Pipelines to reuse water for shale oil extraction build efficiency in West Texas

Bloomberg:

The torrent of dirty water coming out of almost every American oil well is the next big bet for a former fund manager for billionaire Paul Allen.

Getting rid of wastewater from onshore wells has become an increasingly costly problem for oil producers as U.S. crude output surged in recent years, especially in the new shale fields from Texas to North Dakota. Drillers typically get about seven barrels of water for every one of oil, and some struggle to deal with the overflow that is mostly sent by truck to disposal sites miles away.

David Capobianco, a former managing director for Allen’s Vulcan Capital, is trying to change that by building pipelines to get wastewater out. His newly formed WaterBridge Resources LLC aims to be a water-management company for oilfields. The firm is considering a public share listing within a year to 18 months, taking advantage of a U.S. shale boom that the government expects will boost crude production close to 10 million barrels a day next year.

“Next to profitability and safety, water may well be the next most important topic for an oil company,” said Laura Capper, chief executive officer at EnergyMakers Advisory Group, an industry consultancy in Houston. “It has risen to the forefront over the last five years unlike anything I’ve ever seen.”

To get a sense of just how much water is involved, consider the forecasts for rising oil output in the Permian Basin, the busiest field in Texas and a big beneficiary of increased investment in shale reserves. It currently pumps 2.4 million barrels of oil a day, but production could grow to a peak of as much as 10 million in future years. At the current rate of disposal in the area, that would mean 30 million to 50 million barrels of dirty water every day, enough to fill the Empire State Building eight times a day.

Disposal can be expensive, especially with oil prices around $50 a barrel, half the price in 2014. West Texas Intermediate, the U.S. benchmark, was trading down 15 cents at $49.74 a barrel as of 1:19 p.m. Singapore time on Friday.

Most drillers hire oilfield-service companies to get rid of the wastewater. Trucks dump the water into holes dug deep underground that lead to porous formations, thousands of feet below the drinking-water table. In Texas, the service costs about $1.50 to $2.50 a barrel. Capobianco, in an interview, said he can reduce that to roughly $1, once his pipelines are in place.
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Pipelines are a more efficient way of moving the water than tanker trucks which also take their toll on rural roads.  Cleaning and reusing the water will also create efficiencies and make it less likely that an injection well might trigger a small earthquake.