By some estimates, the United States will be producing 55 million barrels a day of produced water by 2025, with the Permian Basin—the epicenter of development and production activity—accounting for the lion’s share. That is obviously a tremendous volume of water to manage on an around-the-clock basis, making midstream water service providers an integral part of the succuss equation for producers all across the Permian.
Midstream players continue to install pipe, pumps, retention ponds, disposal capacity, and produced water treatment and recycling facilities as producers endeavor to eliminate dependency on freshwater for hydraulic fracturing. “On-the-fly” chemical treatment, high-rate solids filtration, and last-mile logistical technologies continue to advance to connect the dots between active frac sites and nearby produced water supplies and transportation infrastructure.
Outsourcing produced water gathering, transportation and recycling functions to dedicated midstream service providers has one huge overarching benefit for operators: lower costs. The need for producers to continually improve environmental and sustainability efforts provides additional benefits, says Larry Richards, president of the Permian Basin International Oil Show and a 35-year executive and leader in Permian oil field services and manufacturing.
“Certainly, it has other tangible benefits for operators, but what drives the entire model is the ability achieve cost reductions,” Richards observes. “Being able to drive down water-related costs in a spread-out basin like the Permian can represent one-third to one-fifth of total production cost.”
The evolution of water midstream mirrors that of natural gas and crude oil midstream before it, he observes, with companies launching and adding to their positions through organic growth, strategic asset bolt-ons and acquisitions, he says. Former executives from operating and service companies are among those who have started enterprises, giving the segment a ready-made vision on how to apply expertise to further reduce costs, Richards adds.
“There are still tremendous opportunities for deals to be done, and like any technology, it will go for the low-hanging fruit first where the economic payback is unassailable,” he comments. “As it gets more efficient and cost-effective, it will begin to draw down and then have 90% of the basin with water going through pipe and not over the road in a truck. However, we’re a long ways from that right now.”