For unconventional natural gas and oil production to prove its mettle, water management has to be at the top of every operator's list, according to researchers.
Two reports in recent days outline the concerns regarding water management for domestic explorers, as well as those wanting to operate in unconventional basins around the world.
In one new collaboration, "The Future of Water in Unconventionals: Water Market Opportunities," IHS Inc. and CAP Resources consultants determined that the U.S. water services market for unconventional oil and gas today is estimated at $8 billion and will climb in the years to come.
"The variability of available water resources on a regional level, combined with drought stress in some areas and increasing water-use demands from across all segments of the economy, has driven water management to the top of U.S. exploration and production (E&P) operation considerations," the IHS/CAP report said.
The IHS/CAP report assessed water demands and the varying characteristics of water management across 13 "high-activity oil and gas plays" in the Lower 48 states, as well as existing oilfield water management from associated geographical regions, excluding California. The entire water management value chain was analyzed, from acquisition, storage, transfer, hauling and treatment to waste-disposal services.
"While we expect modest growth in the overall national water management market of 13%, that national figure obscures the true potential for water management services within the unconventional oil and gas plays," said principal author Marcus Oliver Gay, who directs water information and insight at IHS. "Not accounting for inflation, we expect the continental U.S. oilfield water management market to grow to $38 billion by 2022, with demand for water management services in high-activity shale gas and tight oil plays to grow by nearly 40% by 2022, to roughly $11.2 billion.”
CAP consultant Aaron Horn, who contributed to the IHS report, said there's "no one-size-fits-all solution" for water management in the oil and gas industry "since there is such significant variability of water availability across regions and the water services sector is still quite localized and fragmented. As a result, the local water sourcing, disposal options, and regulations will drive customized solutions in each play or basin."
The collaborators said it was "increasingly important" to evaluate water availability and its uses in the context of overall water balance, which vary by region. For example, in Texas, unconventional oil and gas activity development often accounts "for less than 1% of the state’s available water resources, however, in some locations such as Johnson County, TX, E&P water use may account for as much as 29% of the available water resource at the county level." Johnson County overlies the Barnett Shale.
"While some areas have plenty of water for all significant users (including agriculture, power generation, industry and municipal use), others are in drought-prone regions where water stress is becoming an important consideration for all stakeholders," according to the IHS report.
Unlike conventional E&P, water and wastewater management costs significantly more in unconventional development.
"IHS estimates that front-end water acquisition, storage, transfer and waste-disposal services associated with the initial hydraulic fracturing of a new well can represent about 10% of a well's total capital expenditure budget. Once a well is producing, the storage, treatment, transport and disposal of produced fluid during the life of the well can represent one-third to one-half of the total annual operating expenses of a well."
Those cost levels indicate a strong economic incentive for E&Ps to pursue efficient fit-for-purpose water management solutions. "Continued constraints on water availability and wastewater disposal capacity are driving new operational best practices such as the use of brackish water or recycled wastewater." Researchers said some unconventional plays recycle more than 80% of oilfield wastewater. Nationally, about 16% of fracture fluid volume today is made with recycled oilfield wastewater, a figure forecast to double by 2022, according to IHS.
"More companies will adopt a comprehensive, strategic water management approach that increases operating efficiencies through the use of brackish water, as well as recycling and reuse of treated flowback and produced fluids in the coming decade," Gay said. "This will yield another significant benefit to communities: a reduction in the use of trucks (and the resulting truck traffic) to haul water to, and wastewater from, well sites."
Requirements for local water storage, transfer and treatment services are expected to increase during the next decade, the activities that IHS and CAP "expect the most innovation and technological development to occur, driven by the impetus for cost reduction, efficiency, environmental and overall stewardship of water resources," said Gay.
It's not only U.S. energy interests that are prioritizing water uses, but also energy businesses globally, according to Wood Mackenzie's "Troubled waters ahead? Rising water risks on the global energy industry." Wood Mackenzie collaborated in its study with the World Resources Institute (WRI) for data and maps.
"The key water-driven business risks to the global energy industry include limited accessibility to new sources of supply, delays on project developments, increasing costs and asset downtime," said Wood Mackenzie's Tara Schmidt, who manages the global trends service. Almost all forms of energy production and power generation are dependent on water, and risks vary greatly by fuel type and asset location.
"The research shows that more than half of shale and tight gas reserves in the U.S. -- as well as the top 10 countries by reserves volumes outside the U.S. -- are located in medium to extremely high baseline water stress areas, where competition is high with other local water users and concerns over water quality exist," said WRI's Paul Reig.
Using WRI's Aqueduct Water Risk Atlas, water risks that might have the biggest impacts on U.S. shale gas with global expansions were identified, as well as the upside for Middle East oil and China's future coal-fired power plants.
The largest potential locations for unconventional natural gas, oil and coal are in the United States, Middle East and China, areas that also happen to be some of the most water-stressed, according to Wood Mackenzie. In addition, the energy sector overall is the world's largest industry water user, with more than 15% of global supply and growing.
WRI's Aqueduct mapped key energy production centers over baseline water stress levels, which measured the ratio of total water withdrawals to available supply. The analysis identified areas more likely to see high competition among local water users, water resource depletion over time and growing concerns about contaminating dwindling water supplies.
"Water is a risk to the energy industry," said Reig. "By progressing with innovative technologies, advanced water management practices and public policy engagement, the industry can rise to the challenge of reducing shared water risks."
Some of the solutions to solve water-driven risks include using technology to improve operational environmental performance. As important, early stakeholder engagement in the river basins, particularly with regulators, "to identify opportunities to collectively reduce water risks," Reig said.
Unconventional natural gas "holds some of the most promising opportunities to halve or altogether eliminate its water use with saline water sourcing, recycling and green completions, and potentially offset well cost increases as a result," according to Wood Mackenzie.
Many operators have begun to address public concerns about water impacts through assessment reports and collaborative public policies. "Wood Mackenzie expects this trend in increasing transparency and public engagement to continue, as companies move into international markets with more pressing water concerns," said Schmidt.