Water disposal in the Permian Basin is likely to hit a new all-time high in the fourth quarter of 2020, exceeding 1.3 billion bbl for the period for the first time in history, potentially further expanding Texas’ total water market which had already recovered close to its pre-COVID record in October, a Rystad Energy analysis projects.

The water-disposal market is the last growing market of US land services. Behind the expected expansion is a combination of factors including a rapid recovery in activity, a steady clip of enhanced oil recovery (EOR) projects and base production structurally shifting to become more mature, which increases the water-to-oil ratio.

The rapid recovery in the disposal market will position the region’s dedicated midstream operators for better financial performance heading into 2021, with improved market sentiment as activity levels tick up.

Before production curtailments started in March, Texas’ underground injection possibly surpassed 30 million B/D. It then declined by about 5.6 million B/D, or 18%, when operators curtailed production in March–May following the collapse in oil prices. Meanwhile, the estimated shape of the recovery curve in the post-curtailment period of the third quarter remains, and Rystad estimates that the state’s underground injection returned to about 29.5 million B/D in September.

*The total US water market consists of water coming from fracturing fluids flowback and from formation water extracted during oil and gas production. This water can then follow three different paths. One is disposal back to the ground via special disposal wells, another is re-injection to producing wells to enhance recovery, and the last is treatment to be reused for fracturing. In 2020 we expect total produced water volumes to reach about 22 billion bbl, out of which 1.8 billion bbl are treated, 12 billion bbl are disposed, and the remainder are re-injected for enhanced recovery.

When it comes to the disposal market in the Permian Basin, fresh data reveal an even stronger recovery in the third quarter. After declining by 9% in the second quarter, the total volume of disposed water rebounded by 9% in the third, with nearly all growth coming from the Texas part of the Permian Basin.

Based on current activity levels and preliminary data for October, we anticipate an increase of another 4% in the Permian disposal market in the fourth quarter, which will bring the size of the market to the record of 1.3 billion bbl per quarter.

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