Even with the recent crash in prices, oil production from unconventional formations, such as shale or tight sandstone, has transformed the industry.
Since 2008, when U.S. crude oil production was 1,830 million barrels (lower than any year since 1947), the country has become the largest petroleum producer in the world, with production in the 12 months through October 2015 at an amazing 3,412 million barrels.
The combination of horizontal drilling and hydraulic fracturing gets the credit for most of that increase.
But the so-called fracking revolution has had a downside, which is not well known to the general public: the increasing cost of water for oilfield operations. According to data from the Interstate Oil and Gas Compact Commission and the Ground Water Protection Council, while the drilling of an average well requires about 250,000 gallons of fresh water, the hydraulic fracturing of a well is much more water-intensive, averaging about 2.5 million gallons water per well.
Much of this hydraulic fracturing activity happens in regions with acute water shortages. Some 48 percent of U.S. wells are located in extreme water stress areas, where more than 80 percent available ground and surface water is already allocated for such uses as agriculture, power generation, and human consumption. Several oil-producing states expect added stress on limited water supplies from future population increase.
The Eagle Ford formation in south Texas is considered ground zero for fracking-related water issues. There are thousands of wells in the Eagle Ford region, and they consume water at a rate about double the national average. Compounding the problem is that 98 percent of the wells there are in areas with at least medium water stress, and 28 percent are in extreme stress areas.
It makes sense that there would be a scramble for water in south Texas, but surprisingly, water is also a bottleneck in the Bakken, despite its location in the wet and cold climate of North Dakota.
There, the challenges are attributed to a lack of access points, limited storage depots, and permitting restrictions. In oil and gas production regions as diverse as the Marcellus in Pennsylvania and the Monterey in California, water issues are a big concern.
These water challenges are starting to significantly affect the bottom lines of oil producers, particularly in the current low-price environment. Treatment and reuse of flowback and produced water is a promising option, but is associated with high water treatment costs. Freshwater supply for fracking has rapidly become a multibillion dollar business with several leading oilfield services companies getting in the game. Freshwater procurement can cost up to 3 cents per gallon in some areas. The real wallet drainer, however, is transportation which can cost as much as 12 cents per gallon. Total water costs can therefore reach as much as 15 cents per gallon, which works out to $6 per barrel of water or as much as $2 per barrel of oil produced.
It isn’t just the direct cost to oil producers. Trucks are the workhorse of water transportation and trucking distances can be huge. Trucks bring along the expected problems of traffic, road damage, noise, and accidents, which make for unhappy communities.
While obtaining water is a headache for drillers, they also have at their disposal the means for providing their own water. A technology known as atmospheric water harvesting can wring moisture from humid air at a surprisingly rapid rate. And though the technology has a reputation for being energy-intensive, oil production sites often have on hand fuel that they can’t use—and indeed, simply burn (flare) off.
By harnessing natural gas that is now often just flared off, oil producers could eliminate a large fraction of their water needs.
WASTE AND OPPORTUNITY
Flaring is a big problem in its own right. While oil spills and refinery explosions get widespread media coverage, flaring often manages to stay below the media radar, despite having severe negative consequences in terms of pollution and constituting an enormous waste of energy.