OKLAHOMA CITY—One of the biggest challenges in the oil and gas industry today is not those highly desired hydrocarbon products but water. It is both sought after and avoided, two midstream executives told attendees at Hart Energy’s DUG Midcontinent Conference & Exhibition here Nov. 15.

How important is it? Water can make or break a play.

“The rig count correlates with water source needs,” Michael Dunkel, vice president-water for the engineering firm Jacobs, emphasized in his presentation. If a region lacks water-handling assets then development slows to a stop.

Drillers need water to complete hydraulic fracturing of unconventional wells while producers must have the means to dispose of produced water. And in many plays, shale wells produce multiple times the volume of water as oil and gas.

“Companies need to know they can get enough water [to drill] and means for disposal,” Dunkel said.

“Cost has been the driver since cost is the big deal with water” at both ends of the drilling and production chain, Dunkel added. That means putting water-dedicated pipelines in place that, once in service, can handle water for a fraction of the cost of trucking.

The issue is so important that the midstream has seen the rapid emergence of firms that are pure-play water handlers, he noted. That trend has positives and negatives.

On the plus side, dedicated midstream firms reduce costs, minimize producer capex, allow producers to complete more wells and better balance supply and quality. But there are negatives, including control concerns, firm commitments from area producers, water mixing and system complexity.

“Each region has unique characteristics that impact water management,” Dunkel said, which makes procuring and disposing of water tricky. The water question can’t be answered with a one-size-fits-all answer. “It’s a complicated story,” he emphasized.

Sourcing water suitable for frack jobs can be particularly tricky in areas where both water quantity and quality are problems, he said. The semi-desert country of West Texas and southeastern New Mexico are particularly challenging for Permian Basin firms. Comparatively dry South Texas presents similar challenges in the Eagle Ford.

There are efforts to employ brackish water for frack jobs in the Permian and Eagle Ford, for example, and deals to draw treated municipal sewage for fracking from Oklahoma City in the Midcontinent and from Carlsbad, N.M., and Odessa and Midland, Texas, in the Permian. Treated effluent might work but it will remain “an interesting niche” due to the comparatively small volumes available, he added.

More promising, he said, will be reuse of produced water for frack jobs. That can be tricky because the mineral content of produced water varies widely—even within one play—and those minerals can interfere with frac treatments.

Craig Collins, vice president and COO of Kingfisher Midstream LLC, complemented Dunkel’s presentation with a focused review of water issues in Oklahoma’s Stack play.

Kingfisher offers “a multi-stream service platform to deliver growth” for Stack producers, he said, since the midstream operator has dedicated systems in place to handle gas, oil and water. For crude oil, Kingfisher “offers a direct route to Cushing,” the big oil pipeline terminal and trading hub southwest of Tulsa, Okla.

Water disposal has been a particular problem in Oklahoma, Collins noted, given the highly publicized earthquakes that have occurred in the state. He noted Kingfisher’s disposal wells move water into the Wilcox 2 formation rather than the seismically active Arbuckle that has received much of the produced water coming from Midcontinent wells.

Sooner State producers have worked closely with the Oklahoma Corporation Commission to lessen earthquakes with notable success.

“We have to offer the producers flexibility,” Collins said of Kingfisher’s water disposal service. “They prefer to put the produced barrel of water away as soon as possible.”

Kingfisher Midstream currently serves Oklahoma’s Kingfisher County but has growth opportunities to the northwest of its existing operations in Major, Blaine and Dewey counties, he said. It acquired water-handling assets from Alta Mesa Holdings late this year. Collins noted there is “an incredible amount of potential” in the Stack and added the firm “is applying in-house technology skills” to improve water handling and cut costs.

Paul Hart can be reached at pdhart@hartenergy.com.

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