Efficient Water Management Needed in Low Oil Price Market
With oil prices at a low level, budgetary pressures on the oil and gas industry have increased, and the water management sector is no exception. Total revenue in the US oilfield water management services market is expected to drop by 19% from USD 23.2 billion last year to USD 18.9 billion this year.
In this new economic environment, efficient water management practices will become even more essential for companies looking to run successful hydraulic fracturing operations, a panel of experts said.
In a webinar, “Water Management in a Down Market,” held by the SPE Gulf Coast Section’s Health, Safety, Security, Environment, and Social Responsibility Study Group, speakers discussed emerging water management trends in the oil and gas market.
Advance planning can have a significant impact on a company’s water management costs. Kristie McLin, water management project lead at ConocoPhillips, said companies in the exploration phase of a project often deal with a lack of organizational structure and financial support from third parties, and service providers may not be readily available in the rural locations of some shale plays.
These factors may lead to higher water costs, and the companies that do not have enough investment capital to offset these costs must get creative in finding solutions, McLin said.
“If your acreage is not consolidated, you’ll definitely see an increase in costs because you’ll have to come up with separate strategies for separate areas, where it might be easier to consolidate to one holistic strategy if you’re in close proximity from one set of acreage to another,” she said.
Piers Wells said logistics optimization is critical for exploration and production (E&P) companies because of the potential for cost efficiency in the transportation, disposal, and treatment of produced water. Wells is the chief executive officer of Digital H2O, a software and data analytics company specializing in digital oilfield water management.
He said more private equity should enter the water supply chain, particularly in saltwater disposal. Operators and service companies will need to develop a better understanding of the potential growth of produced water volumes in their fields and the capacities of the local water treatment infrastructure.
“You could see the water supply chain move more toward a midstream model with investments in infrastructure, pipe, waste and disposal facilities, anywhere where you can get scale, where you know the economics are viable in a low-price environment in a producing area for, hopefully, decades,” Wells said.
In future years, service companies may take a primary role in managing the on-site infrastructure. Francesco Ciulla cited companies such as High Sierra, which recently acquired oil and gas water disposal facilities in the Denver-Julesberg Basin in Colorado.
Ciulla, managing director of consulting at IHS, also mentioned Nuverra, which last year partnered with XTO Energy to build a pipeline network for gathering, delivering, and disposing produced water in North Dakota. He said that as service companies learn more about managing infrastructure, E&P companies will warm up to the idea of third-party partnerships in this area.
“Certainly E&Ps will own the infrastructure and make big money because it’s their DNA,” he said. “That’s what they do. They invest money, they recover the investment a number of years in the future. Water has been a part of that investment strategy, but for E&Ps, water is not their business. If we have a third party taking care of that piece of the operation, that would be great.”
The panelists discussed the ways in which reduced drilling volumes in hydraulic fracturing operations have affected the economics of water management. Wells, Ciulla, and John James Tintera each said recycling is a long-term strategy for operators.
Tintera, president of the Texas Water Recycling Association, said the service companies and operators must adapt to the changing social environment surrounding hydraulic fracturing, and transparency will be key. It will be important for companies to reach out to local residents and state regulators as they implement new technology at their drilling sites and water management facilities.
With the disposal of produced water coming under increased scrutiny in recent years, Tintera said recycling and reuse have become more viable strategies.
“Disposal is under increasing pressure. That is going to be a game-changing scenario regarding water management because simply trucking [water] to disposal will not be an option in many geographic locals where the new plays are being developed,” he said.
While a decline in drilling volumes will lead to a decline in produced water reuse, McLin said that service companies will continue to develop more infrastructure to improve the logistics of water treatment and reduce costs.
“It’s still the endgame,” she said. “We’re still moving forward on reuse, but you see a volumetric reduction because there’s less to do.”
This webinar is available at https://webevents.spe.org/products/water-management-in-a-down-market
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Water Midstream Companies Strike Deals in Delaware, STACK Plays
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