The rapidly developing water midstream sector promises a “wall of water” for producers. This expanding midstream sector replaces truck trips with more efficient hub-and-spoke gathering and distribution systems.
For waters break forth in the wilderness,
and streams in the desert;
Isaiah 35:6, ESV
“We are modern day alchemists,” says Wolfcamp Water Partners CEO Toby Darden. “Instead of turning lead into gold, we are turning water and sand into oil and gas.”
Speaking at Hart Energy’s Water Forum, a recent addition to the company’s Executive Oil Conference in Midland, held on Nov. 5-6 in Midland, Darden stated that the formation of a midstream industry to handle oilfield water “is going to be fun to watch.”
As with most innovation, the rising tide of a water midstream sector gets a green light at the intersection of opportunity and necessity. As hydraulic fracturing methods use more and more water, putting increasing pressure on a strained water supply while producers at the same time dispose of millions of barrels of produced water, the problem and the solution seem obvious in some ways. This is especially true when considering the cost of transporting these oceanic water volumes.
Getting there, however, requires broad thinking and deep pockets. These days, both are flooding into the Permian and other basins, especially as recycling of produced water—currently at less than 10 percent—continues to become more cost effective.
Addressing the problem, Darden observes that recent completions are now upwards of 700,000 barrels of water per lateral. That would translate into 2.5 billion barrels per year for the Permian by 2040, according to many analysts’ projections. To say, “That’s a lot of water,” would be a gross understatement, and such volumes would put a tremendous strain on resources if it were to all come from groundwater.
Then there’s the cost factor.
“A truck is $2 a barrel, a pipeline is pennies a barrel,” Darden points out. “There’s no question about where the industry needs to go to get efficient. We need to build more pipelines, we need to integrate those pipelines between the service companies that are all working to get producers water and we need to cooperate with the producers to serve their needs.”
Increasing volumes required for frac’ing means that water has become one of the largest logistical considerations for producers, especially as they also fight the evaporation demon that stalks every water pit in the West Texas desert. Frac pits approaching the size of lakes can take two months to fill, during which time up to 20 percent of the water evaporates. Darden sees cooperation among producers and water companies as necessary to boost flow and reduce the time frame for evaporation.
Those who are building the midstream sector understand that the issues are much more complex than simply laying a pipeline from a producing well to a frac site. Jim Summers, CEO of H2O Midstream LLC, describes the evolution of shale water handling in three steps. Shale water 1.0, he says, involved trucks hauling produced water to a disposal well. Shale water 2.0 graduated to “gathering and disposal,” using pipelines to deliver produced water to the disposal well.
Shale water 3.0, which is the current phase, is much more complex and involves a much larger scale of operation. “It’s a fully integrated midstream model,” Summers says. And it involves multiple producers and disposal wells.
With recycling still at that single digit figure, the reality is that most systems rely heavily on disposal wells.
In somewhat of a twist, Summers relates water gathering systems to power grids in the areas of peaking and baseloads—a subject in which he has had expertise.
Accommodating peak and baseload are particularly important as the system adds flowback options, where the filling of a single frac pond may require 100,000 barrels of water per day for 60 days. If there is not enough incoming water to support that during the time, additional capacity is needed. In the power grid the need would be satisfied with additional generation capacity. For water midstream, peak shaving comes more from storage.
H2O Midstream recently bought a Howard County midstream facility from EnCana, a system in which peaking and baseload are being added. Along with 120 miles of pipe feeding a disposal capacity of 85,000 bpd, the network includes a 1MMB storage hub.
Starting with five flowback wells on the system, Summers says, “We’re now looking at potentially 24-well pads, and I think that’s probably just the beginning,” which makes the presence of a permanent system for flowback water invaluable.
The system will also need to accommodate inflows of fresh water, for what Summers estimated as a 50-50 blend of fresh and brackish water.
The complexities are indeed challenging: incoming water from producing wells and from fresh water wells; outgoing water to disposal wells, frac pits, or to an intermediary stop in a storage tank; balancing the needs and capacities in all directions, with all the capex needed to create that capacity. This is why water midstream companies are rising separately from most producers.
On the other hand, some majors and large independents with aggregated fields are able to build and operate their own proprietary system.
Denver-based Cimarex Energy’s Water Resources Manager, Robert Huizenga, said in a phone interview that his company is handling their own water midstream network in Culberson and Reeves counties of West Texas.
“We put in our own infrastructure so we’re not looking at a water midstream in that particular area [Culberson County],” Huizenga says. “We laid the pipe ourselves and we also have our own SWD [salt water disposal] wells.”
They’ve followed the same procedure among a concentrated area of wells in Reeves County.
In Culberson County they are using 100 percent produced water for frac’ing, a level they are not yet at in Reeves, but are moving strongly in that direction.
No treatment is involved before dispatching the water into frac jobs. “With the new chemistry of the frac fluids, they’re able to have high chlorides in that particular case, and within Cimarex—I know other companies are willing to treat the water and put it into pits for storage—within Cimarex, we don’t want that liability, so we have opted to do it in what we call an on-demand system.”
Any pits the company does have are used exclusively for fresh water storage.
They’re able to avoid pits and their associated maintenance costs because frac’ing requires all their produced water and then some. In a procedure that could be compared to Jim Summers’ “peaking and baseline,” Cimarex uses produced water as a baseline, then satisfies peak load by mixing in fresh water.
“As an example,” says Huizenga, “if I need 75,000 barrels of water per day and I’ve got 60,000 barrels of [produced] water a day, instead of taking that liability of having some water in a pit, we’ll just supplement that with fresh water.”
The company’s volume of recycled produced water has increased almost tenfold since they first tested the program in 2013-14—from 840,000 bbl a year then to 8 million barrels through November of 2017. They started sending produced water directly to frac jobs in early 2015.
Cost savings numbers are not available to the public, but they’re not the driving force behind the recycling efforts. Instead, Cimarex simply wants to take as little water out of the ground as possible, although they’re happy for the fact that there are also savings involved.
For many, the driving forces are both cost and preservation of future supplies. Darden says, “We’ve all got to find cost efficiencies. Producers need to focus their capital on production growth—that’s what the analysts are all telling them,” but cutting costs by eliminating duplicate infrastructure. “And water management is the best area to achieve large efficiency gains. So we’re going to work on supply, recycling, and disposal. And that’s Nirvana in the water management business.”
However it is done, experts clearly see exponential growth in water pipelines, proprietary or third party. Summers notes that H2O’s Howard County facility has already reached volume goals set for 2021, and they’re still growing.
“That’s exciting for us,” he says. “I will tell you that, for those of you considering midstream, whether you’re a producer building it yourself, or outsourcing to a third party, it’s not as easy as it looks.” He adds, “All the [water volume] numbers you’ve been hearing about are probably underestimating the level of water that’s going to be out there.
“The wall of water is certainly coming.”
And there are whole industries gearing up to handle that wall.
Paul Wiseman is a freelance writer in Midland.