Article- The Next Big Bet in Fracking: Water Some investors see fortunes to be m

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Article- The Next Big Bet in Fracking: Water

Some investors see fortunes to be made in the U.S.’s hottest oil field—by speculating in water, not crude. Fledgling companies, many backed by private equity, are rushing to help shale drillers deal with one of their trickiest problems: what to do with the vast volumes of wastewater that are a byproduct of fracking wells. When producers blast a mix of water, sand and chemicals to release oil and gas from rock formations miles underground, they not only unlock oil and gas, but also massive quantities of briny water long buried beneath the surface. Drillers in the Permian Basin in New Mexico and Texas currently generate more than 1,000 Olympic-size swimming pools full of this murky, salty water every day. Handling it amounts to up to 25% of a well’s lease operating expense, according to analysts. Investors have expressed interest in this corner of the U.S. shale industry as oil production in the Permian soars to record levels. Analysts said the region could produce more than five million barrels of oil a day by 2023, more than the current daily production of Iran. Sensing a chance for a big return, private-equity firms have invested more than $500 million into wastewater-disposal companies such as Solaris Water Midstream LLC, WaterBridge Resources LLC, Goodnight Midstream LLC and Oilfield Water Logistics LLC. There are roughly a dozen of these water-focused companies that analysts said could each be worth hundreds of millions of dollars. These companies are building pipelines to transport the wastewater and dispose of it deep underground, hoping to displace the trucks that currently do the job. Some companies have a longer-term plan: recycling the wastewater to sell it back to drillers to reuse. Most of the companies are currently private; WaterBridge Resources in June announced plans for an initial public offering, and others are expected to follow suit.  

“The math on this is really, really easy,” said Christopher Manning, a managing partner of Trilantic Capital Management LP, which has invested in Solaris Water Midstream and committed as much as $100 million to the company. “If the Permian goes up by one million barrels per day in oil production, it’s going up six million barrels in water. That’s an opportunity.” Larger pools of capital are looking for a way into the game, and Mr. Manning and others expect the companies to attract billions of dollars in investment. KKR & Co., one of the world’s largest private-equity firms, has begun approaching companies in the space in recent months, according to people familiar with the matter. A KKR spokeswoman declined to comment. Finding a long-term solution to the wastewater problem is essential for Permian producers. A single shale well can produce more than a million of barrels of oil over its lifetime, and many times that amount of water. Energy consultancy Wood Mackenzie has found that in some parts of the Permian Basin, wells produce 10 times as much water as they do hydrocarbons. In the Delaware portion of the Permian, the area’s most popular geologic deposit, water-to-oil ratios conservatively average 5 to 1, analysts said. For years, drillers have relied on trucks to move the water, but surging U.S. shale production means trucks alone may not be able to handle the growth, a problem exacerbated by a continuing trucking shortage. Moving the water by truck, about 125 barrels at a time, is no longer feasible when a single well produces thousands of barrels a day. And rising watermanagement costs could add as much as $6 to the cost of producing a barrel of oil, according to Wood Mackenzie, potentially curbing the growth of future Permian oil supply by 400,000 barrels a day by 2025.

Truckers and the new entrants typically dispose of wastewater in underground wells, but the latter group hopes it can provide drillers the service more cheaply using pipelines that are scalable. Outside of Pecos, Texas, WaterBridge is building a network of pipelines to take away wastewater from some of the area’s biggest producers— Occidental Petroleum Corp. , Concho Resources Inc., Anadarko Petroleum Corp. and Noble Energy Inc. The company said it would have 125 miles of pipelines built by the end of the year capable of handling 600,000 barrels a day. “We really don’t know the potential here,” said Jason Long, WaterBridge’s chief commercial officer, during a recent tour of one of the company’s roughly 20 disposal sites on the edge of the Chihuahuan Desert, a compound of steel tanks that process thousands of barrels of water before pumping them into an underground disposal well. “We could sit back in 2020 and have 500 miles of pipe in the ground.”

There are looming regulatory and environmental challenges. Studies have linked disposal wells to earthquakes as wastewater from fracking can put stress on underground faults and increase seismic activity, and some in the industry predict regulators will tamp down on permitting new wells. Still, producers are signing up for long-term contracts with companies like WaterBridge. That is a shift from what had been a spot market priced by the truckload and a sign that producers need to lock up a solution for their water, said David Capobianco, whose investment firm, Five Point Energy, has pledged $200 million to WaterBridge. Moving water by pipe costs anywhere from 60 cents to $1.50 a barrel compared with more than $2 by truck, said Mr. Capobianco, who previously headed Vulcan Capital, Microsoft Corp. co-founder Paul Allen’s investment firm. Apache Corp. , one of the largest producers in the Permian, wants to reuse more water to reduce the millions of barrels it must dispose of and limit the freshwater it purchases for fracking, according to a company presentation earlier this year. Apache recycled more than 22 million barrels of water from 2013 to 2016 in just one subsection of the Permian. “Prudent water management is critical to our success. It’s good for communities, it’s good for the environment and it’s good for business,” said Apache spokesman Phil West. That potentially means a new business opportunity for water-disposal players. Historically, producers have mostly used freshwater for fracking, but water companies are setting up their networks with an eye on treating produced water so it can be reused for fracking and resold to the shale drillers who paid them to take it away in the first place. “You can flare gas,” said Mr. Capobianco. “You can’t flare water. Once the water stops flowing you have to shut in a well. When we began looking at this sector seven years ago, that was really an epiphany.”

