Blowing the Competition Out of the Water and Making It to the Next Boom

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AdobeStock 74150099
AdobeStock 74150099

The onshore oil and natural gas industry is a perfect example of how technology can help an industry evolve. Challenges continue to be answered with solutions provided by America’s vast pool of bright and talented engineers. The industry’s combined efforts have resulted in countless case studies of efficiency: faster drilling times, longer laterals, improved geosteering, better completions, lower total well costs and ultimately increased well performance and profit. In short, the industry has perfected how to do more with less. And that’s key in today’s new era of about $50 oil.

According to a March 2016 Energy Information Administration report, “the profitability of oil and natural gas development depends on both the prices realized by producers and the cost and productivity of newly developed wells. Prices, costs, and new well productivity have all experienced significant changes over the past decade.” The report’s opening section identifies six key categories of cost attributed to U.S. onshore oil and gas drilling and completion.

When it comes to advances in the completions fluids and flow back category, produced water recycling projects have been in the spotlight. It is undeniable that recycling water for completions is the future, but the industry can’t overlook the fact that freshwater sourcing will remain a critical component of the water cycle in the oil field. Nearly all produced water recycling projects depend on a mix of fresh and recycled water to attain necessary key performance indicators for well completions. Additionally, economical recycling projects require a large number of wells concentrated within a small geographic area, alongside an operator that is in it for the long haul. As a result, produced water recycling doesn’t necessarily work for smaller and private equity-backed operators.

Since freshwater sourcing will continue as a cost center in the completions process, companies everywhere should be focused on ways to lower sourcing and transportation costs. But are they? If companies are rightfully looking to save costs everywhere they can, one would think technology development and adoption in water sourcing wouldn’t be overlooked. Yet the industry is doing what it’s always done for water sourcing: rely on word of mouth, turn to field consultants and their resources, or tap the good ol’ boy network.

The reality is that technology in the water sourcing space has advanced, but it has done so in the realm of information, not engineering. Water Sage has spent the last two years aggregating water- and land-related data that has direct correlations to costs at the drill site. Our users have discovered ways to leverage this data to pre-qualify water sources from their desks based on meaningful parameters like water well yields, depths, total dissolved solids measurements, and right-of-way and trucking costs. Efficient access to better information has had a meaningful impact on users’ drilling schedules and costs.

If the vanguard of horizontal drilling, coupled with hydraulic fracturing, has taught us anything, it’s that tapping technology can blow the competition out of the water. Water sourcing costs aren’t going away, and they can’t be overlooked, especially in today’s market. In the overall scheme of an operator’s plan, managing water sourcing costs could make all the difference in who survives this downturn and makes it to the next boom.

About the author: Spencer Williams is a Business Development Manager for Water Sage, a web-based information platform that helps oil and gas users identify and evaluate fresh and brackish water sources and their relationship to land. Prior to joining Water Sage, Williams practiced water and oil and gas law, advising clients on the development of water resources for oil and gas operations.

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