Splish Splash - Where Are Permian Producers Going to Put All of That Produced Water?

Production growth in the Permian Basin continues to have profound effects on the crude oil, natural gas and NGL markets. It also has helped to spur the rapid development of what is, in effect, another midstream sector: one that focuses on the delivery of large volumes of water for hydraulic fracturing and — just as important, and even more challenging — the gathering and transportation of vast and increasing amounts of “produced water” that emerge from Permian wells with crude and associated gas. Until now, most Permian produced water has come from legacy conventional wells, but last year, the water volumes from unconventional, tight-oil wells caught up and their share will only rise from here on out. That’s a problem for producers — and a big one — because they can’t just re-inject the water back into the producing formation like they can with conventional wells. Today, we discuss highlights from RBN’s new Drill Down Report on water-related issues and infrastructure in the U.S.’s hottest shale play.

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Splish Splash - Water Challenges Permian Growth: Producers And Water Midstreamers Scramble To Address Water Supply And Produced Water Takeaway Needs

Production growth in the Permian Basin continues to have profound effects on the crude oil, natural gas and NGL markets. It also has helped to spur the rapid development of what is, in effect, another midstream sector: one that focuses on the delivery of large volumes of water for hydraulic fracturing and - just as important, and even more challenging - the gathering and transportation of vast and increasing amounts of “produced water” that emerges from Permian wells with crude and associated gas.

In this Drill Down Report, we review our analysis of past and present produced water volumes being generated in the Permian by conventional and unconventional wells, and discuss a number of representative water and produced water pipeline systems in the Permian - some existing and some planned. We also consider the play’s need for more water-related infrastructure as production there continues to grow.

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The trends toward longer horizontal wells and more intense well completions have resulted in the need for sharply higher volumes of water (and frac sand) during the hydraulic fracturing of Permian wells. The amount of water needed to complete a typical well in the region has increased from less than 100 Mbbl in 2014 to more than 300 Mbbl in 2017, and that water use per well can run considerably higher. Industry reports indicate that some huge Permian frac jobs have used up to 1 MMbbl of water per well. Supplying large volumes of water for Permian well completions is not an easy task in dry and dusty West Texas and southeastern New Mexico. Traditionally, the task of delivering that water has gone to fleets of trucks. But with the volume of water needed for well completions rising quickly, producers and water midstream companies have been developing water pipeline systems that can bring large volumes of water to the lease at a much lower cost per barrel.

The Permian’s water-related challenges do not end with the water needed for well completions — far from it. Each barrel of crude oil that emerges from a Permian well can generate many times more produced water that needs to be gathered and safely disposed of. By and large, the oil that emerges from conventional, vertical-only wells comes with copious amounts of produced water — often more than 10 barrels per barrel of crude — and the average produced-water-to-oil ratio (PWOR) for each well typically increases over time. Figure 1 shows the PWORs for conventional Permian wells (blue line) and for unconventional Permian wells (red line) over the past few years, which as you can see is considerably lower, averaging less than 4 barrels of produced water per barrel of crude in recent years. But don’t let the relatively low PWOR for unconventional wells fool you — there’s trouble in that red line.

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