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Let’s Take a Step Into The Future: Water Management
05/14/2020
Water management in oil and gas operations has become an industry itself. According to Bluefield’s report, “Midstream Water Management: U.S. Hydraulic Fracturing Strategies, Solutions & Outlook,” water management for hydraulic fracturing has been steadily growing from 2017. All indicators, according to the same report, say this trend will be kept for the next few years.
As demands for water management solutions increase, service companies are looking for new ways to optimize their ability to recycle and store this water.
Total Water Management Spent 2011 - 2028
According to Evan Tikka, senior consultant, at Wood Mackenzie, the water midstream sector growth can now be associated with long-term acreage dedications. WaterBridge has acquired almost 10 different systems which resulted in a 10-plus-year acreage dedication. ”From an E&P perspective, it’s been a year of a trust as we’ve started to see some of the larger U.S. independent and supermajors’ views change on the types of contracts and types of relationships that they’re willing to enter into with the water midstream players, characterized by longer-term acreage dedications and some larger divestments.”, Tikka says.
When asked if more E&P companies will be selling their water infrastructure assets to water midstream companies, Matthias Bloennigen, director of upstream consulting at Wood Mackenzie said ”The short answer is yes.” He also said that water midstream companies need to be thorough when researching assets to be purchased because E&P companies are selling ”their less strategic and underutilized water infrastructure assets”. Although these purchases may be risky for water midstream companies, there is a clear opportunity for them if they manage to integrate infrastructure and increase utilization.
From what cost is concerned, Laura Capper, president and CEO of EnergyMakers Advisory Group, stated ”Cost is absolutely a key driver to overall oil and gas profitability.” She also pointed out that for the big players, cost with water management will decrease over time as volume and resource contributes to the effectiveness of the water management programs. Smaller players will however have a more difficult time in keeping the costs low in the long run.
When referring to the challenges that water teams are facing in the year ahead, Rob Bruant, director of products at B3 Insights said ”Things will continue to be challenging on the regulatory front.” As an example, due to current regulations, New Mexico operators will have greater costs to dispose of the water into deeper formations. ”There is going to be a continued net movement of water from New Mexico to Texas, where the regulations are getting stricter but not nearly as strict.”
Andy Adams, director of water management and infrastructure for Select Energy Services, said ”The greatest issue I see is the logistical challenges of managing and sharing water. Everybody wants to share the water; everybody wants to reuse produced water. But the most difficult aspect of this is actually managing the logistics of delivering the water safely and on time.”
Source: https://www.hartenergy.com/exclusives/bringing-balance-water-demands-186176
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Shell's Midstream Assets in TX and LA (Gulf area)
On October 19, Shell USA completed the almost $1.96 billion acquisition of the master limited partnership. The company paid $15.85 in cash for every common unit representing limited partner interests in SHLX not held by Shell USA or its affiliates. A subsidiary of Shell USA has 269,457,304 SHLX common units or roughly 68.5% of SHLX common units.
Companies Advancing U.S. Exports
A number of companies successfully contributed to the growing of U.S. exports.
Kinetik Holdings recently announced a series of transactions in the energy sector. They struck a deal to buy Durango Permian infrastructure for $765 million. At the same time, they're selling their 16% share in the Gulf Coast Express Pipeline to ArcLight Capital Partners for $540 million. The total purchase cost includes $510 million in cash paid immediately and an additional $30 million that will be paid later, depending on whether they decide to expand further.
Recently, the Permian has seen significant acquisitions: Exxon Mobil purchased Pioneer Natural Resources for about $60 billion. Diamondback Energy's $26 billion deal to acquire Endeavor Energy Resources is currently on hold due to requests from the U.S. Federal Trade Commission. Occidental’s acquisition of CrownRock for $12 billion in the Midland.
EOG Resources is pushing boundaries in Ohio's Utica oil play and now drilling on the Sable pad, also located in Noble County. This site features the 3.7-mile lateral currently under construction. The company's first multi-well pads in the area Timberwolf and Xavier have each produced over 200,000 barrels of oil since their inception—Timberwolf in August and Xavier in October. A third site, the four-well White Rhino pad in Noble County, is also showing promising early results, according to Keith Trasko, EOG’s Senior Vice President of Exploration and Production, who noted the wells are performing as expected in their initial weeks.