Seeking Clarity in Murky Waters

Abstract

In the oil-rich Permian Basin of west Texas and southern New Mexico, water serves as catalyst and crutch, ally and enemy, asset and liability. It’s water that allows producers to fracture high-potential wells in the region and get robust volumes of oil to flow back to the wellhead. It’s water that has allowed basinwide production to climb from pre-pandemic levels of around 4.7 million to over 5.4 million B/D in November 2022—a new record for the region. However, along with the oil that flows out of each well comes produced water. A lot of it. In some areas of the Permian’s Delaware Basin, for example, for every oil barrel extracted, producers can get 15 bbl of produced water (Fig. 1). Produced water is a complex issue with no true silver bullet to solve the problem of what to do with all of it. In addition, each current handling method employed is a partial solution at best, each with its own set of hurdles. Recycling is growing in popularity and scope, but the infrastructure in place and planned is finite. Disposal is under enhanced scrutiny in both Texas and New Mexico due to its potential seismicity impact and has even been banned within several areas. Even trucking it away adds unfavorably to capital costs and environmental impacts. Produced water is also nasty stuff, full of saline and it can also contain varying amounts of oil residues, sand or mud, naturally occurring radioactive materials, chemicals from fracture fluids, bacteria, and dissolved organic compounds. On the flip side, water demand in the Permian remains high as operators move to boost production as pandemic concerns wane. According to analysis by Wood Mackenzie, the typical 500,000 bbl of water needed to fracture a 10,000-ft lateral is close to the daily demand of the city of Midland, Texas. With numbers like that, you can start to see the appeal of recycling produced water into water that can be reused by oil companies to fracture wells, and limit the reliance on other water sources and the competition for those with municipalities, farms, etc. “There are two main benefits to recycling water that companies talk about quite a lot. First, the more water you recycle, the less water you need to inject into disposal wells, and there’s a lot of scrutiny on that because of the induced seismicity in the region. Secondly, increasing recycled water use reduces sourced water costs,” explained Josh Dixon, senior research analyst with Wood Mackenzie. “Many people don’t realize it, but the cost of sourcing groundwater can be a lot higher than recycled water. If you’re sourcing all your water from water wells, you’ve got to pay the Opex of those wells, as well as royalties to the landowners where those wells are. By recycling your own produced water, you’re just basically treating something that you would otherwise have to pay to dispose of, and then you can reuse it. Water recycling Opex is coming down, and some companies are now citing increased recycling as an economic incentive as opposed to a purely ESG one.”