Investment Opportunities in Water

Water is one of the most exciting sectors at the moment in terms of cleantech innovation. The industry has a huge variety of investment opportunities but at Carbon International we focus on identifying the areas that we believe are the most exciting within broad industries such as this, and uncover the companies and investors leading and innovating.

Two water sectors I’m particularly excited about, because I believe they’ll grow significantly over the next few years and beyond, are the produced water market, in the oil and gas industry, and wastewater from mining. These sectors might not be for purest cleantech investors but fossil fuels aren’t going away anytime soon. So we should focus on how to make them cleaner, cleaner in their use and in their extraction. The mining industry will always be with us. It’s worth remembering that much clean technology requires metals that must be mined, unless they are recovered from waste streams, thought this is not always doable. Companies that provide solutions to clean up these dirty industries will enjoy rapidly growing markets. Key for investors and corporations active in, or looking to enter, the sector, will be to seek out the most promising of these and we aim to provide some scope at least through our free London Environmental Investment Forum conferences.

‘Produced’ water market

‘Produced’ water is the term used to describe the water generated and used by the oil and gas industry. According to Global Water Intelligence, handling and treating this wastewater is an industry currently worth more than $5 billion a year in North America, and it’s growing fast. With conventional oil and gas – that is, onshore and offshore wells – having likely peaked in some regions, North America being one of them, energy companies are now focusing on ‘unconventional’ projects such as shale gas, oil sands and coal bed methane. Once too difficult and too expensive to exploit, widespread adoption of technological innovations such as hydraulic fracturing (‘fracking’) and horizontal drilling means these projects are now commercially viable – and they’re providing a real boost to supplies.

These ‘unconventional’ projects are highly water intensive however. On average, for every barrel of oil recovered, eight barrels of water are also generated. Over the next 15 years, this oil-to-water ratio is forecast to increase from 1:8 to 1:12. During this time, the size of the produced water market (in the US) is set double to $10 billion.

The main growth sector within this industry is advanced treatment. This refers to treating the produced water to a high level which allows it to be safely recycled or re-injected. Treating water to higher standards can relieve stress on local water supplies, reduce environmental concerns and improve oil recovery rates. The more that can be reused the better. Technologies include filtration, biological treatment and desalination. With the market for the latter projected to grow at more than 20% annually, this is a particularly promising area for investors and corporations operating in the oil services sector. Produced water is highly saline and if it’s to be reused onsite or sold for use offsite, the salinity needs to be reduced to a specific level. The winners will be providers of low cost solutions that offer superior water recovery rates.

Wastewater from mining

The mining industry is a huge consumer of water. As more mines are developed in water stressed regions, such as Australia, Chile and South Africa, the industry is under increasing cost, environmental and social pressures to secure water supplies in challenging environments and treat wastewater to higher levels. Mining projects with water issues are considered high risk investments and will struggle for finance.

This issue is creating a big opportunity for solution providers. The market for water services related to mining stands at $7.7 billion a year and if the industry continues to boom, this could double in the next three years. As mentioned above, one of the main reasons for this is the rising number of mines being developed in countries which already suffer from fresh water scarcity. Other drivers include more stringent government regulation and better corporate social responsibility practices which are leading companies to treat wastewater to higher standards. The mining and processing of great amounts of lower grade ore is also requiring bigger volumes of water.

Consequently, providers of flexible solutions for the supply of desalinated water from ground sources of from the sea, or those that can treat the highly saline wastewater so that it may be reused on or even offsite, look set to benefit. The growing desalination market is also creating opportunities for the disposal of waste brine.

Another interesting growth area is in the recovery of metals from mine tailings. Tailings or ‘slurry’ refers to the leftover ore and wastewater after the metal has been extracted during the processing stage. This waste material, which still contains quantities of valuable metals, is typically left to settle in large dams or tailings ponds before being disposed of. An opportunity exists here for solutions that can selectively recover metals from this waste stream, reducing its volume and providing additional revenue streams for miners.

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, which provides corporate finance services to companies and investment firms operating in environmental and cleantech industries. The next LEIF conference is ‘Investing in water’, on March 16 at the London Stock Exchange. LEIF conferences are free for professional investors, corporations and entrepreneurs.