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f crude prices, rig counts, and tight oil The severity of this issue will depend cer of Digital H2O, a company that uses
production demonstrate a stronger on how aggressively shale producers analytics-based models to forecast oil-
upward trend in the months to come, seek to rebound from the downturn by field waterresources.
US shale operators may find themselves drilling new wells. It also will depend on Because it is the most active and pro-
with more produced water than they bar- how quickly they activate the estimated lific shale play, the Permian Basin of
gained for. 4,000 oil-rich, drilled-but-uncompleted Texas is already under pressure. As
The concern is that a surge of pro- wells (DUCs) that have amassed over the shown by Digital H2Os model, the
duced water could eat into profit mar- past 2 years as both a cost-cutting and a recent uptick in drilling there and in the
gins even as oil prices improve by production management maneuver. adjacent Delaware Basin is yielding pro-
drivingup costs for hauling and disposal. If you get a lot of new completions duced water volumes that are approach-
Many shale producers can ill afford a in a short amount of time, that means ing what many of the disposal wells can
significant spending hike on such ser- you are going to get a whole bunch of take away.
vices when, according to IHS Markit, water too, and this is something that While they may not be at full pressure
produced water management can rep- the industry needs to be thinking about utilization today, many are getting close
resent half of a shale wells operat- and planning for, said Piers Wells, and, in a higher-price environment, you
ingexpenses. co-founder and chief executive offi- will see many more areas shifting into
Source: Getty Images.
high utilization, Wells said. The thing options than their conventional coun- ing longer-term strategies, they can gain
that people need to be aware of is that terparts on what to do with it. One leverage over rising wastewater costs.
this could all happen really, really fast. major disadvantage is their inability Their recommendations include lessen-
With far less drilling activity happen- to reinject into unconventional reser- ing reliance on inefficient water trucks
ing, North Dakotas Bakken and Texas voirs, underscoring that disposal wells by building more water pipelines along
Eagle Ford shales are not facing quite will always play an outsized role in with permanent processing and treat-
the same situation as the Permian cur- shale developments. ment facilities.
rently is. However, higher prices would And proving that even virtuous solu- Michael Dunkel, a vice president for
start to change that, and there are also tions have their limits, if every shale well the engineering consultancy CH2M, has
more than 2,000 DUCs in those two in the US was hydraulically fractured been involved with water infrastructure
plays that if brought on line in quick suc- with recycled produced water, it would projects in Texas and Oklahoma and said
cession have the potential to drive water- account for only a single-digit fraction a number of operators are on the cusp
handling costs higher. of the total volume of water generated of investing more capital on this front.
Produced water management is com- each day. However, he noted that a meaningful
plex and expensive for shale produc- Those studying water management expansion of water facilities in the shale
ers partly because they have fewer practices say that if operators start adopt- sector will be years in the making.
Forecasted Permian Basin Produced ducing formations for waterflooding or
Water at Different WTI Prices enhanced oil recovery. Unfortunately for
390 shale producers, neither of those practic-
380 es are applicable to nanoscale permeabil-
ity reservoirs, yet.
370
363 Shale wells are also drilled in much
Millions of Barrels
360 360
tighter clusters from pad sites than what
350 one would see in conventional develop-
346
340 342 344 ments. This concentrates the volumes of
334 produced water and places high demand
330 333 on nearby disposal wells.
320 As to why operators did not plan for
310 this earlier, during the beginning of the
300
shale revolution they had to be some-
what nomadic, in search of the best fair-
290
ways and sweet spots. This left them
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uncertain about exactly where future
production would come from, mak-
ing it hard to invest in multimillion-
dollar water facilities that could not
Reported Production USD 30 WTI Price
be moved.
USD 50 WTI Price USD 70 WTI Price And lastly, while some data show that
shale wells produce less water than con-
Oil prices are directly correlated to both oil and water production in US shale ventional wells on average, they gener-
plays, which is why they may be the best predictor of how intense the issue of ate significantly more in the early life
excess produced water becomes. Because it is the largest onshore producing of the well. Industry-reported numbers
region, the Permian Basin of Texas is likely to feel the squeeze before other
show that a typical shale well unloads
areas. Source: Digital H20.
