Produced water to have a market value of $28 billion, IHS Markit said in a report.
Produced water volumes from oil and gas wells in onshore US plays are expected to reach nearly 21 billion bbl, a 1% increase over 2019 levels.
Paola Perez-Peña, principal research analyst at IHS Markit and lead author of its water market analysis in the report, said via email that 2020 will still be a good year for those in the water disposal market, as disposal volumes are expected to increase because of the reduction in recycling volumes.
By 2022, 41% of the produced water from oil and gas operations will be reinjected, 47% will be disposed of using saltwater disposal (SWD) wells, and 13% will be recycled for reuse in fracturing operations.
To estimate the future market values for oilfield water, IHS Markit considered the complete value chain of the market—water sourcing, treatment, and disposal, with logistics services throughout the chain. Of those segments, water logistics and disposal are the largest sectors and are expected to drive 91% of the water market value in 2022.
As a result, the group said third-party water disposal companies have formed a new type of water midstream business model that is being adopted in the industry, especially in the Permian Basin. This new model eliminates the need for infrastructure investment from operators.
With the need for cost containment and the fragmented nature of water production, IHS Markit expects to see more collaboration and partnerships among operators. In addition, operations to handle oilfield water will be more localized and will shift toward multi-operator infrastructure systems.
Perez-Peña also said that after 2021, a recovery in drilling and completion activities is expected, “which will increase the demand for frac water and it will increase the produced water volumes. However, we don’t expect produced water volumes to reach 2019 volumes in the next five years.”
“The more oil the U.S. produces from these younger unconventional wells, which decline rapidly in their first year of production, the more the industry must drill and produce just to keep oil volumes level, which means more produced water to manage across the system. However, if we were to stop drilling activity right now, it will take up to a year for produced water to start decreasing,” Perez-Peña said. “Going back to the beginning of unconventional resource production, the focus was understandably on the water needed for drilling and completions. Now that there is a considerable, established production, operators are realizing the extent to which produced water is not only a sizable matter, but an ongoing and essentially, perpetual one.”
(Source: IHS Market)