“Greatness is not where we stand, but in what direction we are moving”
This quote by Oliver Wendell Holmes has some real applicability to the Oilfield Water Management Industry. Numerous sources are calling oilfield water management one of the fastest-growing industry segments within oil and gas. Personally, this is an exciting space to work in, but as I stand working in this industry, I have to ask, where are we going?
I think we all expect to see scale develop—bigger gathering systems and larger disposal networks while the water mid-streams acquire and/or grow organically. This is already materializing, so is this our future? Smaller disposal well operators get acquired and water mid-streams get bigger; the traditional roll up. As E&Ps see capital for their drilling and completions programs getting more constrained, will we see more E&Ps selling off water infrastructure to water mid-streams, further fueling their already-growing industry?
Well, I expect that will happen. The water mid-stream will likely be where the growth will come from—like they say, “follow the money.” And the money is all going into backing water mid-streams or developing water mid-streams. Is it really that simple, that oilfield water management will be dominated by the water mid-stream? Well, yes and no. There are other factors to consider.
Seismicity risk. I hear people talk about seismicity (i.e. earthquakes) like it’s a serious problem, but something that only effects Oklahoma. All I can say is you’re not paying attention. Let’s take a quick look at what actions the Texas Railroad Commission (RRC) has taken. In November 2014, RRC enacted changes to the Underground Injection Control (UIC) program that regulates disposal wells to address seismicity. In 2016, the EPA issued a letter to the RRC, stating a concern with seismicity in North Texas and the RRC’s reluctance to admit that this was due to unconventional oil and gas activity. Personally, this was off base, because the RRC was acting and restricted, and shut down injection wells in North Texas at that time.
The concern here is the UIC is a federal program, and the EPA grants states the authority or primacy to regulate and manage this program, but it also can take that away. Now, TexNet was already being discussed and was voted into existence in 2017. TexNet is Texas’s earthquake monitoring program. Permits were already seeing language, allowing the RRC to restrict or modify existing permits, due to seismicity. In May 2018, the RRC issued a report showing that of the 189 applications received, 92 were permitted with special conditions, nine permitted without special conditions, 36 returned or withdrawn, 10 scheduled for hearing due to protests, and 42 pending. This draws a pretty clear picture that seismicity was impacting permits and permitted capacity.
Then, in December 2018 after a spike in earthquakes in the Delaware Basin, the RRC said there will be further changes in disposal well permitting. These included a seismic review panel, further evaluation and more restrictions. The current average is 140 days for a permit, but in 2018 the longest duration for a permit was 1.5 years. In 2019, we are already seeing permits taking close to two years, so permitting durations are taking longer. Reeves County permitting is taking the longest, and is also where seismicity has been most prevalent. Another permitting trend in the Delaware basin is a 10,000-bpd restriction on the capacity requested. As of May 2019, there has been about a 33% reduction in injection capacity requested, and a 50% reduction in pressures, based on what the permittee requested. The good news is the RRC is issuing more permits, albeit with restrictions.
So, what does this all mean? If you’ve been paying attention, seismicity has been an issue over the last few years, and the RRC is taking action. But, are you? How are you planning for a potential shortfall in capacity? Especially in the Delaware basin, ground zero for the Texas seismicity problem. The Delaware basin is also home to higher water cuts, 5–10 bbl of water to every bbl of oil, as compared to 1–2 bbl of water to every bbl of oil in the Midland basin. And this is all happening at a time when completion activity is transitioning to the Delaware basin—an opportunity in the making, or a major obstacle for the industry?
I truly believe how we manage our way as an industry through the issue of seismicity in the Delaware basin will be a major indicator of whether we will see sustained growth or a retraction while production backs off to address the concern of disposal capacity. We will not run out of capacity; it just might not be were we want it, driving up the cost of produced water disposal. If the cost goes up too much, some operators may focus on lower water cut acreage or shift to the Midland basin, where seismicity hasn’t been a concern.
Much of how we react to this opportunity will rest with the water mid-streams, and their scale and disposal well capacity. Can they rise to the challenge? Well, they aren’t the only ones stepping up. Recycling activity is increasing, and recycling costs have been driven lower, even lower than disposal costs. Recycling can provide much needed capacity to the Delaware basin. This is also a dilemma for some mid-streams—every barrel of recycled produced water is a barrel of fresh water I can’t sell and a barrel of disposal revenue I miss.
Some mid-streams have invested heavily in freshwater infrastructure, for which they may not see a return on investment, if recycling grows. New Mexico forced the issue under the “Produced Water Act” allowing operators to void fresh water contracts if they chose to recycle. Will mid-streams support recycling or consider it a threat? The greatness of this industry will be defined in how we respond to the challenges of the Delaware basin, and I can’t wait to respond to the challenge. WO
- Water management (February 2024)
- U.S. producing gas wells increase despite low prices (February 2024)
- U.S. drilling: More of the same expected (February 2024)
- U.S. oil and natural gas production hits record highs (February 2024)
- Offshore potable water production from subsea karstic aquifers (November 2023)
- Singlet oxygen-generating treatment technology achieves sustainable operations, helps operators meet production goals (November 2023)
