To complete a single two-mile horizontal well in the Permian, producers or their contractors need to bring in several hundred thousand barrels of fresh, treated or brackish water — not an easy task in dry and dusty West Texas and southeastern New Mexico. And the water challenges don’t end there. Each barrel of crude oil that emerges from a Permian well can generate even more produced water that needs to be transported and safely disposed of. With Permian production of crude and associated natural gas rising fast, the sprawling region is experiencing a rapid build-out of water pipeline networks and other infrastructure aimed at keeping pace with hydrocarbon production growth. Today, we begin a blog series on water-related pipeline, storage and treatment infrastructure in the U.S.’s fastest-growing crude oil production area.
The Permian has been a frequent topic in the RBN blogosphere for some time now, and given that 2018 is likely to be another very active year for drilling and completions in the liquids-packed, 70,000-square-mile region, more Permian blogs are surely in the cards. The Growth Scenario in RBN’s production forecast for the Permian [based on a $53.67/bbl price for West Texas Intermediate (WTI) in 2019, rising to $61/bbl in 2023] shows crude oil production in the play climbing over the next five years — from the current 2.6 MMb/d to 4.8 MMb/d (see Help On the Way). The Permian’s phenomenal production growth is being driven by unprecedented investment there. As we discussed in Ready to Run, a number of the oil-focused and diversified producers we track have been ratcheting up their planned 2018 capex in the Permian — examples we cited include ConocoPhillips, Parsley Energy and Occidental Petroleum. Also, Chevron has announced that in 2018 it will invest $3.3 billion in Permian projects, and that it plans to increase its Permian rig count by one-third (to 20 from the current 15) by the end of 2018. In addition, the Permian has been the recipient of multibillion-dollar investment in new hydrocarbon-related infrastructure — something we’ve examined at length in blogs and in Drill Down Reports on crude takeaway pipelines, gas pipelines, NGL pipelines and crude shuttle pipelines and gathering systems.
Permian production growth also is being spurred by three factors we discussed in Faster Horses. First, producers are assembling ever-larger leaseholds in the parts of the Permian they have determined to be the most promising, and filling in gaps so their holdings are contiguous and are not “checkerboarded” (interspersed with leaseholds held by other producers). That is enabling producers to drill longer horizontal wells or laterals (now often 7,500 to 10,000 feet, and sometimes longer). And they are intensifying their well completions with the use of more pressure, more frac sand (and more water) per linear foot of lateral and more frac stages. We zeroed in on frac sand and produced water in our “Wipe Out!” blog series. In Part 1, Part 2 and Part 3, we discussed how the trend toward high-intensity completions caused sand demand — and prices — to soar, and prompted the rapid development of new sand mines in West Texas.