E&Ps are waxing up their managerial surfboards to navigate an onrushing wall of water demand rolling toward the oil and gas industry. In the Permian Basin, there is not enough water under present completion practices to meet future demand, which is in line of sight for 7 million barrels per day (bbl/d).

Current water use tops 275,000 bbl per well in the Permian and 235,000 bbl per well in the Eagle Ford Shale. Leading edge wells use twice that volume. Despite a lower rig count, water consumption for fracture stimulation has doubled since 2014 as slickwater completions used ever higher pumping rates to deliver ever larger volumes of finer mesh proppant to ever more stages along ever longer laterals. Permian water consumption is expected to double again within two years.

It ain’t cheap, either. Pioneer Natural Resources Co. will spend $1 billion over 10 years on an integrated network to supply water to develop its Midland Basin assets, including purchasing all the effluent from the cities of Midland and Odessa. Few independent E&Ps can afford to spend at that level to develop oil and gas assets. Besides, multiple companies building repetitive infrastructure for water handling creates capital inefficiency. Little wonder, then, that the concept of “water midstream” is rapidly flooding industry technical conferences as a new solution.

Water midstream involves the infrastructure to source water, recycle flowback and reallocate treated water for reuse through a common system among multiple parties.

Private equity is now backing former hydrocarbon midstream management teams, including H20 Midstream LLC and WaterBridge Resources LLC, to develop water midstream infrastructure companies. H20 Midstream purchased EnCana’s midstream assets in the Midland Basin (Howard and Martin counties, Texas) and is building parallel pipelines to provide water for fracture stimulating new wells and returning flowback water for treatment and reuse.

WaterBridge Resources purchased water infrastructure in Oklahoma’s Arkoma Basin and soon will deliver effluent from Fort Stockton, Texas, to Delaware Basin oil and gas producers. Denver-based 3Bear Energy LLC acquired pipeline right of way in southern New Mexico to build water midstream infrastructure in parallel with its gas and crude oil gathering and processing services. Layne Christensen Co., working in part with the Texas General Land Office, and privately held Wolfcamp Water Partners are tapping separate new Delaware Basin brackish water aquifers to supply oil and gas producers.

In the Northeast, a newly formed industry consortium will look at joint E&P water sourcing and recycling in the Marcellus Shale.

The water midstream concept is early in evolution—and in form. Assuming E&Ps can work together to support a utility-like solution (think of the power grid), water midstream will provide a cost-effective solution to multiple water-related challenges.

Permian fracture stimulation consumed 4.5 MMbbl/d of water in 2016. Trucking produced or flowback water can exceed $2/bbl vs. less than 60 cents in a dedicated pipeline. The arbitrage easily offsets cost for water treatment in preparation for reuse, which is also in its infancy.

Challenges remain. E&Ps require different water quality for wells so water midstream entities likely will create a base industry water profile (this doesn’t exist yet) and individual E&Ps will adjust to the standards the company prefers through customized treatment at the delivery point.

The most notable solutions near term are the simplest, which involves individual companies recycling and reusing flowback water. In the intermediate future, look for inter-regional water transfers in Oklahoma, where water production out of the Mississippian in the north can supply E&P needs in central Oklahoma; or in the Permian, where high water cuts in the Delaware Basin can meet undersupplied needs in the Midland. Such solutions establish a community of water use involving more than a single company.

Also, think more deeply about sourcing. All that produced water currently pumped into injection wells will gain value in the future and may become a source of sales as water is drawn out of storage, treated and pumped into a midstream network for distribution to multiple oil and gas producers. That will allay public perceptual barriers for an industry where scarce water is discarded after a single use—unlike any other industry—and where water injected underground is a factor in induced seismic events.

Few E&Ps mentioned the oncoming wall of water in recent earnings calls. You can bet they will all be talking about it two years from now. Surf’s up.

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