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Collaborating for sustainable water management in
the oil and gas industry
Sarah Fletcher
Senior Research Analyst
IHS Wate...
Copyright © 2013 IHS Inc. All Rights Reserved.
Significant area of US facing near-term
drought risk
2
Source: IHS Energy, ...
Copyright © 2013 IHS Inc. All Rights Reserved.
Onshore E&P activity overlaps with areas in
drought risk
3
Source: IHS Ener...
Copyright © 2013 IHS Inc. All Rights Reserved.
Key Insights
• The oil and gas industry is a consumptive user of water
beca...
Copyright © 2013 IHS Inc. All Rights Reserved.
Produced water is more difficult to manage
than flowback fluid
5
0%
10%
20%...
Copyright © 2013 IHS Inc. All Rights Reserved.
Wells in sparse drilling areas have limited
wastewater management strategie...
Copyright © 2013 IHS Inc. All Rights Reserved.
Optimization model: Operators choose strategy based
on cost and operational...
Copyright © 2013 IHS Inc. All Rights Reserved.
Field-level case study: Hypothetical operator
in Barnett Shale
8
Treatment ...
Copyright © 2013 IHS Inc. All Rights Reserved.
Regulation A: More wells are able to recycle
9Source: IHS Water
Treatment p...
Copyright © 2013 IHS Inc. All Rights Reserved.
Regulation B: Financial incentives for
treatment
10
Treatment prices
Water ...
Copyright © 2013 IHS Inc. All Rights Reserved.
Before Regulation B: Over half of Type-1 wells
recycle
11
0%
10%
20%
30%
40...
Copyright © 2013 IHS Inc. All Rights Reserved.
After Regulation B: Nearly 100% Type-1 wells
recycle flowback
12
0%
10%
20%...
Copyright © 2013 IHS Inc. All Rights Reserved.
Before Regulation B: Recycling is rare in Type-
2 wells
13
0%
10%
20%
30%
4...
Copyright © 2013 IHS Inc. All Rights Reserved.
After Regulation B: Nearly all flowback and
some produced water recycled in...
Copyright © 2013 IHS Inc. All Rights Reserved.
Before Regulation B: Treatment for discharge
is too expensive in Type-3 wel...
Copyright © 2013 IHS Inc. All Rights Reserved.
After Regulation B: Strong incentives needed
to make discharge widely pract...
Copyright © 2013 IHS Inc. All Rights Reserved.
Financial incentives for treatment can cut
water consumption by nearly half...
Copyright © 2013 IHS Inc. All Rights Reserved.
Conclusions
• Well-designed regulation can reduce water consumption by
half...
Copyright © 2013 IHS Inc. All Rights Reserved.
Type-1 well: Hauling dominates cost in optimal case,
treatment costs prohib...
Copyright © 2013 IHS Inc. All Rights Reserved.
Type-2 well economics similar to Type-1, but scenario
1 slightly cheaper th...
Copyright © 2013 IHS Inc. All Rights Reserved.
Type-3 well: Treatment for discharge more expensive
than for recycling
21
$...
Copyright © 2013 IHS Inc. All Rights Reserved.
Interested in learning more?
IHS Water: http://www.ihs.com/products/cera/co...
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Collaborating for Sustainable Water Management in the Oil and Gas Industry

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Sarah Fletcher, Senior Research Analyst at IHS, presents at the 23rd Annual World Water Week, September 2-6, 2013 in Stockholm Sweden. World Water Week is the preeminent water conference for academic research on water. Sarah’s presentation, “Collaborating for Sustainable Water Management in the Oil and Gas Industry,” is part of an entire workshop on linking science, practice and policy under increasing complexity and uncertainty. www.ihs.com

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Collaborating for Sustainable Water Management in the Oil and Gas Industry

  1. 1. Collaborating for sustainable water management in the oil and gas industry Sarah Fletcher Senior Research Analyst IHS Water sarah.fletcher@ihs.com
  2. 2. Copyright © 2013 IHS Inc. All Rights Reserved. Significant area of US facing near-term drought risk 2 Source: IHS Energy, NOAA Drought report author: Brad Pugh, Climate Prediction Center, NOAA http://www.cpc.ncep.noaa.gov/products/expert_assessment/season_drought.html Current or predicted drought
  3. 3. Copyright © 2013 IHS Inc. All Rights Reserved. Onshore E&P activity overlaps with areas in drought risk 3 Source: IHS Energy, NOAA Drought report author: Brad Pugh, Climate Prediction Center, NOAA http://www.cpc.ncep.noaa.gov/products/expert_assessment/season_drought.html Current or predicted drought Highest activity US oil and gas shales Barnett Shale
  4. 4. Copyright © 2013 IHS Inc. All Rights Reserved. Key Insights • The oil and gas industry is a consumptive user of water because most wastewater is disposed via underground injection. • Operators make decisions about water management based on operational constraints and service costs, both of which vary significantly. Optimization tools should analyze uncertainty across a field. • Regulation can reduce water consumption if it incentivizes water treatment. Significant incentives could reduce water consumption by nearly half in the Barnett Shale. 4
