Breitling Oil an Gas Discussed in Oil & Gas Journal Article

Drought raising water costs, scarcity concerns for shale plays

07/30/2012

By Paula Dittrick
Senior Staff Writer

 

The most widespread drought across the US in more than 50 years is calling attention to the volume of water that the oil and gas industry uses for hydraulic fracturing in shale plays, forcing drillers to pay higher prices and to seek alternate water sources.

Concerns about water availability have joined the public’s fracing-water conversations, which previously focused primarily on whether frac fluid chemicals might contaminate ground water supplies.

Water regulators in Pennsylvania told natural gas drillers to stop withdrawing water from certain streams in the Marcellus shale. One Dallas independent spoke with OGJ about how the drought is making it harder to buy water for fracing in the Eagle Ford in South Texas, and he suggested industry might see the same issue arising in the Bakken formation of North Dakota and Montana.

The National Climatic Data Center reports 56% of the contiguous US experienced drought conditions as of June 30. NCDC is part of the National Oceanic and Atmospheric Administration.

The US National Weather Service this month forecast increasingly dry conditions across much of the Midwest.

“Water is the key to unlocking oil and gas. We take it for granted,” in the US, said Chris Faulkner, Breitling Oil & Gas president and chief executive officer.

Less Eagle Ford water for sale

The drought is forcing oil and gas companies, including Breitling, to purchase water farther from drillsites as they seek farmers and municipalities willing to sell them water. Faulkner said oil companies and fracing crews are going outside the core Eagle Ford area for water, sometimes having to move it by truck from 75 miles away.

Along with added transportation costs, Faulkner said companies are paying more for the water that is for sale in the South Texas Eagle Ford shale play.

Farmers worried about future water supplies are becoming more reluctant to sell their water to oil companies, said Faulkner. Breitling used to buy water for 50¢/gal, but now some farmers are refusing to sell the company water at 75¢/gal.

“The amount of water needed for drilling is a double whammy,” in South Texas, which is very hard hit by the drought, Faulkner said. “We’re getting push back from farmers, and my fear is that it’s going to get worse.”

He said it takes about 150,000 gal of water to drill an Eagle Ford well and about 6 million gal to frac a well there.

The Texas Legislature, the Texas Water Development Board, and the Texas Railroad Commission all are evaluating industry’s demand on the state’s water supplies. Dan Hardin with the Water Resources Planning Division said much of Texas remains in a drought although it is less severe than last year.

In the Marcellus, various companies already had slowed drilling because of low gas prices.

Marcellus water restricted

The Susquehanna River Basin Commission in Pennsylvania on July 16 suspended permits to take water from the river’s streams. The suspensions involve some 30 companies—not all are gas producers—that rely on 64 water withdrawal areas across 13 Pennsylvania counties and one county in New York state.

SRBC, which manages the river as a water source, said this is the highest number of areas in which permits were suspended since June 2008 when SRBC began issuing such permits.

Companies affected include Talisman Energy Inc., Chesapeake Energy Corp., and ExxonMobil Corp.’s XTO Energy.

Faulkner said the suspensions could cause companies to curtail at least some drilling in the Marcellus although many companies already had slowed Marcellus activity before the SRBC order.

Talisman was among the companies instructed to suspend water withdrawal for fracing, but a Talisman spokeswoman said Talisman previously reduced its activity in the Marcellus due to natural gas prices. “We are currently operating one rig, down from 10 at the end of 2011,” she said. “We currently are not conducting any hydraulic fracturing activities, and the SRBC suspension will therefore not impact our operations. We do not foresee an impact in the near future.”

Meanwhile, a growing number of oil and gas companies are working on recycling wastewater or using brackish water unsuitable for drinking. Currently, both recycling and desalination generally cost more than buying fresh water but these could hold long-term promise, Faulkner said.

Devon Energy Corp. this year is launching a water recycling project in its most active drilling area. Pipelines eventually will connect 36 wellsites to a 500,000-bbl recycling pond near Calumet, Okla., in the Anadarko Woodford shale formation, commonly called the Cana play west of Oklahoma City.

“This will dramatically reduce our need to pull water from farm ponds or the North Canadian River for future development,” said Jim Heinze, operations manager for the Anadarko basin. The project also will reduce Devon’s water disposal costs. Devon worked with the Oklahoma Corporation Commission to receive the necessary permit in 2011.

Devon plans to move water from wellsites into a concrete-lined settling basin to allow solids to settle. A separator then will remove any oil and natural gas liquids from the water. Finally, the water goes into the 500,000-bbl pond for storage until being moved to a drillsite for another frac job.

The use of membrane filtration to recycle water from fracturing flowback was among the research projects funded by the Research Partnership to Secure Energy for America (RPSEA), a nonprofit organization that works with government, universities, research organizations, and industry (OGJ, July 6, 2009, p. 22).

Bakken farmers concerned

In North Dakota’s Bakken formation, Breitling’s Faulkner said some farmers are starting to mention concern about water supplies. Breitling has shale gas assets in the Eagle Ford, Haynesville, Barnett, and Woodford.

“Bakken and Eagle Ford are our big keys to energy independence,” he said. “Without water, drilling shale gas and oil wells is not possible. A continuing drought could cause our domestic production to decline and derail our road to energy independence in a hurry. It affects prices of crude and in turn prices at the pump.”

When it comes to developing shale plays, water is a conversation all over the world, Faulker said.

“Folks are concerned that we are going to use all their water,” for fracing, especially in other countries such as China.

Industry has compared the volumes it uses for drilling and fracing with water use by cities and coal-fired electric power plants (OGJ, July 6, 2009, p. 20).

He noted that initially the public was concerned about whether chemicals used in frac fluid might contaminate drinking water, and he said now the concern is shifting from questions about contamination to questions about water availability.

 

Original Article: http://www.ogj.com/articles/print/vol-110/issue-7d/general-interest/drought-raising-water-costs.html