Water for Onshore Oil and Gas

As oil fields mature and unconventional extraction methods gain ground, growth in demand for water treatment and reuse is set to outstrip the wider water services market for oil and gas, according to 2014 report from GWI

In 2014, the global market for water management services and technologies in the onshore oil and gas industry is estimated to be worth $37.9 billion. This figure is expected to grow at 6% a year, in line with increasing oil and gas production. GWI's new primary research report, Water for Onshore Oil & Gas , focuses on opportunities for water treatment in three segments of the oil and gas industry - produced water management, hydraulic fracturing and enhanced oil recovery. The volumes of produced and flowback water associated with the production of oil and gas are constantly rising. This is due to an increase in the production of unconventional oil and gas, which requires more water per unit of product recovered, and an increase in water to oil ratios (WOR) in mature oil fields. By 2020, the onshore oil and gas industry will generate over 500 million barrels of produced water a day. The management of produced water is becoming highly challenging: disposal options are becoming more limited, regulations are getting stricter, and water sources more scarce. Exploration and production (E&P) companies are already experiencing these challenges and are becoming more aware that produced water is an asset rather than a waste stream.

Servicing the US

The largest segment of the market is water management services, which will be worth an estimated $34 billion globally in 2014. Demand is highly concentrated in the United States (71% of the global total), and is driven by increases in unconventional oil and gas production. In 2014, the US market is estimated to be worth $24 billion, with water hauling the largest component of the services market. It is, however, an extremely competitive niche, comprising many local, regional and national players none of which has a share of the market greater than 5%. Treating hydraulic fracturing fluids and flow back water is expected to be the fastest growing segment of the services market, as volumes become greater and chemistries more complex. Is it predicted that the market for these services alone will be worth $2.12 billion a year by 2020.

Treat 'em well

Capital expenditure on produced water treatment equipment is expected to grow from an estimated $3.4 billion in 2014 to $5.4 billion in 2020. There are four principal drivers of this growth:

Increasing water cut - The ratio of produced water to oil production in mature fields is increasing rapidly. The decline in easily accessible oil reserves means that wells that would once have been shut due to high volumes of water are now being kept in production. In Oman, for instance, the water to oil ratio increased from 6:1 to 24:1 between 2006 and 2013.

Growth in unconventional oil and gas production - In the future, the percentage of global oil production extracted by unconventional methods will increase. Hydraulic fracturing and enhanced oil recovery require larger volumes of water per unit of hydrocarbon generated than conventional production. Technology providers and service companies who can efficiently manage the water from these operations will find substantial opportunities in this segment of the market.

Stringent environmental regulations - The boom in hydraulic fracturing has, rightly or wrongly, focused an unprecedented amount of attention on the oil and gas industry. Regulations are in flux, as governments have to navigate a path between supporting economic growth and enforcing better environmental practices. The knowledge gained by technology providers in the water sector can help the industry meet these challenges.

Water scarcity - The most productive areas for the oil and gas industry frequently occur in regions with scarce water resources. Investments in advanced treatment technologies can relieve the stress on water resources by encouraging beneficial reuse of produced water, thus reducing the burden that unconventional production places on local environments.

Featured in Global Water Intelligence April 2014

GWI's new report, Water for Onshore Oil & Gas: Opportunities in produced water management, hydraulic fracturing and enhanced oil recovery is available now, priced at £2,200/$4,000. For more details on how to order, please go to www.globalwaterintel.com

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