Unconventional E&P ‘$8 Billion of US Water Services Market’
Limited available water resources, drought and increasing water-use demands from all segments of the economy is driving water management issues to the forefront of US exploration and production (E&P) operations’ considerations and accounts for $8 billion in spending for water services in US unconventional oil and gas plays, according to a report from IHS.
The analytics firm forecasts oil and gas water management to far exceed the modest growth (13 percent) it predicts in the overall national water management market, says Marcus Oliver Gay, principal author of the IHS study and director, Water Information and Insight at IHS. Gay says the continental US oilfield water management market will grow to $38 billion by 2022, with demand for water management services in high-activity shale gas and tight oil plays growing by nearly 40 percent by 2022, to about $11.2 billion.
The Future of Water in Unconventionals: Water Market Opportunities, produced in conjunction with CAP Resources, assesses water demands and water management across 13 high-activity, oil and gas plays in the continental US, and existing oilfield water management from associated geographical regions (excluding California). It covers the entire water management value chain: acquisition, storage, transfer, hauling, treatment and waste-disposal services.
Aaron Horn, consultant with CAP Resources and a contributing author of the report, says no “one-size-fits-all solution exists for water management in oil and gas” because of the localized water services sector and the variability of water availability across regions. Because of this, local water sourcing, disposal options, and regulations will drive customized water management in each play or basin, Horn says.
In Texas, for example, the report notes that development of unconventional oil and gas activities often account for less than 1 percent of the state’s available water resources. However, in some locations such as Johnson County, Texas, E&P water use may account for as much as 29 percent of the available water resource at the county level.
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.
In contrast to most conventional oil and gas E&P, water and wastewater management is a significant cost in unconventional oil and gas developments. 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 percent 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.
These cost levels indicate the strong economic incentives for E&P operators to pursue efficient, fit-for-purpose water management solutions that will keep costs down, the report says. 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. According to study researchers, some unconventional plays recycle greater than 80 percent of oilfield wastewater. Nationally, approximately 16 percent of fracture fluids volume is made with recycled oilfield wastewater today. IHS expects this figure to double by 2022.
US demand for water treatment chemicals will rise 3.2 percent per year to reach $6.7 billion in 2017, an increase driven by growth in the oil, gas and mining industries and a rebound in manufacturing production, according to a study by the Freedonia Group published last month.
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