Incorporating Reuse: The Next Frontier for Produced Water Management
Water midstream operations are a matter of logistical challenges that require significant amounts of capital and trust between producers and water managers, but the head of a midstream company working in the Permian Basin said that its development has the potential to be one of the largest market transformations in the industry.
Speaking at the Permian Basin Water in Energy Conference (PBWIEC) in Midland, Texas, H2O Midstream CEO Jim Summers explained how existing water infrastructure can be used as a water distribution system, pointing to his company’s own efforts in the Permian as an example of a system that can help operators move toward 100% reuse of produced water.
Summers described the evolution of produced water handling through a series of four stages. The first stage, Shale 1.0, involved the trucking of produced water from the well pad to a disposal well owned either by the producer or a third party. Shale 2.0 saw stronger economics underpin the replacement of trucks with pipelines. Shale 3.0 involved the burgeoning development of water midstream, and Summers said the challenge of the current Shale 4.0 era is incorporating reuse into water management.
H2O Midstream currently owns and operates a gathering, disposal, and reuse network in Howard County, Texas, near the town of Big Spring. The network contains 120 miles of pipelines and has a permitted disposal capacity of 80,000 BWPD. The company plans to expand this system significantly through the addition of new produced-water pipelines, additional disposal wells, and the construction of a water storage and reuse hub that Summers said will serve several producers in the area. By the end of 2018, the company plans to have more than 200 miles of gathering pipelines, 1 million bbl of storage capacity, and 250,000 BWPD of disposal capacity connected through 10 different wells on the system.
H2O acquired the infrastructure and acreage from Encana in a transaction announced last June. Summers said a centralized hub model will allow producers to save money on building significant storage infrastructure, thus encouraging greater reuse.
“For us, when we talk about reuse, the breakthrough technology to make reuse viable and increase the percentages is not a new black box technology. It’s a business model that allows multiple producers to use common infrastructure. Our vision is the ability to really divert water off that system for multiple producers,” he said.
Summers said he had talked to several treatment providers about the possibility of adding centralized treatment of produced water to H2O’s system, but the company ultimately decided against it for a number of reasons. First, the variations in treatment between producers are too great. Summers said each producer has a different required water quality and would require the building of a central treatment plant on its system and the use of a dedicated water transport pipeline to be certain of meeting its specifications.
Also, Summers said that as the cost of treatment has decreased and the technology of treatment has gotten easier to implement, the difference between a large, centralized plant and what he terms a “frac-on-the-fly” facility has diminished to the point that, in terms of scale, the centralized plant would not net significant savings for the producer.
“I can [treat water] without as much piping and without as much infrastructure, so it’s the lowest-cost way to do it,” Summers said. “We’re working with treatment companies to show what level of treatment is necessary and what infrastructure is necessary.”
Several producers have considered some kind of self-build water midstream system, with approaches varying from having a fully staffed team dedicated to water to delegating water responsibilities to a single individual. Summers said self-built systems have some advantages. The producer controls the timing of the design, construction, and operation of the system, and it can dedicate 100% of the system’s capacity for the producer’s needs.
However, Summers said that a third-party midstream affiliate also has its own advantages in helping producers achieve a low level of effort in water management. H2O does this by leveraging its infrastructure for a number of tasks, like handling overflow volumes from producers and transportation permits to allow for greater volumes to move through its system. Transportation permits can help with producers who have negotiated deals with disposal companies but cannot physically move their volumes to a disposal site.
“We have our own disposal, we have third-party disposal, and we have storage to provide an incredibly high level of service that would be difficult for a producer to do themselves,” he said. “The notion here is to eliminate trucking from [the producer’s] vocabulary as well as ours.
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