require interconnection agreements, Virtual Utility® can be deployed faster than traditional microgrids—making it ideal for remote or fast-moving oilfield projects.
The future of power in oil and gas is no longer tethered to diesel generators or fragile grid infrastructure. With hybrid power solutions like Virtual Utility®, operators can reduce emissions, cut costs, and gain energy autonomy—all while enhancing reliability and supporting ESG goals.
As the industry evolves, those who embrace resilient, hybrid power strategies will be best positioned to lead—powering progress from wellhead to market.
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