| LOS ANGELES, July 15
LOS ANGELES, July 15 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.
To attack those problems, oilfield service companies like
Halliburton, Baker Hughes and FTS International
, are treating water from "fracked" wells just enough so
that it can be used again. Smaller companies like Ecosphere
Technologies Inc have also deployed similar methods.
"It is a paradigm shift," Halliburton's strategic business
manager of water solutions, Walter Dale, said.
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
"It doesn't lessen the potential for groundwater
contamination, and it can increase the amount of contaminants
that you are exposing the groundwater to," said Myron Arnowitt,
Pennsylvania director for Clean Water Action.
Halliburton and Exxon Mobil Inc's XTO Energy earlier
this year documented the use of Halliburton's H2OForward
recycling service on XTO Energy wells in Eddy County, New Mexico
in a paper at a Society of Petroleum Engineers conference. The
study found cost savings of between $70,000 and $100,000 per
well. The wells have shown no loss of production, Dale said.
The average cost of a well varies by region, but comes in at
about $7.5 million in Texas' Eagle Ford shale formation,
according to a Jefferies report from May.
FTS International said it is using up to 100 percent
reclaimed water in some locations in Oklahoma and Texas, with
results comparable to using fresh water.
Increased industry comfort with recycling comes as
regulators are moving to require more recycling of water used in
fracking. The Railroad Commission of Texas, which regulates the
oil and gas industry there, adopted new rules in March to
encourage recycling. Under those rules, operators no longer need
a permit to recycle water if they are on their own land leases.
The U.S. Environmental Protection Agency could also
implement rules concerning recycled water when it delivers its
study of hydraulic fracturing next year.
Transportation is by far the costliest element of water
management for fracking, and local communities like recycling
because it takes trucks off the road.
But the industry has a long way to go, Halliburton's Dale
said, adding that recycling is still in a "pilot" period.
Water use and resources are local issues, and approaches to
managing water will vary by geography, XTO said in a statement,
adding, "Recycling is not a universal solution."
PUMPS, VALVES AND PIPES
Rollout of recycling technology is in its infancy, but
poised to lift demand for everything from water pumps to valves
to pipes. Companies like Xylem Inc, which makes water
testing and other equipment, Ecolab, which owns water
treatment company Nalco, and Gorman-Rupp Co, a pump
maker, are companies that could see an uptick in business, one
portfolio manager said. All three currently trade close to their
"Fracking has simply added the ability for incumbents in the
market to grow earnings further," said Simon Gottelier, a
portfolio manager who oversees water investing for London-based
Impax Asset Management, which has $3.5 billion under management.
Some companies already forecast big revenue gains from
Layne Christensen Co, a provider of water
management services, said it expects its new fracking-focused
business to generate $200 million in revenue by 2017, with
"meaningful" revenue generation beginning in 2015. It is
completing development of its water recycling offering this
year. Meanwhile, utility Aqua America Inc has said a
water pipeline to supply frack sites in the Marcellus shale in
Pennsylvania will eventually add 10 cents per share to its
For energy companies, the use of flowback water for fracking
eliminates the need to truck wastewater to disposal wells. Water
can be treated onsite and reused for the next frack.
Some say the water that comes from underground is better
suited for fracking and requires less chemical treatment because
it is compatible with a well's native geology.
"When you use water that's native to that formation, your
chemical is either nil or not required at all," said Tom Whalen,
Baker Hughes' vice president of water management.
Today recycling is only prevalent in the Marcellus shale,
where about 90 percent of flowback water from wells is recycled,
because there are few disposal wells in the region and water to
be discarded must be trucked to Ohio to be injected underground.
A disposal well is a pipe into which waste water is injected
for permanent storage. Pennsylvania's geology is less suitable
for deep injection wells than other regions, and new wells are
both costly to permit and often face opposition from communities
concerned about groundwater contamination. In addition, a study
found powerful earthquakes thousands of miles away can trigger
swarms of minor quakes near injection wells.
INDUSTRY COMES AROUND TO RECYCLING
Baker Hughes debuted its water management offering, called
H2PrO, about 18 months ago. At that time, the company's
customers were interested, but not committed to using it every
day, according to Whalen.
"In the last 12 months, that's totally changed," he said.
Baker Hughes now has about 300 employees working on water
management in all the major North American shale plays. Its
customers are saving 30 to 50 percent compared with trucking the
used water to underground wells, according to Whalen.
Drought conditions in Texas have helped prompt the industry
to recycle more in all geographies. Though fracking makes up
less than 1 percent of overall water use in the state, it makes
up more than 50 percent of water use in certain counties,
according to a 2011 report by the University of Texas.
Savings vary by region depending on the availability of
water and the proximity and number of disposal wells. A recent
report by Jefferies estimated that oil and gas companies can
save $370,000 per well in the Marcellus shale play in
Pennsylvania and $70,000 in North Dakota's Bakken region. In
Texas' Eagle Ford shale play, the cost of recycling would be
about the same as using freshwater because disposal wells are
The author of the Jefferies report, Brad Handler, said
Halliburton and Baker Hughes will be the main beneficiaries of
an increase in water recycling because of their expertise in the
chemical makeup of water used in fracking.
"You need the confidence that Halliburton's chemists can
bring," Handler said.
EcoSphere has also had success with its process, which it
has used in 750 wells since 2008. It has worked with Newfield
Exploration Co and Southwestern Energy Co. But,
like many startups, it has had its share of difficulties
breaking into the oil and gas industry.
EcoSphere has accused Halliburton of stealing its trade
secrets in an ongoing arbitration case, and earlier this year
the company that was the exclusive licensee of its technology,
Hydrozonix, lost its exclusivity for failing to pay for water
(Reporting by Nichola Groom; Editing by Ed Tobin, Patricia
Kranz and Leslie Gevirtz)