In my last column, we talked about the Santa Rita No. 1 as the well that launched the Permian basin. Most people believe the Santa Rita No.1 was the first well, but I also mentioned the lesser-known Texas and Pacific Abrams No.1 (T&P No. 1). You see, the T&P No.1 was the first producing well in the Permian basin, beating Santa Rita No. 1 by about three years. We all have heard the story of the Santa Rita No. 1 and passed, or even stopped at, its historical marker near Big Lake. Named after the Patron Saint of the Impossible, we will always remember the story, as it is engraved in our minds, as the one well that started it all.
Sorry to shatter the illusion, but it’s not true. Santa Rita is very important for many reasons, especially as the beginning of the University Lands program, but it’s just not the first oil well in the Permian basin. The lesson here is, if we repeat something over and over enough times, it becomes the truth. Call it better marketing and promotion—Santa Rita No.1 out-promoted T&P No. 1. What does this have to do with oilfield water management, you might ask. Well, let me answer that. Just about every operator I talk to today, who isn’t recycling produced water, gives cost as the primary reason. In the early days of produced water recycling, it was an expensive practice, but not today. I hear recycling cost as being too high so often, that I believe there is a large group of people that believes this to be true. So, I’m here to say, just like the Santa Rita No. 1, it just isn’t true.
Comparing costs. The cost of developing a conventional disposal well can easily be $4 million to $6 million. Now, assuming I am using the same gathering system for my disposal well and recycling facility, while using the same surface equipment, centrifugal separators, and gun barrels, I can put in a recycling facility with pits for about $2 million to $3 million. The difference, here, is there is some risk with a disposal well—I can’t guarantee capacity, and costs are increasing for disposal wells with increasing permitting time and deeper wells because of seismicity concerns, while recycling costs are decreasing.
Operating costs of the disposal well, compared to a recycling facility, are similar. Now, let’s be clear here, we are talking a company-owned recycling facility, where the operator owns the pit, aeration system, pumps and associated equipment. We are not comparing a third-party recycling company to a company-owned disposal well. This would be the same as comparing third-party disposal, which can cost anywhere from $1.00 to $2.00/bbl, with trucking to a company-owned disposal well with costs under $0.25/bbl. Third-party recycling can be as high as $0.25 to $0.75/bbl, while a company-owned recycling program can be established for less than $0.25/bbl; we have developed some at under $0.10/bbl
So, don’t let this misguided idea that recycling is too expensive stop you. As important as recycling will become in 2019, it will become even more important in the Delaware basin, with its 5-10:1 produced water-to-oil ratio. You see, there will be more than double the produced water than can be recycled into a completion fluid. Consider that logistics will play a role. This will limit how much produced water can be recycled; not everybody produces enough water in the right locations, and this will result in blends of fresh/brackish and produced.
There will be some landowner restrictions, as well, where an operator is required to use fresh or is not allowed to transfer produced water. New Mexico is addressing this issue through the HB546 bill. This bill, now called the Produced Water Act, does a lot to encourage recycling, from defining ownership of produced water to voiding freshwater purchasing agreements, if produced water is available. There is no telling whether this bill will pass, but it does give you a general sense that everybody is starting to understand the importance of recycling produced water and addressing some of the obstacles.
Texas actions. Texas led the way, when the Railroad Commission (RRC) established a “Permit by Rule” approach to encourage recycling of produced water. A “Permit by Rule” basically means you don’t need a permit; you just need to follow the requirements. This really gave Texas the leadership role, when it came to produced water recycling, but now we have seismicity in the Delaware basin, and the RRC announced further changes. They have already included language in disposal permits allowing them to restrict capacity, but the further changes are the concern. Disposal wells are the backbone of any produced water management program, so these actions will have a significant effect on disposal capacity in the Delaware basin.
You really do need a reality check, if you haven’t started recycling. But let me say that with completion activity moving to the Delaware basin, we all need to be proactive. Lack of planning will require a reliance on third-party disposal. Seismicity is already slowing permitting, and with potential restrictions coming our way, third-party disposal will get more expensive. Recycling is a great alternative, but completion schedules can be an unreliable outlet, due to oil price fluctuations, take-away capacity issues, and limits on spending.
The reality check for 2019 is recycling should be your low-cost option, but it’s unreliable. We are expecting stable oil prices allowing for some consistency in completion programs. We can compensate for the unreliability by maximizing recycling of produced water, using sharing agreements and improving logistics through increased storage and transfer options. You still need to plan your disposal capacity or allow a water midstream company to help you out. In any case, you will need a three-tiered approach, which will include recycling, disposal and third-party services. It’s time to face reality and consider all options. WO
- Water management- (May 2023)
- Progress and development in the Permian basin (April 2023)
- Regional Report- Gulf of Mexico (April 2023)
- ShaleTech- Permian shales: Production hits new high amidst talk of looming plateau (April 2023)
- Water management (March 2023)
- ShaleTech: Marcellus-Utica Shales (February 2023)