GE Pushes Fracking Research With Lab in Bet on Shale Gas

General Electric Co. (GE) will spend $110 million on a research lab in Oklahoma City to study ways to improve extraction of hard-to-reach oil and gas deposits, including hydraulic fracturing and horizontal drilling.

The facility will hire as many as 125 engineers and scientists in the coming months and will eventually expand its research to more conventional drilling techniques, Chief Technology Officer Mark Little said in a telephone interview.

Oil and gas is GE’s fastest-growing segment, with revenue up 57 percent to $15.2 billion since 2009, and Chief Executive Officer Jeffrey Immelt is betting that other divisions can profit as drillers tap more shale formations. The center will join labs from Shanghai to Rio de Janeiro and be the only one focused on a single GE business, Little said.

“This is a robust, dynamic industry that’s growing and ripe for technology infusion, and we think we can add a lot to it,” Little said. GE is announcing the project today in Oklahoma City.

In addition to fracking, GE researchers also will investigate how to meet oil and gas wells’ electricity needs, reduce the environmental impact of unconventional drilling and help manage water usage in petroleum exploration, Little said.

Fracking is a drilling technique that forces millions of gallons of water, sand and chemicals deep underground into rock formations trapping oil and gas. It’s unleashing previously inaccessible reserves, contributing to a surge in U.S. fossil- fuel output, while spurring attacks from environmentalists as a threat to drinking-water wells and reservoirs.

Energy Acquisitions

GE’s oil and gas business’s growth was jump started by $11 billion of acquisitions during a six-month period ended in 2011. The Fairfield, Connecticut-based company may consider additional purchases in the industry “over the next couple of years,” Chief Financial Officer Keith Sherin said at a February meeting with analysts and investors.

GE’s bets on natural gas aren’t limited to supplying equipment and services to energy firms. It’s developing locomotives that can run on liquefied natural gas instead of diesel fuel and helping leasing customers add compressed natural gas-powered vehicles to corporate fleets.

Oklahoma offered incentives, including participation in a program that provides quarterly payments of as much as 5 percent of new employees’ salaries, to secure the GE research facility, Governor Mary Fallin said in a telephone interview.

“Having one of the most important companies in the world invest and create a new global research center in our state is going to be a tremendous boost to the great resources we already have in our state in the oil and gas sector,” said Fallin, a Republican.

GE is still scouting for a location for the lab, and hasn’t disclosed an opening date.

Chesapeake Energy Corp. (CHK), the second-largest U.S. natural gas explorer, and Devon Energy Corp. (DVN) are both based in Oklahoma City. GE said it has more than 550 employees in the area working on electric submersible pumps for oil and gas drilling. Its global research operation is based in Niskayuna, New York.

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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