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WiO asks: How will the 2020 downturn shape the oil & gas water space?

Water in Oil spoke to several experts with exposure to different sub-sectors of the oil & gas water sector to understand how low oil prices will influence market trends and opportunities.

Coming off the growth achieved in 2019, the global oil & gas industry was poised for further gains in 2020. Instead, the combination of collapsed oil demand and plunging oil prices since the beginning of the year has yielded an uncertain future for players throughout the value chain, including water services providers and technology firms. Water in Oil reached out to oil & gas water experts for their perspectives on the pervasiveness of the downturn, which areas will continue as bright spots or generate future opportunities, and how the industry might look once the market stabilizes. Here are their insights:

Kelly Bennett

CEO of B3 Insight, a US-based water intelligence platform“The economic stress that low prices are putting on producers, particularly those with high debt levels, will force some to shed assets. Accordingly, several are actively marketing their water assets to reduce debt or achieve other strategic purposes.

Economic stress will also impact the water midstream business. Some of these companies are highly levered and are dependent on growing water volumes. Less water due to reduced drilling or shut-in production will force consolidation in this sector as well. As a critical service to Permian production, it is likely that some of the incumbent midstream players with better balance sheets and diffuse customer risk will still attract funding for acquisitions.”

Willem de Waard

Managing director of Barack Oil & Gas, a provider of consultancy and technology services for the global oil & gas industry

“End users are taking drastic measures to get through this period in which major developments, such as ADNOC’s Dalma project, have been put on hold with awarded contracts being terminated. The absence of sufficient projects could lead to a reshuffling of the produced water treatment suppliers market, which has always been very competitive. Some suppliers may not make it through this downturn, and some may decide to stop serving the oil & gas industry, pivoting towards other industries where they can apply similar services and technologies.

However, I believe that when this crisis is over, new opportunities will arise because ultimately, there is no oil & gas production without produced water treatment. Players that remain in the market will be very relevant to the oil & gas industry when it bounces back, though competition may be even more aggressive during the immediate recovery period.”

Rune G. Nilssen

Managing director of Stauper Offshore, a Norwegian technology provider focused on compact flotation units for offshore projects

“Even before the recent downturn, we saw the brownfield segment as the most promising segment. Most of the projects we have supplied technology for or have pursued over the past few months are related to produced water system upgrades or debottlenecking. More than 50% of offshore installations in the Norwegian and UK continental shelves and the Gulf of Mexico are operating beyond their original life design, and with the recent downturn in oil prices, operators may be even more motivated to seek out solutions for keeping these sites operational and economically viable.

Some of the greenfield projects we have pursued have been postponed, but as of yet, we have not been notified about any brownfield projects being delayed as a result of the oil price situation. We expect that there will be further pressure on suppliers to reduce costs.”

Gaurab Chakrabarty

CEO of Solugen, a US bio-based chemicals manufacturer

“The 2020 oil & gas market crash continues to increase pressure on operators and service companies to make the necessary reductions in capex and opex. Water, which is the largest-volume byproduct of oil & gas production, continues to be processed for disposal or use in secondary and tertiary recovery.

Technology-focused companies are using this opportunity to find more economical solutions to dispose of produced water or turn it into a value-added product for repurposing (e.g. for agricultural applications), which requires cost-effective, low-environmental-impact chemical treatment programs.”

Arian Edalat

Co-founder and president of Pacifica Water Solutions, a California-based company providing membrane technology solutions for wastewater treatment

“The micro-observation is that the oil industry is facing an existential threat, more so in California than elsewhere. The macro-observation is that demand for oil and other fossil fuels will not suddenly go away.

The pandemic will eventually be controlled. When cars and airplanes are back in operation, the industry will again have to apply lessons learned and become more efficient and resilient towards socioeconomic turbulence. Improving water management is a crucial component of that strategy.

California has a unique opportunity to couple energy independence with our need for new freshwater resources. As a result, technologies that enable cost-effective and efficient beneficial reuse of produced water will be evermore in demand. Technological innovations that currently limit and cost-prohibit reuse – for example, treatment of high-salinity and super-saturated brines – will be needed more than ever.

As people look to further optimize business and workflow operations, process automation platforms will be another area that will see growing demand.”

Jay Keener

Director US Operations at Swirltex, a Canadian startup focused on buoyancy-based ultrafiltration technology

“In the near term, disposal and logistics are the primary opportunities for produced water management in the onshore unconventional space. The opportunities in 2021 and beyond will then significantly depend on whether the US government enacts any broad intervention in the domestic oil market. With government intervention, there will be an array of recycling and reuse opportunities for a broad range of service companies. Without government intervention, the recycling and reuse opportunities may consolidate into a smaller number of operators, requiring a smaller number of service companies. Under any condition, disposal and logistics will remain an opportunity for as long as significant hydrocarbons reserves remain in the formation.”

Ashiqur Rahman

Postdoctoral researcher at the Center for Midstream Management and Science, Lamar University

“A significant portion of produced water contaminants comes from anthropogenic sources rather than geogenic ones. Coronavirus has forced E&P companies to reduce or discontinue physical operations, impacting upstream production. This means that in the current scenario, there is an expectation that the anthropogenic activities related to oil & gas extraction (e.g. fracking fluid injected to stimulate well production) will be reduced. Therefore, in the coming weeks we are looking at not only a reduction in produced water quantity, but also a variation in water quality and composition, such as dissolved ions originating from additives used in fracking fluids. Experimental research designs will depend on the variation in produced water quality and business may be greatly impacted if the quantity of produced water is drastically reduced.”

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