Produced water from U.S. onshore oil and gas wells is expected to total nearly 20 billion barrels annually by 2022, down almost 4% from 2019 volumes, according to new analysis by IHS Markit.
The consultancy expects the oilfield water management market to be valued at about $28 billion in two years, a 20% downward revision from previous forecasts because of the recent oil price collapse and demand destruction for oil and gas caused by the Covid-19 outbreak, said principal research analyst Paola Perez-Peña.
A sharp decrease in drilling and completion (D&C) activity over the next two years will significantly reduce hydraulic fracturing water volumes, “while the decline in produced water volumes will be less severe,” Perez-Peña said.
A seemingly endless slew of U.S. producers have announced sharp cuts to their 2020 capital expenditures (capex) in response to the extreme oversupply and demand uncertainty facing the market, while exploration and production (E&P) company shut-ins and bankruptcies are expected to accelerate throughout North America as the full effects of the pandemic and price crash are felt in areas such as the Permian Basin of West Texas and southeastern New Mexico.
“Before oil prices plunged, the need for a set of robust logistics solutions was pushing the Permian water market to build midstream water infrastructure -- both in terms of equipment and expertise,” Perez-Peña said.
“However, the significant drop in oil prices followed by major E&P capex reductions will challenge midstream water infrastructure development. Industry focus will shift from investing in water infrastructure to efficiency optimization and cost reduction.”
She noted that while water used for hydraulic fracturing has historically received more public attention, in reality, fracturing and drilling water volumes are dwarfed by the subsequent volumes of produced water, i.e. underground formation water that comes up through the well with produced oil or gas volumes.
To illustrate the difference, IHS Markit projected that by end-2020, D&C water requirements in the Lower 48 plays will plunge 46% year/year to nearly 2.5 billion barrels, while produced water volumes from onshore wells will actually increase 1% to almost 21 billion barrels before beginning to decline.
“Now that there is a considerable, established production, operators are realizing the extent to which produced water is not only a sizable matter, but an ongoing and essentially, perpetual one,” Perez-Peña said.
IHS Markit said it expects the Permian to account for more than one-third of U.S. produced water volumes once 2019 totals are fully tallied, but “other U.S. onshore areas also contribute to the growing produced water challenge...The Midcontinent region and Haynesville Shale follow the Permian as the top three water producers from unconventional assets.”