  5. 5. Copyright © 2013 IHS Inc. All Rights Reserved. Produced water is more difficult to manage than flowback fluid 5 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Flowback Fluid Produced Water Wastewater management strategies Surface Discharge Centralized Recycling On-site Recycling Injection Source: IHS Water, CAP Resources Volume Time 30-90 days 20 years Flowback fluid Produced water Wastewater Generation from an oil or gas well
  6. 6. Copyright © 2013 IHS Inc. All Rights Reserved. Wells in sparse drilling areas have limited wastewater management strategies Source: IHS Enerdeq Type-3: No recycling available Type-2: Centralized recycling available Type-1: On-site recycling available
  7. 7. Copyright © 2013 IHS Inc. All Rights Reserved. Optimization model: Operators choose strategy based on cost and operational constraints, not water consumption 7 Type-1 Well Type-2 Well Type-3 Well Flowback Produced Flowback Produced Flowback Produced Scenario 1 (100% Water Consumption) Injection Injection Injection Injection Injection Injection Scenario 2 (70% Water Consumption) On-site Recycling Injection Centralized Recycling Injection Surface Discharge Injection Scenario 3 (Negative Water Consumption) On-site Recycling On-site Recycling Centralized Recycling Centralized Recycling Surface Discharge Surface Discharge Source: IHS Water
  8. 8. Copyright © 2013 IHS Inc. All Rights Reserved. Field-level case study: Hypothetical operator in Barnett Shale 8 Treatment prices Water consumption Well types Hauling distances Optimization model 0.518889309 0.973351734 0.964977288 0.023137484 0.364247456 0.598186651 0.460626867 0.070558276 0.938095721 0.419822645 0.403864883 0.918241679 0.206170182 0.580766578 0.793094256 0.83156138 0.970087239 1.117026825 0.062895305 0.873086589 0.661883838 0.036118654 0.337299306 0.622676156 0.746851888 0.172268972 1.068156185 0.073015937 0.492652985 0.674422782 0.349602714 0.17906539 0.881664509 0.342481713 0.45051848 0.87775748 0.189002127 0.612559876 0.780625883 0.229173448 0.396946575 0.809012842 0.537150335 0.643977463 0.973088406 0.153335025 0.240849643 0.752763909 0.419528876 0.549936367 0.918095322 0.009455211 0.132982437 0.562766801 0.79642461 0.361076737 1.095533587 0.513887637 0.647234963 0.96273086 0.375826598 0.046470102 0.895720123 0.26733555 0.747702419 0.833751123 0.347329691 0.134173117 0.880421746 0.800099733 0.157008848 1.097689848 Optimal strategies Source: IHS Water
  9. 9. Copyright © 2013 IHS Inc. All Rights Reserved. Regulation A: More wells are able to recycle 9Source: IHS Water Treatment prices Water consumption Well types Hauling distances Optimization model 0.518889309 0.973351734 0.964977288 0.023137484 0.364247456 0.598186651 0.460626867 0.070558276 0.938095721 0.419822645 0.403864883 0.918241679 0.206170182 0.580766578 0.793094256 0.83156138 0.970087239 1.117026825 0.062895305 0.873086589 0.661883838 0.036118654 0.337299306 0.622676156 0.746851888 0.172268972 1.068156185 0.073015937 0.492652985 0.674422782 0.349602714 0.17906539 0.881664509 0.342481713 0.45051848 0.87775748 0.189002127 0.612559876 0.780625883 0.229173448 0.396946575 0.809012842 0.537150335 0.643977463 0.973088406 0.153335025 0.240849643 0.752763909 0.419528876 0.549936367 0.918095322 0.009455211 0.132982437 0.562766801 0.79642461 0.361076737 1.095533587 0.513887637 0.647234963 0.96273086 0.375826598 0.046470102 0.895720123 0.26733555 0.747702419 0.833751123 0.347329691 0.134173117 0.880421746 0.800099733 0.157008848 1.097689848 Optimal strategies
  10. 10. Copyright © 2013 IHS Inc. All Rights Reserved. Regulation B: Financial incentives for treatment 10 Treatment prices Water consumption Well types Hauling distances Optimization model 0.518889309 0.973351734 0.964977288 0.023137484 0.364247456 0.598186651 0.460626867 0.070558276 0.938095721 0.419822645 0.403864883 0.918241679 0.206170182 0.580766578 0.793094256 0.83156138 0.970087239 1.117026825 0.062895305 0.873086589 0.661883838 0.036118654 0.337299306 0.622676156 0.746851888 0.172268972 1.068156185 0.073015937 0.492652985 0.674422782 0.349602714 0.17906539 0.881664509 0.342481713 0.45051848 0.87775748 0.189002127 0.612559876 0.780625883 0.229173448 0.396946575 0.809012842 0.537150335 0.643977463 0.973088406 0.153335025 0.240849643 0.752763909 0.419528876 0.549936367 0.918095322 0.009455211 0.132982437 0.562766801 0.79642461 0.361076737 1.095533587 0.513887637 0.647234963 0.96273086 0.375826598 0.046470102 0.895720123 0.26733555 0.747702419 0.833751123 0.347329691 0.134173117 0.880421746 0.800099733 0.157008848 1.097689848 Optimal strategies Source: IHS Water
