Produced-water recycling staves off many problems including drought.

I have had the unique privilege of witnessing the upstream oil and gas water-management industry1 form and develop. Fountain Quail Energy Services (FQES) was the first water recycler in the first shale play. The production engineers we worked for in the Barnett Shale were on the team that worked with George Mitchell to develop the first productive shale wells. Over the last 15 years, the oil field has completely changed how it views and manages water. What may once have been an afterthought is now one of the main considerations for well development—water.

In late 2014, OPEC began dumping cheap oil on the market in an effort to drive North American energy producers out of business. Their intention was to regain market share lost to U.S. shale production. The OPEC assault on U.S. domestic energy was unforeseen, and its impact was devastating to oil-field service companies. The new water-recycle industry was finally hitting on all cylinders by early 2014. The RRC recycle rules2 (2013) helped remove numerous roadblocks for recycling in Texas, and it was becoming widely accepted by early 2014 that produced water (“PW”) could be recycled at a lower cost than acquiring fresh water, especially if transport costs could be reduced by recycling near frac activity.spwm halldorson2NOMAD Recycle Site. The 25 million barrels of recycled
fresh water in the Barnett by FQES was a reference
used by the RRC for its 2013 recycle rules.

As producers slashed their rig counts, one of the first casualties was water recyclers. The Texas Water Recycling Association had lost fully half its members by mid-2015. Most were out of business or in financial distress. Others were running on empty, and had parked equipment and a skeleton staff only, hoping to ride out the storm.

There was a silver lining to the OPEC assault. We learned just how much we could survive, and I think we surprised not only OPEC and the rest of the world, but we surprised ourselves. I have been in the oil field my entire career. I am always amazed at how resilient our industry is. By the time we came out of the trenches, we began to see that there were some areas where we could still work at sub-$35 oil. OPEC flinched. It felt like the underdog had bloodied the bully’s nose.

The U.S. domestic energy sector is far more flexible than that of any OPEC country, and they have reason not to pull the same stunt again. While they did short-term damage to our industry, they also harmed their own economies and demonstrated to the world that they do not have the clout to destroy the U.S. domestic energy industry as they so clearly had hoped to do. We have shifted the entire global oil-supply dynamic simply by surviving.

The water-recycling companies that survived the downturn are generally much stronger than before. Many have gone through painful financial restructuring or have been merged with larger companies and are now more diversified. Fountain Quail is a good example. Before the 2014 crash, we were strictly a recycle company and were either very busy or very slow. Now that we merged with other water businesses, we handle water sourcing, disposal, transfer (pipe and trucking), containment, logistics management, treatment and disinfection.

Such is life in the oil field. We get back up, we dust off, and we carry on.

 

TRENDS AFFECTING WATER MANAGEMENT IN THE ENERGY SECTOR

There are several key trends affecting our industry today.

A. Larger Fracs. Several years ago, we saw 300-to-400,000-bbl (barrel of oil) fracs, whereas today we see ever larger fracs, often >700,000 bbls and sometimes even more than one million barrels per frac. While we recognize at some point there will be diminishing returns, the trend appears to be that higher frac volumes lead to improved production. While this increased water demand may appear negative at first glance, we need to keep in mind that one of these new large volume wells produces the equivalent product of several wells drilled with less water. The net water used per volume of product generated is actually lower than ever before.

B. Logistics. The real challenge now is managing the logistics of sourcing, transporting, recycling and storing such large volumes of water in the real world of ever-changing frac schedules. Almost every producer now has in-house water-management expertise dedicated solely to handling this challenge.

C. Midstream. This to me is the most exciting new development in our industry. Water management has traditionally been handled with an upstream mindset, meaning short-term thinking and extreme adaptability. Now that we have a good handle on the water needs to develop an entire field, it makes sense to migrate water management into a midstream mindset.

By adding fixed water infrastructure into a region that can serve multiple producers over a long time horizon (five years is long by oil-field standards), tremendous improvements in water supply, treatment and disposal efficiency can be achieved. The capital markets have caught onto this. Several well-funded midstream water companies have emerged recently (i.e., WaterBridge, H2O Midstream, Solaris Water Midstream, Oilfield Water Logistics, Goodnight Midstream). In the past, energy producers may have balked at signing a five-year commitment for water supply or disposal. However, today they recognize that lack of water supply/disposal ranks among their highest risks and that locking in with a water midstream company makes sense, and lowers their exposure to water supply and disposal risk.

