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Five things I learned at PWS Permian Basin 2019

Here are some key takeaways from the Produced Water Society’s conference in Midland, Texas

1. Saltwater disposal is becoming more challenging.

Historically the preferred water management practice in the Permian Basin, saltwater disposal now faces significant challenges. Responding mainly to concerns over induced seismicity, regulators in both Texas and New Mexico have adopted guidelines that will restrict permitted injection capacities and pressures. Saltwater disposal well (SWD) operators are already seeing permitting applications held up by slower and more scrutinized review processes, despite the Texas Railroad Commission reportedly being fully staffed. In some cases, applicants are litigating to keep the process moving.

2. Recycling is a growing trend.

The midstream is clearly moving towards incorporating greater recycled water volumes in oil and gas activities. Several factors are driving the practice’s wider appeal: rising disposal costs, SWD permitting delays, growing frack water needs, freshwater scarcity and/or high prices, optimized recycling systems, and advances in treatment technologies and processes that reduce costs. ConocoPhillips, Cimarex Energy, Diamondback Resources and WPX Energy all told attendees at this year’s event about plans to expand their recycling programs.

3. Valuations for water midstream assets are high.

Attendees were cautioned about the high valuations that we’ve recently seen for midstream assets, with some priced even higher than exploration and production companies. Driven by the backing of large investors such as private equity firms and sovereign wealth funds, these valuations are likely to drop as the industry comes to view water disposal less favorably than it once did. This can be put down to factors including SWD underperformance and permitting challenges, as well as the move towards greater reuse.

4. More interconnected infrastructure will reshape the water midstream sector.

Several speakers discussed the infrastructure needs of the water midstream sector given the rising produced water volumes expected to come out of the Permian Basin in the coming years. Interconnected, large-scale infrastructure that allows players to move greater volumes of water will enable more flexibility in water management and provide cost savings. This type of network might also see players share their capacities and could make long-term contracts less appealing than water swaps or spot deals.

5. Approaches to water treatment vary greatly.

As highlighted in the last panel of the conference, each producer approaches water treatment differently, according to their own operational needs. For example, Cimarex, which has been conducting fracking-on-the-fly with only produced water in some areas, uses chlorine dioxide to kill bacteria, but does not apply any other treatment. On the other hand, both ConocoPhillips and WPX carry out oil-water separation and treat for bacteria, iron, and solids, but even their specs vary quite a bit.

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