Producing oil produces even more water. Getting rid of it is a large and expanding business.
By Brett Walton, Circle of Blue
The Permian basin, a chunk of western Texas and southeastern New Mexico that is larger than most eastern U.S. states, is the hottest thing in oil these days. Production there, spurred by growth in fracked oil from stacks of shale formations thousands of feet below ground, has helped drive America’s oil output to its highest level ever, nearly 12 million barrels per day.
The United States is now the world’s largest crude oil producer, and close to one-third of the country’s output comes from the Permian.
Oil is not the only liquid that emerges from the Permian’s wells. Producing oil produces even more water: two to five barrels of water for every barrel of fracked oil. (A barrel equals 42 gallons.) As oil production climbs to new heights, the basin is swimming in its own wastes.
Produced water, as the industry calls it, is a noxious mix, a hypersaline brine — much saltier than the ocean — that includes chemicals used during fracking and trace minerals and radioactive elements that are naturally present at depth. Disposing of produced water is one of the largest operating costs for an oil well. The financial outlay also makes it an underappreciated risk.
“Produced water can be the biggest disruptor of oil and gas,” Benjamin Reed, chief operating officer of SourceWater, a produced water data firm, told Circle of Blue. “You can’t just dump it on the ground.” Not having a means for getting rid of produced water “could literally shut down the oil industry,” he said.
The Permian is not at that point yet. There are several thousand disposal wells in the Texas section alone. But the basin is arid, produced water is plentiful, disposal regulations are tightening, and investors see an opportunity to consolidate a fragmented water disposal sector into cohesive units that resemble the pipeline networks that ferry oil and gas from the wellhead to refineries. As a result, the basin is attracting hundreds of millions of dollars in capital.
This week, Solaris Water Midstream said it would expand its Pecos Star pipeline system 125 miles into Lea County, New Mexico after signing an agreement to handle water logistics for 369,000 acres on which Marathon Oil operates. On completion, the system will include 300 miles of permanent pipeline and 200 miles of temporary lines, Solaris says.
A few days earlier, Blackstone, the New York private equity firm, announced a $500 million investment in Waterfield Midstream, a new water logistics company…Full Story