Horizontal drilling and upsized completions have fast-forwarded the oil and gas industry’s demand for water. At the same time, the lower for longer oil price recovery has placed ever more pressure on operators to cut costs, including for water, according to a new report, “Water for U.S. Hydraulic Fracturing,” from Bluefield Research.

The report forecasts that at a flat rig count of 650, 20.8 billion barrels (bbl) of water will be required for hydraulic fracturing from 2017 through 2026. Last year, fracturing consumed more than 1.3 billion bbl of water and produced 574 million bbl of water for disposal. Investors and industry players are positioning to play a role in this growing water market.

With operators drilling faster, and employing longer laterals, completions now require as much as 12 million bbl of water per frack—triple the volumes of five years ago, the Bluefield authors said. They project that water management, including water supply, transport, storage, treatment and disposal, will total $136 billion from 2017 to 2026 for the U.S. hydraulic fracturing sector.

High reuse rates in the Marcellus and scaling Permian activity—where water per frack ratios are the highest—drove treatment spending to about $198 million in 2016 with an annual spend of $307 million expected for 2017.

“Demand is rising exponentially, particularly in West Texas,” the authors said, “because of increased water volume per frack and an almost 30% reduction in time required to complete a well.”

With water transport, both supplied and produced, rising in importance, the industry craves more pipeline networks and transport services, and a new midstream water sector is developing in response.

“Several firms—Antero Midstream, Noble Midstream, Rice Midstream, NGL Energy—are leveraging their holding companies’ E&P footprints,” the report said. “At the same time, a new crop of market entrants, often backed by private equity, are staking out positions in select basins to capitalize on demand for water services.”

The water company rolls have been diminished by the downturn, but a “select few” are rising from the ashes, according to Bluefield’s report. “Select Energy Services has filed an IPO, Nuverra remains on the edge of Chapter 11, while Fountain Quail and GreenHunter Resources have merged.”

Texas and Oklahoma led the U.S. completed horizontal well count from 2011 to 2017, making them the most active markets for hydraulic fracturing and water demand. Bluefield excluded DUCs (drilled but uncompleted wells) from its forecasts; at the end of March 2017, 5,512 DUCs remained, according to DOE estimates.

In Texas, oil prices, financial stress and rain have “eased the regulatory pressures in some instances,” the report said, making cost of transport the top concern. Some producers are tapping alternative supplies to enhance sustainability. In Oklahoma, earthquake concerns due to salt water disposal practices are fueling recycling efforts.

Annual water demand by basin is led by the Permian, with 45% overall, the Eagle Ford, 12%, the Marcellus, 12%, the Cana Woodford, 8%, and the Haynesville, with 8%.

In basins with plentiful access to saltwater disposal wells, like those in Texas and Oklahoma, treatment and reuse remains below 10%. Pennsylvania and Ohio, which have limited disposal well options and more challenging topography, have seen transportation and disposal costs rise as high as $20/bbl, according to Bluefield. This has prompted E&Ps to buy injection well assets, and another “key area of investment” has been the networking of disposal wells with pipelines across shale plays. E&Ps are investing in projects connected to wastewater plants, water recycling facilities and pipeline transport.

As this still nascent water management and services value chain evolves, Bluefield is tracking several trends in particular: private water utilities leveraging their local presence; pure-play water service providers focusing on transport logistics, treatment and disposal; companies providing centralized treatment in the Marcellus; and increasingly, midstream energy service providers moving into water markets, often by leveraging their related E&P divisions. In other instances, private equity firms are backing midstream entities focused on the water value chain, with some carving out niches in individual basins.

With only 6% of produced water currently being treated and reused, Bluefield projects this share will rise to 16% by 2026. Recycling of flowback water should hit 90% by the same period. And the dollars needed to fund this effort will continue to seed opportunity for investors.

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