Produced Water Society in the Permian
August 24 2018
A trip to Midland Texas does wonders for a soul that yearns for flatness and beige. Last week about 350 souls got their fill of both at the Produced Water Society’s second Permian Basin seminar. The presentations were a balanced mix of business, mostly midstream water, technology and even a little bit of chemistry. And being the Permian, there were two presentations on the proper construction of double-lined holding basins. Big ones.
Both days’ keynotes were about midstream water. The president of Solaris Midstream, Bill Zartler, provided the trends of the Permian. Unsurprisingly, he saw a greater demand for completion water and higher volumes of produced water. Enhanced oil recovery for conventional wells is decreasing, and the reuse of produced water in fracs increasing. He finished by highlighting the causes of inadequate disposal capacity, the threat of seismicity and the rise in pressure in shallow disposal wells, to name three. All of these factors point towards more reuse of produced water.
On the second day, Gabe Collins of the Baker Institute reverse engineered a one-billion-dollar midstream water company by using valuation assumptions and the volumes of source water and produced water reuse and disposal required to get those valuations. To conclude, he made six predictions.
Within 12 months from today (start date August 2018):
- A major Permian-focused water midstream firm goes public or has a similarly large liquidity event
- At least 3 additional large private equity companies enter the space
- At least 3 sizeable (80 kbd+ avg. actual volume handled) water midstream firms in the Permian will be acquired by a larger player
Within the next 24 months:
- There will have been a billion-dollar oilfield water transaction in the Permian
- At least five Permian-focused entities other than Pioneer Water Management will be transporting and injecting 500 kbd or more of produced water
Within the next 36 months (i.e. by August 2021):
- At least 4 million bpd of incremental produced water (relative to August 2018) must be handled
There were a couple of common threads. The lack of proper data on produced water characteristics being one. Another was the need for more of cooperation among E&P companies on water issues. This sentiment was reinforced by a presentation about the Canada Oil Sands Innovation Alliance (COSIA), an organization made up of a group of contributing oil companies with the mission of tackling water issues. The oil refiners do this too with an organization called the Petroleum Environmental Research Fund (PERF). Both of these organizations are funded on a pro rata basis by the member companies, and both conduct research on challenges facing the members. A little more cooperation on water issues in the U.S. oil patch makes sense.
There was a bone of contention. Seems there are some on the operator side that firmly believe that produced water should be segregated and used only in the formation whence it came. And there were others who believe that water can be treated to effectively frac in multiple formations. There was, however, consensus on the fact that there is no single water quality that every producer is willing to accept.
There were more sport coats, and even some suits, than there were at a conference put on earlier in the year by UT Permian Basin. What the PWS conference lacked in cowboy hats and dish-sized belt buckles it made up for with practical content and crystal ball predictions.
Roundtable discussion during the Permian Basin seminar