The need for huge volumes of water is a growing challenge for oil and gas companies working in shale formations, despite dramatic improvements in drilling speeds that have lowered other costs, energy executives said Wednesday.
Speaking at the World Shale Oil & Gas Summit at the George R. Brown Convention Center downtown, executives said that companies now can drill miles-long wells in a matter of days, cutting down budgets for work that just three years ago would have taken weeks.
But drilling technology used in the shale, notably hydraulic fracturing, requires millions of gallons of water, often brought in by the truckload.
“To give you perspective, I’d say that a Marcellus well, a $6 million well, about $1.5 million is just moving water on that well,” said Steven Mueller, chief executive officer of Southwestern Energy. “So if you could actually get rid of that, then you’d save quite a bit of money.”
Executives of several companies highlighted the substantial costs and potential opportunity in reducing volume or increasing recycling of water used in drilling shale and other unconventional wells.
It’s estimated that the industry will drill 1 million unconventional wells by 2035, said Salvador Ayala, vice president of marketing and technology for Schlumberger’s well production services division. Using existing technology, each would require millions of gallons of water in multiple stages, he said.
“The water scarcity issue is something that has to be in everybody’s mind,” he said.
Hydraulic fracturing is a drilling technique that uses a mix of water, sand and chemicals to blast into dense underground rock and free up trapped oil and gas.
Mueller said some new fracturing technologies don’t use water, substituting propane, carbon dioxide or nitrogen, but these are more expensive and don’t create the kinds of fractures producers need.
Finding a technology that meets economic and technical requirements is “the holy grail of what we’re trying to do as an industry,” he said.
That effort has prompted substantial investment, said Bobby Tudor, CEO of energy-oriented investment banking firm Tudor, Pickering Holt & Co.
“When the industry faces a big problem, typically there is a profit opportunity for somebody somewhere,” Tudor said. “And this is a big issue. One of the interesting things that we’ve seen is a flood of capital toward this problem.”
It’s also a priority because concerns about water use in fracturing go beyond cost, said Michael Yeager, CEO of BHP Billiton Petroleum.
“We have economic incentive to reduce that. We have environmental incentive to reduce that. We have landowner relations incentive to reduce that,” Yeager said. “So I think the question can only be grounded in, we have our shoulder into these sort of things on a 24-hour-a-day basis to improve them and I’m confident that we will improve them.”
Schlumberger has made progress with a technique called channel fracturing that has cut water use by more than 50 percent, Ayala said. But most companies haven’t adopted the process, which also cuts the use of sand and other materials, he said.
As American companies focus on improving shale operations, others from around the world are watching.
More than 100 industry professionals from around the world are attending the summit, which continues through Friday.
Speaker from China
Among the speakers Wednesday was the deputy director general of China’s National Energy Administration, Zhang Yuqing, who described his country’s plan to partner with Western companies to learn from the successes in American shale plays that could be applied overseas.
“We are going to introduce, study and then master advanced technologies from other countries and build our self-independent innovation capabilities ultimately,” he said.
Other speakers touched on the anticipated growth in demand for natural gas, which is expected to spur production for decades, despite current low prices for the resource that many described as unsustainable.