Article | February 24, 2014

Assessing Key Unconventional Shale Wastewater Trends And Opportunities

By Ankur Jajoo, industry analyst, Frost & Sullivan Environment & Energy Group

The shale-gas boom could make water the most important commodity product of the 21st century.

The dynamics of the unconventional shale wastewater treatment market has provided a huge business opportunity for existing and emerging water solutions providers. The emergence of companies offering water management and treatment services in the shale market has created some confusion as to what is the best form of dealing with the wastewater. The industry has, at present, four main options:

  1. Treat the flowback to levels for reuse in fracking
  2. Deep-well injection disposal
  3. Reuse for fracking without treatment, which causes the wells to block over time
  4. Treat flowback to potable level standards

The varying degrees of competitors in the market are able to provide different services and treatment options. For the operator, it boils down to which one is the most applicable and cost-effective solution for its given location. The industry is asking, “Will a mainstream technology ever be utilized?” The answer for now is no — and various types of technologies will be used. Total dissolved solids (TDS), total suspended solids (TSS), and sulfur-reducing bacteria (SRB) are the main contaminants that need to be addressed for wastewater recycle and reuse in fracking operations. The industry is heading toward the use of multifunctional systems that are skid-mounted or on mobile trailer systems. This helps address key industry challenges for space and lower energy consumption and is more cost-effective than using different systems for different contaminants. This is likely to be a critical game-changer for the evolution of wastewater treatment into other industrial markets by leveraging the synergies of efficient treatments and addressing similar industry challenges. Some critics may argue that due to the significant variance in wastewater quality found in the different shale plays, many of the systems would not be economical to use.

Addressing Contamination
For all of the innovation and new systems being developed in the market, the shale industry is not without its own challenges for its high water consumption and environmental footprint. Over the years, we have seen the challenges associated with groundwater contamination and the harm hydraulic fracturing does to the water table. It is a known problem commonly raised by environmentalists without fully understanding the dynamics of hydraulic fracturing and the impact on water.

The water table is significantly higher in depth than where the fissures are drilled. The water contamination likely occurs from surface spillages from flowback water in the immediate stage of drilling and from produced water over time, which seeps into cracks in the ground. The drilling company is responsible for making sure the drill casings are properly sealed and there are no potential water leakages. The probability of water contamination from methane gas or from the fracking process is extremely small due to the large differences in depths between the water table and the fissures in the ground. There are far more pressing challenges associated with using daily machinery and power generators that cause air pollution or consume energy, rather than the process of hydraulic fracturing. This disconnect in the industry is portrayed by environmentalists without the real understanding of what the underlying challenge is in the industry.

Water Recycling
The value of freshwater has grown exponentially across all industries, but most critically in the oil and gas industry. The global impact the oil and gas industry has on domestic and foreign supply and demand for energy resources — and the importance of oil for the manufacturing industry — is becoming more critical postrecession. However, the issue starts at water availability for drilling operations, which has impacted big markets such as China. The importance of water management for drilling operations has grown due to environmental regulations and operators’ understanding of the significant costs associated with the fracking process. Furthermore, in Bakken Shale (North Dakota), freshwater for fracking is not the only process that is water-intensive. Freshwater for “maintenance water,” as it is called, is being used to continue the oil flow. Without it, salt buildup from the briny groundwater will restrict the flow of oil, block the wellbore, and damage the pumping equipment. Hence operators are required to consume even more freshwater for aiding the flow of the oil. This is an interesting industry dynamic, as in the Canadian oil sands, the high viscosity of the oil/bitumen requires water to help increase flow rate. In North Dakota, the additional maintenance water is used to increase oil flow due to blockages from brine buildup.

Recycling the produced water, which is high in brine concentration, would be a good option. This would reduce overall freshwater consumption, reduce on-site trucking, and create a byproduct that can be used for deicing in harsh winter climates. However, the use of crosslinked gel fracs in specific basins is more difficult and expensive to recycle for water treatment companies and drives costs up instead of reducing costs. Slick water fracs will be important to maintain steady and lower prices. The misconception over the last few years in the wastewater industry that a singular development at one shale play would apply to all basins has, at times, created widespread joy and excitement of industry best practices for greater water management. However, this indicates a failure to understand the dynamics of a single, particular basin.

The topography and groundwater quality varies significantly enough in certain basins that it is common for different water management techniques to be implemented. Bakken Shale produces greater volumes of wastewater compared to other shale plays, requiring for wastewater treatment equipment such as thermal evaporators and distillation systems. The impact on drilling is critical because, if the price of freshwater increases too much, it will not be economical for wells to be drilled. In the Permian Basin (Texas), strategies to use alternate sources of freshwater are being deployed by operators. This includes brackish water and recycling — reusing the produced water from the well. In Colorado, there is a slow trend for recycling wastewater, but currently the favored method is using disposal wells. This is likely to change due to the need for reusing the wastewater and also to eliminate the trucking of wastewater to injection wells.

Trucking has often been blamed for road damage, noise and air pollution, and spillages. Here, trucks move to a drill site in Weld County, CO. (Photo Credit: Bruce Finley, The Denver Post)

Tapping The Water Market
A possible scenario is an increase in privatization of water sources. We may see investors buy land that has access to groundwater within close proximity to oil and gas drilling. This type of trend may seem likely if the industry fails to reuse and recycle enough wastewater for the fracking processes. This will lead to the price of water becoming very high — some investment firms are rightly calling it the commodity product of the 21st century. This will, in turn, raise the bottom-line costs for exploration and production, and thus the price of oil.

The fact that water consumption is a critical element for hydraulic fracturing has put a huge emphasis on the effective management of water in drilling operations. Historically, operators for drilling, completion, and production have worked independently from each other to complete the respective jobs. However, an increasing focus for integrating operational silos generates significant cost savings for water management in the field. In order to maintain long-term reservoir performance, operators will need to understand the total water life cycle from a holistic perspective, to make better use of the reuse and recycle options available in the industry.

Global markets instantly recognize the value of natural resources such as oil and gas, but now the value of water in all forms — clean, highly contaminated, briny, brackish, or seawater — will be even more important. Without proper management of water, the unconventional oil and gas industry will struggle for as long as the hydraulic fracking process is being utilized. Operators are looking at the prices of freshwater sourcing, which may be logistically cheaper, but as supply falls and demand rises, so will the price. The biggest challenge to the unconventional shale industry is freshwater consumption, and wastewater recycling and reuse is the key to the future for unconventional drilling.

Ankur Jajoo is an industry analyst in Frost & Sullivan’s Environment & Energy Group with four years of consulting experience in market research and growth. His industry expertise includes water and wastewater management in oil and shale gas, petrochemicals, biosolids handling, and power generation.