D. Treatment Level. It had been very hard to nail down a consensus among energy producers on how much treatment was justified to effectively reuse PW for frac supply. Over the past few years, we have noticed some consensus on the reasons for why recycle treatment have shifted from downhole concerns more toward practical surface-water management concerns. In previous years, producers that recycled PW were primarily concerned about downhole water compatibility, scaling and fouling. While these remain valid concerns, advances in frac chemistry (scale inhibitors, friction reducers) have allowed for successful fracs with lower quality water.

Today, many producers are concerned about water treatment for more practical and obvious reasons. Keeping solids out of the PW pits avoids a messy cleanup down the road and prevents valuable containment volume from being taken up with settled solids. Solids in pits often contain nutrient that can lead to bacteria blooms. Preventing pits from going septic by treating the PW avoids odor issues and limits the potential for damaging or souring the formation. The treatment trend today is generally to limit total suspended solids (TSS), remove oil and manage bacteria. Removing iron is a plus, especially if it can be removed along with the TSS.

Future Threats
Looking forward, diminished water and disposal availability pose the largest risk to unconventional energy development. Water availability is threatened primarily by drought. Disposal availability can be threatened by issues such as disposal formation capacity, induced seismicity and increased regulatory demands that lengthen the time required to develop additional capacity.

spwm roverMobile ROVER units deployed in Delaware Basin
recycling PW back for frac supply
The benefit to recycling PW is that it simultaneously helps on both fronts. The volume requiring disposal is reduced, and the amount of new frac supply water is also reduced. Up to this point, many recycle projects have been relatively small in volume (10,000 to 40,000 barrels of water per day [bwpd]) and primarily have occurred in remote locations near drilling and fracturing activity. The advent of midstream infrastructure will change this and allow for much larger volume treatment at a lower price. Rather than place the recycle site near drilling/fracturing, it can be located anywhere convenient along the midstream water pipeline.

As a PW recycler, one of our biggest issues is the availability of PW to treat. For example, a well-meaning producer may expect to have 10,000 bpd of PW available in a region and find that they only get 5,000 bpd. This risk goes away if we are located near a PW pipeline that carries a volume in excess of our treatment capacity. The larger the volume treated, the more efficient we can get on labor, chemical and capital costs per unit volume. This results in a lower cost to the customer and a win-win.

The beauty of interconnecting water sources, containment, recycling and disposal nodes via pipeline is the tremendous flexibility it offers, permitting full-cycle water management. If any one saltwater disposal (SWD) well requires service, then the PW can be redirected to other wells or recycled back to customers in the region without negatively impacting the system’s ability to take in the water. As the system grows, there is a very large volume under management that lets the network pump frac-supply volumes on a Just-In-Time basis, thereby minimizing the amount of frac-water containment customers in the region require.

Drought
Drought will always pose a risk. The longer it has been since the last drought, the closer we are to the next one. We are shortsighted if we do not prepare as best we can to mitigate the impact to our industry. I came across a quote from the 1950s that resonated with me.

"Unfortunately, a good rain washes away more than drought; it washes away much of man's interest in providing for the next one, and it washes the supports from under those who know that another dry cycle is coming and who urge their fellows to make ready for it."3

Oil recovery, in many ways, parallels farming. Farmers use water to grow their crop, whereas we require water to harvest our crop through hydraulic fracturing. Farmers manage their work on the surface. On the other hand, our organics are buried deep beneath the earth and are already mature. Regardless of the differences, both industries are susceptible to drought, and both industries benefit from sustainable water-management practices.

The “Dirty 30s” were disastrous to North American agriculture. Poor farm practices stripped the soil and left no cover so that windstorms devastated much of the prairies. I recall my grandmother telling me how they had to abandon their farm and seek work hundreds of miles away just to survive. Thankfully, our forefathers learned valuable lessons and improved their farming techniques to prevent this from happening again. I believe their example can be an inspiration for us.spwm scoutNew SCOUT Treatment, a fully containerized,
automated back-washable filter system developed
in partnership with Filtra-Systems


The energy industry has, likewise, learned valuable, sometimes painful, lessons about water management. We are putting new practices into place that will safeguard the industry and make us less susceptible to water supply and disposal constraints in the future.

