In the United States, water is something we often take for granted as a cheap and plentiful resource.
But today, its availability is becoming an issue to our domestic energy industry. And it could possibly affect future development of our abundant shale resources.
You see, hydraulic fracturing is a rather water-intensive process. Typically, between one and five million gallons of fresh water are consumed in a hydraulically fracked well – within the first few days.
Indeed, an average of nearly one gallon of fresh water is required for every million Btus of energy produced – or 1,000 cubic feet of natural gas.
When you consider that the United States will be producing 87 billion cubic feet of gas per day by 2020, that’s a lot of water!
We don’t have to wait until 2020 to see energy-related water use to blast off the charts, though…
An Unsustainable Trend
In the United States, as much as 40% of all water taken from rivers and lakes is used for energy-related business.
That’s especially high when one considers the ongoing droughts in many parts of the country.
Making matter worse, a report by non-profit group Ceres shows that nearly half of all fracking in the United States takes place in water-stressed areas of the nation.
In fact, 55% of fracking wells are located in regions that are currently experiencing drought.
One prime example is in La Salle County, Texas, in the Eagle Ford shale formation. By 2020, fracking is expected to consume 40% of the groundwater. And in Johnson County, Texas, already 29% of groundwater is consumed by drilling activities.
In short, the current trend of increasing usage of fresh water by the energy industry just isn’t sustainable.
Companies need to come up with solutions that will use less water in the process of extracting oil and gas from shale resources. And some oil and gas companies are doing just that.
Take Apache Corporation (APA), for example.
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In Texas, Apache has completely eliminated the use of fresh water in some wells. Instead, the company is using a combination of brackish water and recycled wastewater.
The company said it had about 70 non-freshwater wells in operation at the end of 2013.
Not only does this method save Texas’ precious freshwater resources, but Apache says it saves them money, too.
The company claims it costs just $0.29 to treat a barrel of water in order for it to be re-used. By comparison, it costs $2.50 a barrel to have wastewater trucked away for disposal.
Other companies are starting to wise up, as well. And by 2022, the use of wastewater for fracking purposes is expected to double.
There are many smaller companies, of course, experimenting with different methods to fix the water/energy dilemma.
One such company is GasFrac Energy Services (GFS.TO), which was highlighted by Time Magazine.
Time said it had one of the best 25 inventions in 2013 for its fracking procedure.
Instead of fresh water, the company uses gelled liquid petroleum to frack wells. The gel evaporates underground, eliminating any chance of contamination.
Bottom line: Energy companies will spend an estimated $8 billion this year on water services in shale plays. And IHS expects that number to grow to $11.2 billion (or 40%) by 2022.
Rest assured, I’ll keep an eye on this sector and more specific opportunities for future profits to flow.
And “the chase” continues,