"Water demand gives rise to new midstream market:" Sourcewater featured in MRT

By Sourcewater - February 22, 2018

Midstream got its turn in the spotlight Thursday at the second day of the Permian Basin Water in Energy Conference at the Horseshoe Pavilion.

Posted on mrt.com
February 22, 2018



Midstream got its turn in the spotlight Thursday at the second day of the Permian Basin Water in Energy Conference at the Horseshoe Pavilion.

Jim Summers, chief executive officer of H2O Midstream, sees water as the next major market, following the path of the natural gas, power and renewable energy markets.

“Why midstream? It’s about logistics, not technology,” he said. “This is going to require huge amounts of capital. It’s an opportunity to develop an infrastructure that’s an alternative to operators building it themselves.”

It will be cost reduction through common infrastructure and economies gained through efficiency, he said.

RELATED: Oil and gas operators push for use of recycled water

Third-party midstream operations will grow because producing company investors want the producers to invest in wells; third-party ownership of water midstream infrastructure for multiple producers is more capital-efficient; and it will allow producers to focus on their core business of oil and gas production, said Michael Dunkel, vice president, CH2M.

But to be successful, he said, third-party midstream companies must give producers confidence that sourcing and disposal of water will be available, that capital costs for water will be reduced, that low-risk environments will be maintained and that water will be sustainably sourced and disposed of, including reuse.

Midstream companies will need to learn their customers’ concerns and issues and collaborate with them, execute dependably and reliably and anticipate and plan for tomorrow’s water needs, according to C.B. Lackey, chief operating officer at Hillstone Environmental.

“It takes trust and confidence, and that’s what third-party midstream has to execute,” said John Durand, president and chief operating officer of WaterBridge Resources.

Here are some other highlights from the conference:

— Sourcing water: Just as operators on the first day of the conference said sourcing the water for their operations will be a challenge, Michael Anderson, president and chief financial officer of Layne Water Midstream, said sourcing water will be challenged by growing producer demand and their varying approaches to water quality, an increasing need for large volumes and high reliability, obtaining landowner right-of-way and expanding capital requirements. He said there is also growing discussion around regulations.

The solution to navigating the path of contacting water rights’ owners, securing volumes, assuring the water quality and surface use agreements is a water marketplace, said Josh Adler, founder and chief executive officer of Sourcewater, which lets users see all their options, find the best price and who needs your supply of water.

“That’s how all established midstream markets — oil, natural gas and power — work,” he said.

But all the water treatment technologies and additives won’t be effective if companies continue to treat water as they’ve always done, said John Williams, executive director of technology at Bosque Systems. He said water is dynamic and changes with each stage.

“You need to listen and apply the right energy to get it where you want it to go,” he said. Operators have been doing it the way they’ve always done it, he said. “But if you listen, you can, in real time, understand what’s happening with the water. That could mean you use less chemicals at less cost and the treatment is more effective.”


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— The fight to save iron: As water moves through pipes and equipment, service companies are seeing iron components corrode. “We can’t continue to ruin $7 million worth of iron in a two-month timeframe,” said Danny Ratliff of Cudd Energy Services. Service companies have experienced increased rates of “undesirables” in fluid, and Cudd is working to find the cause of accelerated corrosion.

Chlorine dioxide is often used to treat water, and it’s often mixed together on-site. Combining bleach, chlorite and acid presents the opportunity to make corrosive byproducts if not mixed properly, Ratliff said. He added that iron components might need to be changed to super stainless steel.

— Going deeper: Trace Hight of oilfield wastes solutions company On Point Oilfield Holdings said his company is opening saltwater disposal wells in the Ellenberger formation instead of the much-shallower San Andres. On Point has drilled several wells in Howard County with good results. Drilling Ellenberger disposal wells, however, is new territory, but Hight said wells in this formation hold promise because they seem to have lower pressure and higher capacity. The San Andres tends to have pressure issues and active drilling. He said drilling in the Ellenberger is capital-intensive and there is a lot of risk because of lack of data.

— More than a water park: Scott Mitchell, commercial manager of water for Anadarko Petroleum, said he often hears that oil companies should use the water produced during exploration to supply a water park. Water parks require about 16,000 barrels of water to fill and about 325 barrels per day to replenish. Anadarko could supply that amount and then some.

Mitchell said Anadarko, which operates in the Delaware Basin, produced 25,000 barrels per day of produced water in 2014. By the end of February, the company will produce 385,000 barrels per day. Finding a place for all of that produced water is critical.

“The Permian Basin is the golden goose, but one way to kill the golden goose is to drown it by not being able to put the water away,” Mitchell said.