(Wood Mac, 12.Apr.2019) — Water disposal volumes in the Permian Basin are expected to double within the next two to three years, new analysis from Wood Mackenzie shows.
As drilling activity in the basin continues to expand, hydraulic fracturing has resulted in the growing challenge of how to source water, and what to do with wastewater produced by completed wells.
Water disposal costs can account for a third of total lease operating expenses in the Permian, Matthias Bloennigen, Wood Mackenzie’s Director of Upstream Consulting, said.
“Even with 100% water reuse for further completions, which is unlikely, the current salt water disposal infrastructure is expected to hit capacity in the near future,” he said.
“As Permian operators continue to focus on boosting production output, they will need to develop and refine their water strategies.”
Big opportunities for M&A
While exploration and production companies scramble to avoid bottlenecks and well shut-ins, water midstream companies are providing various solutions as the water management challenges grow.
This year, financial sponsors have rigorously explored options to get a piece of the action. TPG Capital went all in in March 2019 with its $1.2 billion investment in Goodnight Midstream, which serves operators across the Permian and Williston basins.
More than a dozen water-related infrastructure deals have taken place in the Permian over the last three years, and the pace of transactions is expected to pick up considerably in 2019.
“We’ve seen a lot of interest from private equity, as there’s still a huge need for water infrastructure. But it’s important that people understand the factors at play in the Permian before they invest,” Bloennigen said.