OIL PRICES may have fallen drastically during the fourth quarter of 2014, but that doesn’t mean operations are shutting down in the US oil and gas shale plays. Nothing could be further from the truth.
Many of the companies that service the oilfield remain optimistic about the long-term future of the shale plays. Optimists include the management team at Dillon Transport Inc, a tank truck carrier that supports oilfield operations by hauling crude oil, process water, downhole chemicals, and frac sand.
“We know that a slowdown is underway in the oilfield, and some drilling operations are being downsized,” says Charles Musgrove, vice-president of operations at Dillon Transport. “However, we believe we are well-positioned to handle a downturn, and we should benefit if some of the smaller oilfield haulers exit the business. Some customers are asking for rate reductions, and it seems likely they will reduce the number of carriers they are using.
“We think crude hauling and water hauling will remain fairly stable. We’ll probably see the biggest impact in frac sand hauling, but drilling operations should continue even if at a slower pace.
“We’re working with some of the bigger players, and most of our customers already had their 2015 plans in place before the end of 2014. We believe they are not likely to scale back operations until mid-2015. It all depends on the price of crude oil in coming months. We see this as a short-term issue.”
Serving the oilfield currently accounts for about a quarter of Dillon Transport’s business. Manufacturing and industrial customers make up an overwhelming majority of the carrier’s business with cargoes ranging from asphalt and dry bulk building materials to biodiesel, ethanol, and methanol.
“We believe we are diversified and insulated enough to weather any oilfield downturn,” Musgrove says. “Besides, the chemical industry and other sectors are benefitting from the lower oil prices. In addition, domestic oil production will displace imported oil.”
Based in Burr Ridge, Illinois, Dillon Transport runs 505 tractors and 738 trailers. Nearly 250 of the trailers are for asphalt. Of the remainder, at least 90 are crude oil tankers and about 100 are dry bulkers.
Operations are spread across approximately two-thirds of the United States. The fleet is dispersed among terminals in Illinois, Indiana, Ohio, North Carolina, Tennessee, Georgia, Florida, Alabama, Mississippi, Texas, Oklahoma, Colorado, and Utah.
Dillon Transport launched its oilfield services in Texas in 2011. “We had some customers in the Dallas area that were involved with oilfield operations, and we saw that it could be a good opportunity for our company,” Musgrove says. “We had hauled some frac sand before establishing an oilfield division.”
Initial operations were conducted in the Barnett shale play near Dallas and in the Eagle Ford shale region in South Texas. The largest of the carrier’s oilfield terminals is in Elmendorf, just south of San Antonio. Based at the 18-acre facility are 93 tractors, 80 crude oil trailers, and 30 vacuum trailers-currently used to transport downhole chemicals.
From its Greely, Colorado terminal, the carrier has 40 tractor/trailer units hauling frac sand and water in the Denver-Julesburg basin. Four A-trains based at the Salt Lake City terminal are hauling black wax crude from the oilfields in eastern Utah.
“We just opened a terminal Midland, Texas with 25 units that are transporting primarily frac sand,” Musgrove says. “We hope to add crude oil and downhole chemicals in coming months. We’ve begun hauling crude oil from the Tuscaloosa shale play in Mississippi, and we see opportunities developing in the Marcellus shale play in Ohio. Our partners have operations in many places, and we want to grow with them.”
South Texas remains one of the busiest oilfield locations for Dillon Transport. Transports based at the Elmendorf terminal haul 100 to 150 loads of crude oil a day. The goal is for each tractor-trailer rig to handle two to three loads per day.
“The length of haul is getting shorter by the day, and many crude movements are now 50 miles or less,” says Kevin Feenaughty, Dillon Transport’s Elmendorf terminal leader/area manager. “However, we have daily shipments to Corpus Christi and quite a few going into the Houston area (roughly 200 miles from San Antonio).
“Because of the varying lengths of haul, we run sleeper and daycab tractors. We need the sleeper tractors for longhaul movements of drilling fluids, as well as crude oil and condensate. However, sleeper tractors also appeals to some of the short-haul drivers. Many drivers want to stay out five to six days at a time.”
Dillon Transport has found that it has the best success with local drivers in the oilfield operation. “They know the area and are less likely to move away when market conditions change, Feenaughty says. “Stability is important. Our turnover rate is 5% to 10%, and we still have about a third of the drivers we hired when we opened the Elmendorf terminal in July 2011.”
Oilfield driving pays very well, according to Feenaughty. “We have one driver who made $100,000 last year, and that was with electronic driver logs,” he says. “It’s all about time management. “Even the least driven driver can make $60,000 plus.”
Even with the slowdown, Dillon Transport is still hiring oilfield drivers. “Finding enough drivers could be our biggest challenge in 2015,” Musgrove says. “An upside of the oilfield slowdown is that it could actually free up some drivers for us.”
