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Big Data Diving into Onshore E&P Water Management

Big Data has become a big-time disruptor in building better onshore wells, capturing granular information about potential drilling locations and thus improving costs. Water management has proved more elusive, but information technology has begun to solve that issue too.

Digital H2O initially was launched three years ago with a $1.275 million investment from Warburg Pincus, Merrick Ventures and First Green Partners. The company, co-founded by software entrepreneurs Piers Wells, who is CEO, and Brandon Pearlman, has attempted to mesh public perceptions about water into the economic and regulatory needs of the U.S. energy business.

"As we delved into this process we found that the data really mattered," Wells told NGI's Shale Daily in a recent interview. The company, which he oversees from Chicago, discovered there was not much data available about the onshore water segment of the energy business. Wells previously led corporate strategy at Tendril, a smart-grid data analytics and energy management software startup. He also formerly was a principal in Booz & Co.'s information technology (IT) strategy practice.

For such a huge market, the company found little cohesion in the marketplace. Many exploration and production (E&P) companies long have recycled their produced water to have more sustainable operations. But it's been piecemeal. E&Ps often have worked individually, with not much knowledge about what their neighbors might be doing.

Wells said the opportunity was to aggregate the data to provide operators with the big picture. For instance, instead of one truck coming in for one small job, was there a way to cooperate with an adjacent producer to lower costs? Could a salt water disposal company aggregate customers to reduce spending by the E&Ps?

Digital H2O wanted to take water production and reuse further, but there are roadblocks. For one thing, the drilling water market is opaque. And some potential customers initially didn't understand the potential.

Then Texas regulators provided an impetus. The state in 2013 was the first in the nation to enact legislation to encourage oilfield wastewater recycling through reuse rather than disposal, a precursor to more water reuse and an associated water marketplace (see Shale DailyJune 3, 2013). North Dakota has since followed suit (see Shale DailyApril 16).

"Operators didn't always understand how much water they were using, how much it was costing," Wells said. Many operators are collecting some data, but most aren't doing anything with it, making it a lost opportunity. "In any kind of market, you need information. The customers want to know what they are buying and what we are selling."

Water typically is a significant cost in building a well. Transporting, drilling/completing and disposing of water all carry individual water costs. Within the same region, water volumes may be higher in one well and lower in another two miles away.

"It's difficult to measure historically, and it's not been tracked in a coherent or a life-cycle way," Wells said.

Producers are looking for the best and most efficient way to drill their oil and gas wells. The wells being drilled today are more efficient and costs have come down. But water volumes have not. Because produced water volumes correlate to production, and with output still strong, that means water volumes have remained static. Producers also are drilling longer horizontal laterals and adding more fractures. Longer laterals and more stages equal more water.

"The bottom line is, water volumes are holding up in a low oil price environment," said Wells. "Longer wellbores are driving increased water use per well."

By itself, the water transport and disposal water in total should hit $12.6 billion this year. The biggest market, the Permian Basin, is estimated at $2.4 billion, while the second biggest, the Eagle Ford Shale, is at $2 billion. Together, the two Texas plays represent 35% of the total U.S. water market, said Wells. The next three big water takers in order are the Marcellus Shale, Anadarko Basin and the Bakken Shale.

After gathering minute details about individual wells and compiling the data, Digital H2O's team of unconventional energy, water management and IT experts launched the first end-to-end water management software last year.

The first software solution, Water Asset Intelligence, initially focused on the Permian and the Eagle Ford, and has since expanded to the Bakken Shale. The database provides millions of observations regarding specific wells in specific counties, with 70 million in Texas alone. Customers can analyze oilfield water logistics, production data on water/hydrocarbon, water consumption for well completions, well demographics, disposal well capacity/use; and skim oil content. The latest upgrade, Predictive Water Modeling, provides estimates of produced water volumes in Texas at individual wells and at aggregated basin levels.

For E&Ps, the software allows planning and scenario analysis, which may optimize logistics and increase water reuse, which in turn could result in lower costs, a reduced footprint and an "improved social license to operate." Service operators have a tool that provides competitive benchmarking and increased operational efficiency, resulting in revenue growth and lower costs.

Apache Corp., one of the largest Permian E&Ps, is a customer, along with SandRidge Energy Inc. and Brigham Resources LLC, as well as a long list of oilfield operators that include Key Energy Services, Nuverra Environmental Solutions and Clear Water Resources. The University of Texas Bureau of Economic Geology also uses the service and plans to collaborate with Digital H2O on research focused on enabling cost effective reduction in water use in upstream oil and gas.

Clear Water, which operates saltwater disposal and washout facilities in the Eagle Ford, had ""struggled with the lack of water market visibility," said Vice President for Corporate Development Charlie Manning.

"Well data is highly fragmented, and current data sets don't include water production and disposal historically to aggregate data," he said last week. "Our main challenge was spending an incredible amount of time and money to organize data." The company used several services, which meant "multiple data sets" and multiple headaches as it attempted to define potential markets. With the Digital H2O software, Clear Water is able to compare, for instance, a 10-mile radius to another 10-mile radius to understand where the water demand is in a particular place -- as well as the makeup of the market.

For the domestic energy sector as a whole, business has slowed. But not so for Digital H2O, which had one of its best sales months in September. Business "is definitely not slow," said Wells. He is optimistic that the value of the service will prove itself as customers continue to look for ways to lower field costs and improve water sustainability.

The company plans by early 2016 to have expanded its geographic coverage of the Lower 48, with "complete" water data for Texas, New Mexico, North Dakota and the Midcontinent. Within the next six weeks or so, pipeline data would be provided not only for water, but for oil and gas pipelines.

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