 

INSULATING THE ENERGY SECTOR FROM WATER SUPPLY AND DISPOSAL CONSTRAINTS

I have four primary recommendations to increase PW recycling, thereby increasing our sustainability and giving us options when faced with supply or disposal limitations.

1. Incorporate PW recycling at SWDs. I believe it is shortsighted to look at PW options as being disposal or recycling. In many cases, the best solution is disposal and recycling. We can fundamentally transform a SWD into a “water management hub” by incorporating recycling at the location. Everything required ahead of a SWD, such as gathering lines, truck unloading, gunbarrel separators and tank storage, all have the capability of serving a dual purpose. The PW tank ahead of injection can also serve as a recycle feed tank. If a SWD can dispose of 10,000 bpd and there is need for 5,000 bpd of recycle nearby, by incorporating recycling, the same location can handle 15,000 bpd by accomplishing both. Every bbl of PW recycled frees up an equivalent bbl of capacity for disposal. So, the two are not competing, but rather complement each other.

2. Water Midstream. As stated previously, interconnecting source nodes (supply wells, pits) and disposal nodes (SWDs, PW pits) via pipelines offer tremendous advantages, especially when a midstream company can develop infrastructure that serves multiple producers in the area. While it may be difficult for any single producer to justify tens of millions of dollars for infrastructure, a water midstream company that contracts with different producers in a region can make the numbers work without any single producer carrying undue risk.

spwm fqesThe FQES Modular Above Ground (MAG) Tank can be
configured in almost any size and capacity.
This one has a 190,000-bbl capacity.
3. Wean ourselves off other sources. Producers today may view PW as their backup plan. If they cannot source adequate fresh or brackish water, they will turn to PW as a last resort. I propose they switch this around and focus on PW as their primary source of frac supply. Let’s face it, there are competing interests for fresh water and even brackish water, but nobody is fighting for PW. By taking the water that nobody wants, our industry avoids conflict. This only works in areas with existing PW (e.g., Permian/Delaware), and it gives these regions an advantage over new regions like the Eagle Ford that do not have abundant legacy PW from old production.

4. Judiciously treat the water. I make a living treating PW. Some could rightly consider this statement as self-serving. However, I do think we need to ensure we weight the potential ramifications of not treating the water adequately. I have met producers that prefer to reuse PW with no treatment at all. However, there is always a risk that a producer could inadvertently sour or damage the formation by not properly addressing something as simple as bacteria. I have also witnessed producers reuse water directly only to discover months later that an expensive pit cleanup was required, thereby costing them more than if they had treated the water ahead of time to remove solids.

 

BENEFITS TO SUSTAINABLE WATER MANAGEMENT

There is really no downside to recycling PW. We take a liability, PW, that nobody wants and that has no value outside the oil field, and we repurpose that commodity to be an asset. Some will argue that clean PW makes better frac water than fresh water because (1) it is higher gravity (less pumping hp), and (2) it’s composition more closely represents the native water in the target formation and is, therefore, more compatible and will not cause issues like clay swelling. Perhaps someday, we will even drill frac supply wells into old disposal formations and harvest that water.

I have summarized the key benefits I see from recycling PW and the reason I am so excited about the future of our industry.

√  Insulates our industry from worrying about the next drought. PW is immune from drought and is, ironically, our most secure water source.

√  Leaves the fresh water we have for communities and agriculture. Even brackish water is best left alone in some regions where it may have limited recharge and could potentially become a future drinking-water supply for nearby communities.

√  Builds goodwill with neighbors. The main opposition to oil and gas development comes from environmental activist groups that falsely claim we are destroying or damaging water resources.

√  Protects SWD capacity. Oil and gas development absolutely requires SWD capacity. By not overutilizing this precious resource, we lessen the risk of overpressuring disposal formations and even lessen the chance of inadvertently inducing seismicity.

√  Recycling PW simultaneously reduces exposure to supply and disposal capacity constraints.

 

Authored by Brent Halldorson

 


References

1 Hereafter referred to as “industry” for reading ease.
2 RRC—Texas Railroad Commission, recycle rules found in TAC, Title 16, Part 1, Chapter 3, Section 3.8.
3 Webb, Walter Prescott, More Water for Texas: The Problem and the Plan, University of Texas Press, 1954.