FORT WORTH, Texas—Water can be “a good servant but a cruel master” two water-management experts told water forum attendees during the opening day of Hart Energy’s recently held DUG Permian Basin conference and exhibition.

Brent Halldorson, chief technology officer for Fountain Quail Water Management, and Michael Dunkel, vice president for water with Jacobs Engineering Group, did a wide-ranging a panel discussion on water economics in the big play. But both focused in particular on costs and operations.

Halldorson emphasized that, although it is a complex topic since water quality varies enormously, operational simplicity is key.

“The more we overthink the plumbing the easier it is to stop up the drain,” he said, borrowing a quote from the movie ‘Star Trek III.’ It’s important to ask, ‘where will it fail?’ when designing and building a water system. “And trust me, it will fail…You need to be as reliable as a disposal well.”

He added automation, which offers cost savings, can create a stumbling block. “It’s important to balance manpower with automation,” Halldorson added. But he noted “good people are the scarcest resource in the Permian” currently.

Keeping critical spare parts on site also assures flow interruptions remain minimal. All employees need stop-work authority for safety reasons, he said.

Halldorson emphasized “we need the interconnectivity that the midstream provides” to handle water as the Permian continues to expand. Separate lease or producer-owned systems further complicate an already complicated issue. He said a successful water management system rests on a three-legged stool of technology, experience and communication. “Over communicate with your customer,” he added.

Dunkel opened his portion of the discussion with a basic question: “How does the Permian compete” with other shale plays? The answer: economics. “Companies around the world know they can make more money in the Permian,” and one of the reasons for that profitability is the region’s comparatively good water handling infrastructure.

That said, produced water remains a significant challenge—particularly for Delaware Basin producers. Delaware wells can flow water rates as high as 7:1 to produced hydrocarbons, he said.

“But cost data is hard to get,” Dunkel added, as producers don’t want to discuss their successes—and failures—when it comes to water. “Costs aren’t well capitalized but shared only anecdotally.”

Saltwater disposal costs “vary a lot,” ranging from 30 cents to $1 per barrel (bbl), while supply water can from 40 cents to $1/bbl. Water recycling costs are in the 20-80 cents/bbl range.

Trucking, when water pipelines aren’t available, can prove a pricey option, $1.50-3/bbl.

Recycling is one option growing in popularity, both to reduce costs and because of water scarcity in the dry Permian region. Dunkel noted Cimarex, for one, says it recycles 53% of its Permian water now, saving a not-insignificant $1.20/bbl in operating costs. But recycling may not be enough.

“The Delaware Basin could reuse 100% of water for new completions, but still have increasing disposal volumes,” he noted.

Dunkel, like Halldorson, agreed that Permian midstream water management is crucial “in reducing costs, that’s the driver. The pluses outweigh the minuses” when producers turn water management over to water-focused midstream operators.

Paul Hart can be reached at pdhart@hartenergy.com

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