The Cost Benefits of Produced-Water Reuse
SWD Background: Saltwater disposal wells (SWDs) have been around since the 1930s. In 1974 with the passage of the Safe Water Drinking Act (SWDA) came the federal Underground Injection Control (UIC) Program, which over the next 10 years or so developed minimum standards to protect major sources of drinking water. There are different classes of injection wells from 1 to 5. For our purposes, we will be looking at Class 2 wells, which are categorized as used for disposal of fluids from oil and gas production.
In general terms, an SWD injects wastewater into a porous zone that is isolated and below sources of drinking water. Imagine a sponge trapped between two impermeable barriers. These zones keep the injected water isolated. It can cost anywhere from $3 to $5 million to develop an SWD. Disposal wells and injection wells are two different things.
Disposal wells get rid of fluid where injection wells are for enhanced production, commonly referred to as waterfloods or enhanced oil recovery (EOR). We will be evaluating disposal, not injection wells. There is an additional value in injection wells due to enhanced production that makes that evaluation much more difficult because it is more complicated to assess the value of the enhanced production.
One common misconception is disposal is the most common produced-water management option. On the contrary, it is waterflooding. In Texas, active injection wells account for about 75 percent of wells compared to active disposal wells at around 25 percent. Nationally, injection wells are closer to 80 percent. Although interesting, we are looking at disposal wells and not waterfloods or injection wells.
Produced-water reuse has gone through an evolution over the last few years—from softening to removing total dissolved solids (TDS) to the much simpler and cost-effective treatment regimen of oxidation. Over the last few years, storage has become larger, bringing on the need to preserve water quality, which started with chemical pit treatments and has evolved to aeration systems, reducing costs dramatically.
Frac fluids have become more salt tolerant, and slickwater fracs are now the preferred frac method. Slickwater fracs consist of, primarily, a friction reducer, which is much more tolerant to salt when compared to crosslink or linear gels. These changes have simplified the watertreatment needs and have led to a much lower cost produced-water reuse program.
All that being said, it’s still common for people to say, “I don’t recycle produced water because it’s too expensive.” Even on the Railroad Commission of Texas website, they mention the most common reason given for not recycling produced water is cost when compared to disposal. The purpose of this case study is to do a comparison of a typical SWD and today’s produced-water reuse program.
As a basis, we will take a 20,000 barrel per day (BPD) operation. We have surface equipment consisting of centrifugal separators for solids control and gun barrel oil/water separators in option 1. This system feeds a SWD, and in option 2, it feeds a produced-water reuse system. Why shared surface equipment for these two options? The key to reducing cost is to optimize what you have and increase utilization.
We are also seeing that this is a common approach. Take an existing SWD and add some storage and make it a combination disposal or reuse facility. This also simplifies the comparison between an SWD and a produced-water reuse system.
In Texas, active injection wells account for about 75 percent of wells compared to active disposal wells at around 25 percent.
Let’s better define the basis for this comparison. We are taking a 20,000 BPD gathering system, and we are adding a 500,000 bbl produced-water pit. We are feeding a frac program using 1,000,000 bbls/month. We are generating 600,000 bbls of produced water and will have some evaporation.
We will be using a 50/50 blend. The freshwater supply is costing $0.25/bbl. You can see fresh/brackish water rates from $0.25 to $1.50/bbl, so we are using the low end.
The produced-water reuse system consists of a 500,000-bbl pit, an automated oxidation system and an aeration system to maintain water quality. The total cost of this system with a pump recirculating the pit is $1.4 million.
Based on this comparison, produced-water reuse is about $0.05/bbl cheaper than an SWD. In addition to this, you are saving $125,000 monthly in water-sourcing costs. This is a total savings of $300,000/month by managing 600,000 bbls/month of produced water $0.05/bbl cheaper and an additional $125,000/month in watersourcing savings for a grand total of $425,000/month.
There are other elements to this comparison that are harder to evaluate, but favor reuse. When drilling an SWD, you can never guarantee capacity. A reuse system is much easier to guarantee capacity. There is some risk in the SWD development to which we are not attributing a cost.
When an operator starts a completion program, subcontracted services are heavily relied on. Water is sourced through third parties, and produced water is sent to commercial disposal.
Over time, the operator drills his own fresh/brackish water wells and develops his own gathering system and SWDs. These changes result in dramatic savings, but when it comes to produced-water reuse, they rely on subcontractors and can pay from $0.25 to $0.60/bbl. Under this scenario, disposal is cheaper than recycling, but when you combine the fresh/brackish water savings, the margin closes rapidly. If a reuse subcontractor can provide a recycling service for $0.40/ bbl or less including storage, he can provide a reuse program that is lower cost than disposal.
Based on this comparison, produced-water reuse is about $0.05/bbl cheaper than an SWD. In addition to this, you are saving $125,000 monthly in watersourcing costs.
ELIMINATING SUBCONTRACTED SERVICES
In this analysis, we are taking the next step in the optimization of the produced-water management process and going from subcontracted services to operator owned. Just the way fresh/brackish water sourcing and SWD development evolved from third parties to operator owned. The difference is we are including the cost of operation and maintenance of the oxidation and aeration systems, which includes weekly water-quality analysis. This new model and a more simplified produced reuse program have allowed for a much lower-cost produced-water reuse model.
Hydrozonix installed five of these produced-water reuse systems at 40,000 BPD with two more planned for this year for the same operator. They have opted not to include SWDs at each location as the reuse-pricing model is more cost effective than an SWD. We are delivering another (five) 50,000 BPD systems for another operator and have installed our automated oxidation systems on SWDs that are not recycling.
Although we have seen this new reuse model replace SWDs, the reality is the SWD will always be the backbone of produced-water management. Completion programs stall for many reasons. We are seeing takeaway capacity problems in the Permian Basin slow down completion activity, and ultimately, oil prices will drive completions up or down. And with that, you will have an unreliable outlet for reuse as a completion fluid. This unreliability means you need a reliable alterative, and that will always be the SWD.
Although this is a very general comparison, it shows that produced-water reuse can be less expensive than disposal. With that, the question remains, why aren’t you recycling yet?