Permian Basin 2017

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PERMIAN BASIN: TECHNOLOGY | November 2017 | 51 commitments from Five Point Capital Partners LLC, it is providing comprehensive and integrated water management solutions by acquiring, operating and constructing water infrastructure assets for its E&P customer base, turning those companies' capex into opex. "In the beginning of these plays, the big driver is finding where the most economic spot is," Dunkel said. "Until you figure out where you are going to drill, and how much you'll be drilling, of course you are not going to put big water infrastructure in the ground. The number thrown out is a million dollars per mile, for the big diameter pipe. "Now we know where the sweet spots in each play are. So the time is right now. It probably would have happened faster, but for the downturn in prices. Rigs went away, and you didn't need the infrastructure because there were no water limitations. Things will happen fast when there are constrictions and constraints. "A clear example is a drought. A drought pushed Pioneer in 2011-12. We said, 'We need to do something now.'" Then there's disposal. "I'm worried that as business ramps up and we drill more wells, there'll be more disposal, in all the basins, from the Bakken to the Permian," Dunkel said. "What is the limitation of the reservoir? Not the wells. We can always drill more disposal wells. But at some point, you pressure up the disposal reservoir. And then the regulators step in. In Oklahoma, it was seismicity. But even if you don't have seismicity, if you supercharge the disposal reservoir, you still have a problem in the Permian. How far can we go with that in the Permian? If it becomes a problem, everyone will be scrambling, and we'll have to re-use water." Theoretically, the best practice in the industry is to reuse produced water in other fracks. But flowback water has more than one story to tell. "In the Midland Basin, if you put 300,000 barrels of water in, you get, on average, about that much back," Dunkel said. "So it is one-to-one. In most basins in the country it is less than one-to-one. That includes the Marcellus and Utica in the Northeast and the Eagle Ford in Texas. You may get a third of the water back." So why is the Midland Basin pushing back? "It has to do with the rock, and if you frack, you may pull in water from other reservoirs," Dunkel said. And that is not the worst-case scenario. The Delaware is even more problematic. "The Delaware makes four to six times the water back," Dunkel said. "You can't even recycle your way out of that. In the long run, what are chances we will fill up the disposal reservoirs? Very good." As the saying goes, water, water everywhere, and not a drop to drink—or even put in the cooling tower of a nearby manufacturer. Evaporation could play a part, however. "In Oklahoma, we found it was much cheaper to evaporate than desalinate and try to use it for another industry," Dunkel said. "The most practical idea is to evaporate 100,000 TDS [total dissolved solids] water and concentrate it to near-saturated brine at 300,000 TDS and inject that. You wouldn't evaporate it all of way because you would create mounds and mountains of solids." Even at today's moderate oil prices, getting water at the right place, right time and right volume is a challenge. When Pioneer formed its water group, the intention was to sell water if it had spare capacity. "They purposely designed lines to have spare capacity," Dunkel said. "And they have sold water. But now they scramble to have enough water. They have the Odessa water coming in and a number of brackish sources. The Midland water will be a huge volume, but it is two years away. "Water projects are even more volatile than oil prices. When oil prices are high, and everyone is drilling, the economics are good and they must have the water. So you put in all those projects when prices are high. That's what people were doing in 2014 when prices began to fall, and rig counts were dropping by half. Then there are no constrictions in water supply. So few water projects are done in slower times." n —B. Robert Partain A Pecos County water well test produces a good flow. (Photo courtesy of Michael Dunkel)

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