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The Problem of Water

The issue of water needs for shale resource development has largely focused on public concern about possible constraints on water supplies, particularly in areas suffering from drought. A new study suggests that without technological breakthroughs or changes in how the oil and gas industry manage water, development of shale production could be hampered in areas with the largest estimated reserves.

Some cities in the United States suffering from drought have imposed bans on hydraulic fracturing, even though oil and gas industry water use compares favorably with that of other industries (see Beyond the Headlines, July 2014 JPT, p. 20). The new report issued by the World Resources Institute, titled “Global Shale Development: Water Availability and Business Risk,” focuses not on public concerns, but energy company risk instead. It contends that water-availability challenges could limit shale resource development on six continents, including in areas with some of the greatest potential for shale production. The report’s executive summary looks at three countries in particular and assesses the potential water challenges.

  • China. The world’s largest energy producer and consumer also has the world’s largest technically recoverable shale gas resources, according to estimates from the US Energy Information Administration (see table, p. 86). But most of these resources are located in areas of “highest water stress,” according to the study. More than 60% of the resources are in areas with arid conditions or high-baseline water stress. Although Chinese oil companies recently have increased expenditures for shale development, the Chinese government in August cut in half its 2020 shale gas target after several years of disappointing E&P efforts.
  • Argentina. Approximately 28% of this country’s shale gas resources, the world’s second-largest according to the EIA, are located in arid areas. Argentina has also had production success, with the joint venture between Chevron and YPF more than tripling production in the Neuquen basin shale formation known as Vaca Muerta from last year.
  • United Kingdom. Public concern about hydraulic fracturing runs high, but the government recently began offering tax incentives to jump-start shale development. Given the high industry and public demand for water, the report classifies a third of the UK’s shale resources in the high to extremely high water stress category.

The institute’s mission is concerned more with the environment than with energy development and production, but its warnings are not considerably different from other recent studies, such as one done by consultants Wood Mackenzie last year titled “Troubled Waters Ahead?” It noted that although agriculture uses two-thirds of global freshwater supplies, energy is by far the largest industrial user (more than 15%). The United Nations is predicting a 40% decrease in freshwater supplies by 2030, which will put additional focus on the amount of water used by oil and gas concerns.

The solution may lie in technology development and better water management. Already the industry has made strides in water reuse and recycling, such as in the Permian Basin, an area facing extreme drought conditions. Numerous research projects are under way throughout the industry that could result in sharp cuts in demand for fresh water or the elimination of fresh water use within a few years.

The Problem of Water

John Donnelly, JPT Editor

01 October 2014

Volume: 66 | Issue: 10

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