Mackenzie Evan Tika, JIM, Cameron Wallace discussed on World Oil's Shale Water Management
I'm here today with my co-host Cameron Wallace afternoon APP. He's the digital editor at world oil. So he's a he's an important cog in the wheel that is world right. That's right and one of the fastest spinning cogs in the wheels world. Oil You go exactly and also we have with us today from Wood. Mackenzie Evan Tika. And Matijas Blue Nagin. And so we're here to talk today about shale water management. That's what this podcast is about. She'll water-management one hundred percent and I don't know we'll just take a camera would take a couple of minutes here and explain. Why why there's no podcast on water management out there? But this is in my estimation one of the hottest places in oil and gas markets these days. There's a lot of money in there. It's a big problem. Need Solutions Right. Yeah it really feels like. This is a part of the business to where we re raced forward with drilling and completion technology. And now we need to decide. What is that next? Step going to be going to advance forward again or is this a place where we have to take a pause and some of the momentum falls out so this is a really important topic absolutely and evident Matijas. They are the water experts over Wood Mackenzie and so they got well Cameron. I can talk in generalities. They can talk in in specifics. So let's get evident. Empathy is on here Evan. Good to see again now. Yeah thanks for having us. Jim's is a great opportunity. And you know we're we're also super excited about the space and I wholeheartedly agree with you guys that it's moving in a million miles an hour and you know it's important to get it right definitely so so. What do you do officially over there? Which are what your title. So I'm a part of our management consulting group and so we do. The spoke engagements shorter stint projects. And most of the work. I've been doing over the last eighteen to twenty four months. Have been in the produced water space and with a particular focus with working with a bunch of our financial partners on any kind of acquisitions that they're looking at and you know certainly telling a story from the macro view why we think this is an attractive space and who who are the players that are really moving the needle in the water space awesome. So Matias what is it you do over? There wouldn't Mackenzie. Hi Jim. Yeah I'M A director in the auction consulting team and I have been leading the water practiced at With my CABELA's couple years we really started working for the different operators and then has mentioned we worked a lot for financial st- private equity and infrastructure funds helping them acquire water Mitchum companies. You so you guys are a team then you and as we all right all right. Yeah we are. We are known as Aquaman number one and number two off. That's awesome and so yeah in the intro where it was just talking about how important it is here. You know how. Why do a podcast on Shell water-management? Maybe you guys can can throw some numbers some numbers about produce water and stuff around. Yes I think from a macro perspective when we started to identify water as a growth market. A lot of it started with getting familiar with the premise. That for every barrel of oil that comes out of the ground you get two three five sometimes ten times as much water coming out of the wellhead so when I talk to people they. They're kind of surprised when I tell them you know we're we're really in the in the water business you know oil. Oil is aside hydrocarbon. That comes out. I mean what are you? What are you going to do with all this water? Because it's it's not a commodity it's very much a waste product that you have to deal with right. Mit as we're does that water come from for people. Why why is there such a big? This called the water cuts right the ratio of oil to water. That comes out I mean. Is that from water that we pump down to fractured Iraq's or is that already down in the formation. So it's both so I you're GonNa get a big on what we industry call slow back. Some of the amount of water was punching cracking than is gonNA come back but then you also have a lot of water. Homefront we call formation water also coming back and the big difference between Shell and conventional is in conventional oil and gas usually dug water. That is coming back is usually we pumped back in the same formation to keep the reservoir pressure buzz you in a shell unfortunately because of his because their formation is so tight it is not possible to pump that water back way came and that's why we have such a big water problem. Yeah and it is a. It is a huge problem. Now you guys you know like you were talking about you. Guys do a lot of consulting you know for for people. You know sovereign wealth funds. Everybody right trying to come into the space and so You guys put together a really good report that I've seen and one of the charts in there is very interesting. It's kind of a decision tree or a tree for the different paths of produced water. Can you run us through that real quick? So she got produce water coming out. What are the first two things you gotta do with a one? You could use to things that you can do. The first one is disposing. It and gather option is recycling so if we go the disposing route the first and most common one is to be injected in at WTI saltwater disposal. Well that is the most common. That's what has been done for a long time. Those are the usually critical. Well that checking water in different formations another option to inject the water is to use that. Whatever for whatever in cortex meaning moving water transporting not wanted to conventional basins like the central basin touch long and using that Produced water from Michelle to use it to reinject into the ground for for maintaining the water pressure. Maintaining the reservoir pressure boss that is still under development