The largest single expense associated with operating wells in a number of U.S. shale plays — including the Permian — is the cost of dealing with the large volume of produced water that emerges from wells along with crude oil, natural gas and NGLs. In many cases, produced-water disposal costs account for more than half of total well-operating costs, and every dime or dollar per barrel that an exploration and production company (E&P) needs to spend on produced water increases its break-even cost and saps its bottom line. To rein in trucking and other produced water-related expenses, more E&Ps and midstream companies are (1) developing produced-water treatment plants that allow the water to be reused in hydraulic fracturing and (2) building centralized systems that efficiently transport untreated produced water from multiple wells to treatment plants or to regional disposal wells. Today we continue our surfing-themed series on the effect of sand and water costs on producer economics with a look at how the old ways of dealing with produced water are being replaced by the new.
Before we delve into today’s blog, our Houston-based RBN team and all of our folks throughout the country again wish to express our heartfelt condolences for the victims of Hurricane Harvey and its aftermath.
Faced with lower-for-longer hydrocarbon prices, E&Ps have been working hard to reduce their operating costs and improve the productivity of their wells. This has been an all-out effort — it’s had to be. With crude oil and natural gas prices falling below $30/bbl and $2/MMBtu, respectively, a year-and-a-half ago and struggling to stay near $50/bbl and $3/MMBtu today, E&Ps have had no choice but to become leaner and (most of all) smarter if they want to survive and even thrive in an era with oil and gas prices much lower than they were three years go.
Among the more significant trends during this particularly cost-conscious period has been what you might call the supersizing and assembly-lining of oil and gas production. As we said in Back in the Saddle Again, producers have been piecing together ever-larger leaseholds in the parts of key shale plays they have determined to be the most promising; drilling multiple wells from the same pad; drilling much longer laterals (made possible by large, contiguous leaseholds); and increasing production by ramping up how much frac sand they use per linear foot of horizontal well. While it may cost more to drill longer laterals and use more sand (and frac water), these steps and others (such as throttling, or “choking back”, initial production from wells to increase their long-term production) have enabled E&Ps to wring far more oil, gas and NGLs out of each well.