Water matters now more than ever in onshore oil and gas; the rise of the hydraulic fracturing method of well stimulation has resulted in increased water usage per well completion and higher average water to oil ratios for produced water, as high as 8:1 in some major shale basins. Given this central focus of water in hydraulic fracturing, water related costs have grown to become a significant component of both development and production operations costs. Water costs typically comprise 10-30% of total well development and are increasing as a share of costs. This is due to the fact that the wells that are being drilled in this low oil price environment are more water intensive. The drilling of longer wellbore laterals and the increased use of slick-water fractures is driving this increasing water use per well. (Figure 1 and Figure 2).
Figure 1. Average Monthly Frac Water Volume in 2015.
Furthermore, water transport, disposal, and treatment costs represent the largest single component of ongoing well production operations expense. In fact, water transport and disposal costs represent over 60% of all water management costs across development and production. Digital H2O research indicates that water management costs for produced water typically range between US$1-US$3 per barrel in the Eagle Ford and Permian Basins and can be as high as US$6-US$8 per barrel in the Marcellus and Utica basins.
While water management costs have declined recently, they have not fallen nearly as much as the price of oil. IHS estimates that transport and disposal costs have fallen by approximately 25-30% over the last 18 months, while the price of WTI has fallen by almost 70% during the same time-period (IHS Energy Partners Insights: Shale Water Expo 2015 – Water Management Services Overview). As a result, water related costs are the largest component of well operating expense in many geographies. For example, in the major Texas basins, water costs per barrel of oil, assuming a 2:1 ratio range from US$3-US$16. However, at a water to oil ratio of 8:1, water related costs increase substantially to US$8-US$24 per barrel of oil. With oil prices in the low to mid US$30s per barrel, basic math proves the point: water costs really matter.
Figure 2. Distribution of Fracture Types as % of Total US Completions.
One of the challenges upstream producers face when reducing water related costs, is a lack of good information and the necessary visibility into the water asset landscape. Selecting the most cost effective water management solution is largely driven by a producer’s proximity to other assets in the oilfield, whether it’s proximity to water sources or proximity to captive and commercial salt water disposal facilities. Asset utilisation also matters – a salt water disposal well three miles down the road from a producing lease is useless to a producer if it’s currently 100% utilised. These water related data-sets have been difficult to collect and analyse. The data is fragmented across multiple sources: producers, service companies, state regulators, and federal agencies and the data is constantly changing. To complicate matters, producers themselves haven’t collected their own water related data in a common and scalable data framework. When the data is collected, it’s often buried in spreadsheets. Objective, fact driven analysis has been difficult to generate. Important oilfield water related investment and operational decisions are often made using obsolete and incomplete information.Digital H2O was started to solve this problem for the upstream unconventional oil and gas industry. The company’s Water Asset Intelligence platform provides unique visibility into the upstream oil and gas water asset landscape in the Bakken, Eagle Ford, and Permian basins among others (Figure 3), and they are also developing an enterprise water planning tool, in partnership with a major upstream producer. This water planning tool which will collect, aggregate, and mine real-time SCADA system generated water volumetric data to provide real-time visibility into current water use, production, and inventory. On top of these data sets, Digital H2O is leveraging its patented predictive models to help its customers accurately predict their future water related requirements based on the current producing portfolio and anticipated new completion activity.
Figure 3. Digital H2O’s Water Asset Intelligence Platform.
These solutions are hosted securely in the cloud enabling cost effective and scalable solutions that can bring to bear the best of publicly available and proprietary data-sets. The company believe the combination of visibility into the water asset landscape, real-time visibility into current water inventory and related assets, and accurate estimation of future water requirements will be a game changer for water management in upstream oil and gas – at Digital H2O, this is called Digital Oilfield Water Management. These types of leading edge digital capabilities will help enable upstream producers to survive and then thrive in the new lower oil price market reality.
Written by Piers Wells, CEO of Digital H2O.Edited by Angharad Lock
Read the article online at: https://www.energyglobal.com/upstream/digital-oilfield/10032016/keeping-hydrated-549/