but a lot of people are starting to think about other opportunities that we have for disposing of the water. Evaporation so unfortunately ponds and empowerment like Ben. Basically building a little lake in waiting for the water to vibrate has not been economic. It works and it's been used across the forty eight in other states but be peration rate is quite slow and therefore it costs a lot of money to build those on's and definitely not economic the other options. Is that what we call an operation and basically here? We're talking about boiling the water in. That could be just a little bit on the top and then using the rest of the water to injecting enlisted weeds. It could be also evaporating. How about half the water to get it to a slurry? Get something they very concentrated or even evaporating all the water and being left wherever solid residue. There's also a different disposal option available or being under development under recycling side. We have what we call views which is aching produce water for fracking operations and that is currently done. Two different ways. One is to just mix the produced water with freshwater to have a nice calm consistent quality of water for fracking operations and That is a very common. But you don't get rid of all that water and you still have to use freshwater. Being adopted very fast lately is also like be thinking that water to a Brian Quality. We shouldn't forget that produced water is when we talk about what it's a very salty water that comes up with salt a which has a lot of the solids lot of iron these a lot of particles in it and it needs to be cleaned. And so it's being cleaned all the way back to Brian. Quality so a very salty water only one company in the forty eight has been recycling water and removing all the salt and India. Build a plant in West Virginia. But that option seems to be very uneconomic even shut in plant a few weeks ago to be wait and we cannot accept that. Yeah because that diesel stuff right. I mean that's like diesel like taking ocean water making drinking water right. That's that's really expensive process. Yeah it is benefiting here. We shouldn't forget that we're not talking about salt. Not Talking about seawater. Were talking a water that is like sometimes four to six times more salty. See what some of the technologies don't work and it created a lot of different operational issues and shout out to the team at Viola. I'd really nice conversation with them earlier this week at the shale water expo which. Jim saw you there long shaking hands and our friends of Yulia told us that they're looking to get to around the the two fifty two to three dollars a barrel. They think that if producer or to pay that that's something that they could build out on a on a larger scale potentially in the Permian data. That's crazy because there's so much more expensive than than recycling or any other US right. I mean they're talking. Like sub fifty cents a barrel for recycling and when someone says. Oh No. It's three dollars to to make it in a good water. That's that's still but you know everybody wants to be seen as green these days right. So maybe they'll be people take it up. Yeah and then. Also what what? There's some other weird uses right. You got for recycling so you can do all that stuff you can make it same but in your charge you have other uses right like agricultural stuff but that is what everyone is dreaming about it especially I mean basin. We're very dry area so everyone wishes they could actually use some recycling technology so that they could be used that water either jumping into a river. The river for example or use it for agriculture is a London calling a lot of almonds for example in south eastern Mexico while using even for potable water water systems for example the city of Midland's getting water up to one hundred miles radius and so it could be for example and that's something that everyone is striving to but unfortunately hasn't been economic. Yeah that's always the problem when you get it clean enough for those types of uses. You're pretty far down the road in the expense and that's one of the things on this podcast ruining explore all those areas in more detail. Not only in in the trends. And what's going on which you guys are experts at? But we'll talk to the technology experts as well and that'll be the second segment of each podcast. So we'll start. We'll talk about you. Know THE TRENDS. And what's going on in the deals that are happening because he's guys with. Mckinsey they know all the deals and then in the second half will talk to technology leaders so yeah let's get to the meat man. What are what are the big trends? What are the big trends? You guys would. Mackenzie see in. Not Not only just on the produce waterside but also on the just just water in general. Yeah so I think one of the reasons that we're really really excited about the space that right. Now we've seen all this great technology and all these great minds come into the industry of a bunch of venture capital funded water midstream players coming in a bunch of you. Know very very small. Water technologies with some cool patents under their belt and from from consolidation perspective. At just like we've seen in the gas gathering and we're seeing right now in the EMP. Space that the need for scale is something that that operators really want. And they're and they're they're willing to value it and so we're seeing a huge offloading of water assets from the MP's themselves so whether that salt water disposal wells or empowerment or water gathering lines and also seeing some of the water midstream. Companies merged that they can build their scale for their pipelines and disposal. And we're also seeing seeing some some acquisitions between technology companies take an x Ri Blue in Fountain Quail for example. Well here's a question then in that in that space so you're seeing the EMP companies themselves..