Drought Creates Cost, Transport And Public Headaches for Gas E&P

 

Natural gas drilling and completion is one of the many water-intensive business activities that are taking a hit because of this year’s drought.

Farmers are selling less of their water to drillers and governments are placing restrictions on water withdrawals in some places. Water must be trucked in from longer distances and at higher prices in plays such as the Eagle Ford Shale in Texas and the Marcellus in Appalachia.

“It’s starting to be a problem, and six months from now, it could be a huge problem for this industry,” Chris Faulkner, president of Breitling Oil and Gas, told Natural Gas Week.

For example, the Eagle Ford Shale lends itself to very water-intensive drilling of up to 12 million gallons per well, and it is also in a state that it particularly hard hit by the drought.

“What we’re seeing in the Eagle Ford is that our secondary sources of water, the farmers, are not selling us water anymore. They are turning down offers,” Faulkner said.

In Pennsylvania, the heart of the Marcellus Shale formation, five counties have been blocking permits for water withdrawals from streams ( NGW Apr.23’12 ). Faulkner said this has been a hardship for his firm, which operates in three of the counties: Bradford, Tioga and Luzerne.

“We cannot use public water sources period,” Faulkner said. “We’re have a much more difficult time dealing with farmers there.”

The difficulties come at a time when “commodity prices are depressed” for gas, Faulkner added, saying that if water challenges raise the break-even costs of drilling too much, “it could be the death of the Marcellus for us as a company.”

In times of drought, water withdrawals for gas drilling could be more controversial with environmentalists, who tend to say that draining too much from water bodies can make the remaining water undrinkable.

Many producers and service contractors have been exploring ways to recycle their water so they can withdraw less of it from local sources.

In the longer term, Faulkner said producers may need to find a way to do waterless fracking — both to protect themselves from water shortages, and to stave off criticism from environmentalists who criticize the industry’s water consumption.

“We need to find a way to make desalination cheaper, and more compact and mobile, to take brackish water from wells naturally,” Faulkner said.

He envisions a scenario in which desalination units could be attached to a wall and could actually help communities supplant their water supply in times of shortages.

“I could help the community in the opposite manner I’m doing today,” Faulkner said. “That’s the kind of thing I’m thinking long-term.”

Natural Gas Week

Lauren O’Neil, Washington