This is the second part of my blog on produced water (you can read the first part here) which will look at the market – the players and technologies – in some more detail.
Produced water is a term used to describe the wastewater that’s brought to the surface during the oil and gas production process. For conventional oil and gas (onshore and offshore), it refers to the water that already exists in the oil reservoir and the water that’s been injected to force more oil to the surface. In unconventional oil and gas projects, such as hydraulic fracturing (fracking), coal bed methane (CBM) and oil sands, it refers to the wastewater produced by the fracking process (flowback water) and the process water used to recover bitumen from the oil sands.
Produced water is a hazardous waste stream. Broadly, it’s highly saline and contains hydrocarbons and other chemicals and it must be managed in line with local regulations which can differ greatly between states and countries. But its exact nature differs depending on the type of oil and gas field it has come from.
Most produced water has typically been disposed of (after treatment) through reinjection into deep aquifers because that’s been the cheapest and easiest option. But a number of factors including technological innovation, water scarcity and rising costs of disposal (if the water needs to be disposed of offsite), mean that for many projects, it’s becoming increasingly cost effective to treat it to a level where it can be reused or recycled.
The treatment market can be categorized into three main sectors: primary, secondary and tertiary.
The technologies used in the primary stage separate the oil from the water. Those used in the second stage remove smaller droplets of oil. Tertiary filtration reduces the amount of oil in the water even further.
These first two markets are well established and, unsurprisingly, mostly dominated by a handful of big companies, such as Cameron, GLR/Exterran, Veolia and Siemens. (Processes used at these stages are not overly complex though so smaller, local players, particularly in emerging markets such as Brazil, are gaining traction.)
Where the real growth is forecast is in an emerging fourth category – advanced treatment and desalination.
By reducing salinity, the water can be reused in fracking fluid or customized to enhance oil recovery (EOR). Customizing it for EOR means creating a specially formulated water which is injected into a maturing well. The water peels oil away from the clay, further increasing the recovery rate. In both cases it reduces the amount of fresh water that needs to be taken from local sources. And it means this wastewater becomes a valuable resource to be recycled and reused, rather than disposed of.
Desalination is a highly energy intensive process though (and therefore expensive). To be viable, it must be competitive with costs of disposal. Technology providers need to deliver solutions which offer superior water recovery rates (little or no waste liquid), but at the lowest capital and operational cost. Leading technologies include reverse osmosis (RO), forward osmosis (FO), High Efficiency Reverse Osmosis (HERO™), Optimized Pretreatment and Separation (OPUS™), thermal distillation, crystallizers and brine concentrators,. Brine concentrators are used to concentrate the reject produced water following RO, FO or HERO™ (as OPUS produces very little reject water) treatment.
As a less established market, there are no clear leaders yet. Several of the larger players, Veolia, GE Water and Siemens have entered the market through acquisition rather than organic growth. Smaller companies are developing and providing innovative and competitive solutions alongside the larger players. There’s not yet a one-stop shop provider of treatment services at all levels. And as a market that’s projected to grow at more than 20% annually, and with a host of new technologies on the market, it’s one of the most promising areas for investors and corporations operating in the oil services sector to expand their service offering and secure a piece of the action.
As far as the big players go in produced water treatment, Cameron is the largest as a result of an aggressive consolidation strategy, but it doesn’t have a lot to offer in tertiary and advanced treatment technologies.
Veolia and Siemens on the other hand are stronger in tertiary and advanced treatment with good technology portfolios but they offer little in the way of primary and secondary treatment services. Veolia is the developer of one of the leading desalination systems, OPUS. OPUS has low energy consumption, produces low waste volumes and can handle variations in feed water quality.
The main competing tech to OPUS is HERO, which is provided exclusively by GE Water outside the US, and mid market player, Aquatech, in the US. HERO is another highly efficient technology which can handle the nature of produced water much better than standard Reverse Osmosis. Though it is saline, produced water differs greatly from seawater. This is one of the reasons why companies with seawater desalination methods won’t always have an easy route into a new market such as produced water.
Heckmann Corporation is an industry consolidator with deep pockets looking to buy produced water disposal operations and reducing costs by introducing pipelines, recycling and reuse.
Nalco is a leader in water chemistry as well as oil field chemistry, Nalco is well positioned to take advantage of the growing volumes of produced water and the challenges of new, unconventional resources.
There are also a host of smaller private and quoted companies.
The aforementioned Aquatech, the exclusive holder of the HERO license in the massive North American market, also has other relevant thermal and membrane expertise and has made external tech investments of its own. It also has operations outside the US.
212 Resources uses a patented vapour compression flash evaporation systems to recover clean water and other valuable byproducts from produced water. The system is mobile and claims to be cost effective.
Filterboxx is a Canadian packaged water treatment company offering relevant technologies to oil sands operators on and equipment sale or rental/design-build-own-operate basis.
Aqua Pure, listed on the TSX venture exchange, owns Fountain Quail which has a strong technology and service portfolio. The company offers patented evaporator technology to recycle flowback and produced water into fresh water for re-use.
Hydration Technologies Inc manufactures forward osmosis membranes for produced water, desalination and industrial applications.
Water Standard Company is a start-up which is probably the only treatment specialist to have locked on to the opportunities in desalination for enhanced oil recovery.
Altela uses a new energy-reuse water desalination product that operates unattended in remote locations, such as oil and gas wells.
WaterTectonics uses a technology known as ‘electrocoagulation’. It passes pressurized water through a tank where electricity is applied, separating contaminants into a sludge that can be filtered away.
Fundamentally, water is crucial to the oil and gas industry and how it manages its water will be central to future production. These companies will be ones to watch as the market heats up.
Article by Tom Whitehouse. Tom is the Chairman of the London Environmental Investment Forum (LEIF), a conference platform which connects environmental innovation with capital, and the Founder and CEO of LEIF’s Initiating Partner, Carbon International, a corporate finance and investor communications consultancy for environmental and cleantech industries.
Thanks to our partner and industry expert Global Water Intelligence for providing us with its report on Produced Water. We will be holding our ‘Investing in Water’ conference on 25 May 2012 which will explore this topic in more depth through industry insight and discussions with leaders and innovators. If you’re interested in partnering with us for this event, please contact us. Find out more about LEIF at www.london-eif.com.