Please answer the question from above article:

1. What unique uses are companies finding for fracking waste water?

2. What ethcial responsibility do companies have for finding alternative ways to recyle waste products and scraps?

3. Describe ways that other companies use their process scrap to create new products or as a supply material for another industry?

4. Think of a company- what waster products and scrap does the company produce? What does the company do with these waste products? Think of some creative alternative uses for this waste.

4. Ask one question on this topic .

Please provide your own answer.

Explanation / Answer

The Next Big Bet in Fracking: Water

(1).The oil and gas industry is finding that less is more in the push to recycle water used in hydraulic fracturing. Slightly dirty water, it seems, does just as good a job as crystal clear when it comes to making an oil or gas well work.

Exploration and production companies are under pressure to reduce the amount of freshwater used in dry areas like Texas and to cut the high costs of hauling millions of barrels of water to oil and gas wells and later to underground disposal wells.

Until recently, many companies considered recycling too expensive or worried that using anything other than freshwater would reduce well output.

But oil and gas companies are increasingly treating and reusing flowback water from wells, which unlike freshwater is very high in salt, with good results.

The practice scales down the amount of freshwater used for fracking, but environmentalists say it does nothing to assuage concerns about groundwater contamination, and only facilitates the extraction of fossil fuels that produce climate-warming gases.

Transportation is by far the costliest element of water management for fracking, and local communities like recycling because it takes trucks off the road. A rollout of recycling technology is in its infancy but poised to lift demand for everything from water pumps to valves to pipes.

For energy companies, the use of flowback water for fracking eliminates the need to truck wastewater to disposal wells. Water can be treated on site and reused for the next frack.

(2). Alternative ways to recycle waste products and scraps

1.Recycling of Aluminum Cans:

You can choose to invest in the recycling of aluminium cans. Even if you don’t have the needed capital to go into it full scale, you can still make money by collecting the cans for big recycling firms. This idea is good for those people that are familiar with their neighbourhood.

All you need to do is post a notice in the community bulletin board or send out business cards containing the rationale of the business and contact information and the promise of free pick up of your neighbour’s aluminium cans. This is even a profitable aspect of waste management.

2.Recycling of Scrap Gold:

Often tagged as mining gold above ground, the process of recycling scraps gold entails re-melting, refining and remaking new pieces. This process costs less than mining and in fact does not diminish or degrade the purity of the gold.

3.Recyclable Waste Collection Centre:

If you don’t have the capital to set up a recycling plant, you can still start a profitable recycling business by setting up your own recycling centre; where people can drop off their recyclable items like cans, bottles and paper. The establishment, in turn, will deliver these materials to bigger recycling centres or companies in exchange for cash.

4.Recycling of Construction Waste:

The process of construction waste recycling entails collecting the different scraps and leftover materials from construction sites like hardwood, waste metals, electrical materials, etc and reselling them.

5.Electronic Waste Recycling:

Electronic Waste recycling is another great recycling business idea. This business entails the buying of scrap electronic peripherals and electronic devices and selling them to recyclers. Gadgets that can be recycled or refurbished include all electronic gadgets, laptops, computers, mobile phones, etc.

6.Copper recycling:

Copper and the copper alloy such as Brass and bronze, have one of the highest cost per pound rates of non-precious metals. Good copper and copper alloy sources include copper pipe, plumbing fixtures, bronze bearings, copper wire, transformers, electric motors, copper trim, buss bars, light ballasts, cooking pots, door knobs, circuit boards, etc. The great thing about copper and copper alloys is you don’t need very much to be able to make a lot of money in this field. Currently at the writing of this article copper is at $3.15 per pound.

7.Steel recycling:

Steel is the number one recycled metal on earth. Almost every product made in the world contains some steel. There are many different grades and alloys all are worth different amounts. Cast iron, stainless steel, sheet metal, construction steel, etc. This is one business that you have to take seriously if you want to make good money.

8.Plastic recycling:

Most plastic containers have a triangle with a number and abbreviation to tell you what grade of plastic they are made from. This makes the separation for recycling easier. Post-consumer plastics if cleaned and shredded and in some cases baled are worth from $50 – $480 per ton. HDPE is one of the most sought after it’s used in most of the consumer products we buy from disposable oil containers to car bumpers. With the current oil crunch, the value of this material is only going to increase.

9.Battery recycling:

There are many places that will pay for lead-acid batteries. These are either sold per battery or by the pound, and some places pay up to $7.00 each for used car batteries. Also, another great way to get paid for lead-acid batteries is to recondition them. Most of the time when the car, motorcycle, marine etc batteries die, it is because of sulfation.

10.Packaging materials recycling:

Packaging materials might not seem like a business opportunity. But keep this in mind almost every single product in the world that is shipped, is packaged to prevent damage in some way or form. With the growing number of people shipping products on the internet, the demand for packaging material has never been higher.

Some examples of packaging material include wrapping foam, packing peanuts, cardboard boxes, guards, pallets, and plastic bags. Packing peanuts are a big one they are probably the most discarded and yet are somewhat expensive to purchase. One yard bag of packing peanuts retails for around $75.00.

*The answer to the questions (3) and (4) can be referred to in (2) as it cover-ups the entire scenario.

(4).From the above-mentioned passage, companies building pipelines to transport the wastewater and dispose of it deep underground the right decision? Doesn't it put stress on underground faults and increase seismic activity?

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