  11. 11. Copyright © 2013 IHS Inc. All Rights Reserved. Before Regulation B: Over half of Type-1 wells recycle 11 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Scenario 1 100% consumption Scenario 2 70% consumption Scenario 3 Negative consumption Type-1 wells: Optimal scenarios across field Base Regulation B Source: IHS Water
  12. 12. Copyright © 2013 IHS Inc. All Rights Reserved. After Regulation B: Nearly 100% Type-1 wells recycle flowback 12 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Scenario 1 100% consumption Scenario 2 70% consumption Scenario 3 Negative consumption Type-1 wells: Optimal scenarios across field Base Regulation B Source: IHS Water
  13. 13. Copyright © 2013 IHS Inc. All Rights Reserved. Before Regulation B: Recycling is rare in Type- 2 wells 13 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Scenario 1 100% consumption Scenario 2 70% consumption Scenario 3 Negative consumption Type-2 wells: Optimal scenarios across field Base Regulation B Source: IHS Water
  14. 14. Copyright © 2013 IHS Inc. All Rights Reserved. After Regulation B: Nearly all flowback and some produced water recycled in Type-2 wells 14 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Scenario 1 100% consumption Scenario 2 70% consumption Scenario 3 Negative consumption Type-2 wells: Optimal scenarios across field Base Regulation B Source: IHS Water
  15. 15. Copyright © 2013 IHS Inc. All Rights Reserved. Before Regulation B: Treatment for discharge is too expensive in Type-3 wells 15 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Scenario 1 100% consumption Scenario 2 70% consumption Scenario 3 Negative consumption Type-3 wells: Optimal scenarios across field Base Regulation B Source: IHS Water
  16. 16. Copyright © 2013 IHS Inc. All Rights Reserved. After Regulation B: Strong incentives needed to make discharge widely practical 16 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Scenario 1 100% consumption Scenario 2 70% consumption Scenario 3 Negative consumption Type-3 wells: Optimal scenarios across field Base Regulation B Source: IHS Water
  17. 17. Copyright © 2013 IHS Inc. All Rights Reserved. Financial incentives for treatment can cut water consumption by nearly half 17 94% 92% 60% 55% 0 2000 4000 6000 8000 10000 12000 14000 16000 Base Regulation A (Operational) Regulation B (Financial) Regulation A + Regulation B Perwellwaterconsumption(thousandbbl) Effect of policy on operator water consumption Well type 3 (discharge) Well type 2 (central) Well type 1 (onsite) Source: IHS Water
  18. 18. Copyright © 2013 IHS Inc. All Rights Reserved. Conclusions • Well-designed regulation can reduce water consumption by half. Treatment incentives are more effective than operational incentives. • Operators face significant variability in well-to-well water management. Rules-of-thumb for defined categories of wells can simplify decision-making. • Optimization tools with simulation can be used by operators, regulators, and NGOs to asses water management in any location 18
  19. 19. Copyright © 2013 IHS Inc. All Rights Reserved. Type-1 well: Hauling dominates cost in optimal case, treatment costs prohibit produced water recycling 19 $- $0.5 $1.0 $1.5 $2.0 $2.5 Scenario 1 100% consumption Scenario 2 70% consumption Scenario 3 Negative consumption Milliondollars Water management cost for Barnett Type-1 well, by service Total Storage Cost Total Treatment Cost Total Injection Cost Total Hauling Cost Total Transfer Cost Total Acquisition Cost Source: IHS Water
  20. 20. Copyright © 2013 IHS Inc. All Rights Reserved. Type-2 well economics similar to Type-1, but scenario 1 slightly cheaper than scenario 2 20 $- $0.5 $1.0 $1.5 $2.0 $2.5 Scenario 1 100% consumption Scenario 2 70% consumption Scenario 3 Negative consumption Milliondollars Water management cost for Barnett Type-2 well, by service Total Storage Cost Total Treatment Cost Total Injection Cost Total Hauling Cost Total Transfer Cost Total Acquisition Cost Source: IHS Water
  21. 21. Copyright © 2013 IHS Inc. All Rights Reserved. Type-3 well: Treatment for discharge more expensive than for recycling 21 $- $0.5 $1.0 $1.5 $2.0 $2.5 Scenario 1 100% consumption Scenario 2 70% consumption Scenario 3 Negative consumption Milliondollars Water management cost for Barnett Type-3 well, by service Total Storage Cost Total Treatment Cost Total Injection Cost Total Hauling Cost Total Transfer Cost Total Acquisition Cost Source: IHS Water
  22. 22. Copyright © 2013 IHS Inc. All Rights Reserved. Interested in learning more? IHS Water: http://www.ihs.com/products/cera/consulting/water.aspx 22 Sarah Fletcher Senior Research Analyst IHS Water sarah.fletcher@ihs.com

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