He adds that the real problem is that the United States simply is not producing enough new truck drivers. “We plan to begin recruiting right out of select truck driving schools,” he says. “We’re in the process of choosing pilot schools for our new program. We’ll put school graduates with senior drivers on dry bulk runs for a number of weeks and then move them into other products. This is one of a variety of strategies we are exploring.”
To be considered for employment, experienced drivers must have been operating a commercial vehicle for at least two years, and that can be either over the road or local. Those hired go through a week-long new-hire orientation that covers key oilfield safety factors including hydrogen sulfide risks and environmental factors, such as weather, insects, and snakes. Drivers receive hands-on training in loading and unloading procedures and equipment operation.
Drivers get a thorough orientation on the tractors and trailers. The carrier runs a mix of tractors in the oilfield, including Peterbilt (Models 384 and 579) and Kenworth (T800s and W900s). Starting in 2015, the carrier is standardizing on 60-inch sleepers for its sleeper tractors.
Dillon Transport has become a strong proponent of natural gas as a truck fuel, and about 40% of its tractors are now fueled by compressed natural gas (CNG). “Across our fleet, we’ll be at 50% by the end of 2015,” Musgrove says. “We will reach 100% for our entire fleet in the next few years.”
Fleet-wide, Dillon Transport currently operates just over 200 CNG-fueled tractors, with 55 more coming in early 2015. All of the company’s day-cab tractors will be on CNG by the end of 2015.
In the oilfield operation, all of the tractors in Colorado and in Midland, Texas are fueled by CNG. CNG also fuels two Houston-based tractors that are used in crude hauling.
“We would like to run more CNG-fueled trucks in the South Texas oilfield, but the fueling infrastructure is still lacking,” Musgrove says. “There are no CNG fueling locations that are close to our South Texas operations. The infrastructure situation is getting better, but more work is needed.”
As diesel-fueled tractors age out of the fleet, they will be replaced with CNG-fueled tractors. To manage the transition more effectively, the carrier is extending the service life of some of its diesel-fueled sleeper tractors with an in-frame overhaul of engine and replacement of the transmission.
“We’re scheduling the in-frame overhaul at 600,000 to 700,000 miles,” Musgrove says. “That should enable us to run these tractors for another two to three years for a total of 900,000 miles.”
New trucks running on CNG are specified with the 400-horsepower Cummins Westport ISX12 G engine and Eaton Fuller UltraShift Plus automated transmission. Tractor specs include the Bendix Wingman system with roll stability, Omnitracs on-board computers with electronic driver logs, Michelin X-One widebase single tires, and Holland fifthwheel with no-lube pads.
All of the tractors have hydraulic power systems for running product-handling equipment. Tractor-mounted Gardner Denver blowers are used in frac sand operations, and tractor-mounted Cowboy vacuum pumps are used with the vacuum trailers.
Most of the crude oil trailers were built by E D Etnyre & Co and Mac LTT Inc. Polar Tank Trailer Inc built the insulated A-train doubles tank trailers used in the Utah crude hauling operation. Polar also is building 5,000-gallon portable storage tanks for Dillon Transport’s Midland operation. These tanks can be used to store drilling fluids at well sites. They will be resupplied from 7,000-gallon DOT407 insulated tank trailers leased from Matlack Leasing LLC.
“We started with Etnyre crude trailers due to lengthy experience with their asphalt trailers,” Musgrove says. “Crude trailers were in short supply at the time, and they had the plant capacity to meet our timeframe. We started our crude hauling operation with 15 of their trailers.
“We later added some Mac crude trailers, because we were already running quite a few of their dry bulkers. We have roughly 20 of their crude trailers now.”
Constructed of aluminum alloy, crude trailers have a double-conical tank with an 8,400-gallon capacity. The tanks have an epoxy lining to protect the interior from corrosion. Tank hardware includes Titan Logix level gauges, Air-Weigh digital scales, Dixon Bayco API adapters, Betts internal valve, Roper product pump, and Girard pressure- and vacuum-relief vents.
Dry bulk trailers used in frac sand service have a 1,050-cubic-foot capacity and are specified with an Alumiclear exterior coating. Trailer hardware includes Bulk Tank Inc valves and couplings and RMC remote operated domelids.
Michelin X-One tires are specified on crude and dry bulk trailers. Running gear includes Hendrickson Intraax suspensions and Tiremaax tire inflation systems.
Vacuum trailers—both code a non-code—were built by Dragon Products Ltd. As is typical for the oilfield, the tanks have a 130-barrel capacity.
With its broad range of equipment, Dillon Transport is well positioned to meet the needs of customers in virtually any of the shale plays across the United States. ♦