30-40% of the water that it will churn
out over an entire decade in the first year
It will be slow to evolve, he empha- depending on prices. Wells said that if of production.
sized. But 5 years from now, I am con- prices maintain a holding pattern of About 20% of that water, termed
fident that there will be a lot more water around USD 50/bbl, the model expects flowback, includes the fluids used for
infrastructure in place, both to move many disposal wells in the Permian to hydraulic fracturing, which are also
around source water and to interconnect soon begin flirting with their upper injec- growing in volume. To get more prop-
disposal water, which will give greater tion limits. pant into fractures, many operators are
flexibility in transporting it to different The screws tighten at around using two or three times the volume of
disposal wells. USD 70/bbl. It is a price point many in water for fracturing that they were just
the business are longing for, but Digital 3 years ago.
Price Matters H2Os model shows that it will overstrain Laura Capper, president of Houston-
The place to watch will be the Permian many disposal networks in the Permian based technology consultancy CAP
where, according to the Baker Hughes and other high-producing basins. Resources, explained that though water
rig count, there are more rigs turning Wells noted that lead times to plan, cuts from shale wells begin leveling
to the right than in any other place on permit, and drill new disposal wells could off after year 1, their front-loaded pro-
Earth. Having maintained solid growth be at least a year. If demand outpaces duction creates especially high demand
throughout the downturn, the Permian supply, then bottlenecks could form and for disposal services in areas where oper-
is producing about 2 million B/D of oil operators may be forced to expand their ators are ramping up.
and about 11 million B/D of water. batteries of water storage tanks in order What you have is a hot play, where
Assuming that even modest gains to keep producing unconstrained. all of a sudden youre doing consider-
in crude prices will encourage more ably more business there than you used
drilling in the Permian, as has been Uniquely Unconventional to and youre trying to inject the water
the case since June, Wells said one of There are several reasons why this par- close to the wellsite, she said, adding
his firms clients there is expecting the ticular produced water problem is unique that, those neighboring injection wells
prolific region to see a wall of water to unconventional developments. are getting substantially higher injection
next year. In the conventional world, opera- volumes than the ones that are maybe 50
It is an assertion that the firms model tors have the luxury of reinjecting much miles away and only running at say 10%
for produced water largely agrees with of their produced water back into pro- of their volume capacity.
A snapshot of Grady County, Oklahoma, in 2014 highlights that even during periods of high drilling activity there is far
more produced water generated in a shale play than can be used by oil and gas companies. The costs and logistics of
recycling that water to drinking quality are also extreme. Source: Laura Capper.
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Seismicity To Drive Costs Higher
High-rate injection activity in disposal wells connected to Arkansas, and Ohiothe short-term solution to avoiding
fault-prone formations has been cited by both industry induced seismicity will involve a more granular
and government experts as the primary contributing approach to monitoring injection volumes and downhole
factor to induced seismicity in the US. pressures. It will also be key to understand local
In areas where regulatory actions over induced geological factors that may facilitate seismicity.
seismicity have limited the supply of disposal wells, By taking these steps, Capper explained that observant
operators who want to increase production will have operators should be able to stay under the thresholds
tospend more money hauling loads of excess water thought to trigger seismicity, something she added has
outof a quake zone. been proven to work in certain areas where disposal
The epicenter of this scenario is in northern activity was restricted. Though she emphasized that it
Oklahomas Mississippi Lime play where injection-linked can take 18 months or more for injection reductions to
earthquakes have led regulators to force shut-ins or result in fewer observable, or felt, earthquakes.
curtail injections at hundreds of disposal sites spread The idea taking shape around disposal wells in
across more than 10,000 sq. miles. In 2016, the state seismic risk zones is that geomechanics must trump
experienced three 5.0-magnitude quakes while the rest logistics. If the industry can demonstrate an ability to
of the country saw two. self-regulate injection activity, and where necessary use
While the regulatory restrictions will undoubtedly a more dispersed network of disposal wells, additional
impact operators, the problem is in fact manageable, government-enforced restrictions may be avoided.
albeit with more planning and analysis, which costs We know where these events have happened, so they
money, said Capper, who recently contributed to a should be able to manage their businesses there, Capper
state-by-state risk analysis on disposal wells. said. But its still going to be an additional cost burden
She said for those companies working in potential to the industry in that you will probably have to drive
seismic risk zoneswhich also include parts of Texas, your water trucks farther out, or pipe it farther away.
of tangerines and almond groves. Texas But aside from these isolated exam- that is needed to prove to the wider
A&M University also recently concluded ples, this concept has not been warmly public and relevant government agen-
a study that used treated produced water embraced or benefited from the type cies that it can be done safely on a
to grow cotton. of extensive, and expensive, research larger scale. JPT
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