Water Management: Where are we headed?
As I sit here, planning for the upcoming Produced Water Society event and preparing my presentation, I can’t help but think, “where is the produced water management market headed?” In general, the ESG movement is expected to change the way we do business, but will our industry grow and maintain, and what other impacts will there be from seismicity, legislation and other fronts? So, let’s look at where we are going.
Industry growth. Depending on where you get your information, the consensus seems to be that near-$100 oil will continue, with it dropping into the $90s and potentially high $80s. It depends on how much demand is destructed by inflation and recession. In any case, the next three to four years will continue fairly stable oil and gas production. This is good news for water management, as we will continue to see stable-to-slightly increasing water volumes.
A common concern is that we have fewer frac fleets today then we did pre-pandemic, so how will there be a return to that level of production? With the growth of simulfracs, multi-well pads and zipper fracs, we see efficiency gains—doing more with less. But the really good news is that recycling is projected to increase. Today, about 25%-30% of frac fluid is recycled produced water. Projections show this number reaching 50% by 2025 and stabilizing. This is essentially a near-doubling of recycling of produced water.
Unfortunately, 50% looks like a cap. This is a shame, as we produce two to three times the produced water needed for frac completions, but recycling has logistical limitations, and, more importantly, landowner restrictions. Some major landowners generate significant revenue selling water, and they don’t want that revenue to diminish. So, they restrict the recycling of produced water in different ways, either through water supply contracts or restricting the distribution and gathering of produced water on their properties. Maybe we can reach a common ground, with a royalty structure for landowners. In the meantime, we see a nice growth curve for recycling over the next three to four years.
Seismicity. Many believe that seismicity is driving increased recycling, but the reality is the increase will not offset the reduction in capacity we see from SRAs (Seismic Response Areas). And we will see a cap to recycling that we mentioned. Thus, we see renewed focus on uses outside of the oil field and the use of desalination to achieve this, primarily thermal-based technologies.
We also see renewed interest in enhanced evaporation. These efforts bring new challenges, primarily development of discharge standards, which may be five years away. However, one major operator is close to obtaining a permit for discharge outside of the oil field. I can’t disclose anything yet, but this could open the gate to more discharge permits.
Each new opportunity also brings challenges. Thermal desalination will require management and treatment of VOCs (volatile organic compounds) and ammonia. As our industry evolves, we will see an increase in the complexity of problems we solve. We do know one thing—either other options are developed outside of recycling, or produced water will begin moving further distances for disposal, which will increase costs and emissions. Seismicity will remain the elephant in the room.
The ESG movement. We all expected ESG to change water treatment or at least encourage more recycling. On the surface, seismicity seems to have a bigger impact on recycling than ESG. Companies are taking their existing practices and labeling them ESG, with no real changes to their operations. We definitely see a push for automation, which reduces labor demand and truck traffic, so that is an ESG-driven exercise. In reality, qualified labor is getting harder to find and increasing in cost, trucks are getting harder to source, while automation reduces cost.
We started our push five years ago to achieve full automation; no human intervention. Instead, operators tell us they want labor. Nobody asks about carbon footprint; they ask about price. We hope this changes, and some operators are adding ESG to the discussion, but it isn’t entering into buying decisions. An example of this is chlorinated oxidizers. Although falling out of favor in many applications, chlorine bleach, for example, went the way of non-chlorine bleach because of the formation of chlorinated by-products.
In oilfield water management, chlorinated oxidizers are still prevalent, and some misrepresent it as a green biocide alternative. We expect ESG issues to become more prevalent and greenwashing to reduce, as buying decisions change and weed out the pretenders.
Legislative and other issues. VOC regulation has been on the radar, off the radar, and back on again. This will add some complexity to treatment and recycling of produced water. We have done some work here, and it can be achieved easily. Another related issue is benzene, a VOC also regulated as a hazardous waste. Today, we enjoy an exemption from hazardous waste regulations. This exemption has been challenged, and we expect the Biden administration to challenge it again. This could monumentally impact how we manage produced water.
Another related issue is the recent West Virginia vs EPA case, where SCOTUS ruled that the EPA has no authority to make changes to existing rules without legislation. This puts the power back into Congress to create new laws. This ruling can cause challenges to the SEC regarding ESG disclosures, as well as the definition of WOTUS (Water of the U.S.) that determines which waters fall under federal jurisdiction. These issues can shape or change how we do business in oilfield water management.
I will keep you updated on these issues, but for now, the future looks bright, at least for the next three to four years.
- Applying ultra-deep LWD resistivity technology successfully in a SAGD operation (May 2019)
- Adoption of wireless intelligent completions advances (May 2019)
- Majors double down as takeaway crunch eases (April 2019)
- What’s new in well logging and formation evaluation (April 2019)
- Qualification of a 20,000-psi subsea BOP: A collaborative approach (February 2019)
- ConocoPhillips’ Greg Leveille sees rapid trajectory of technical advancement continuing (February 2019)