There are troubled waters ahead…but if water treatment companies can ride the wave of low oil prices, new growth opportunities will emerge, argues Amanda Brock.
Just as we thought, the last global recession was behind us, we are abruptly reminded how tentative and fragile any perceived economic recovery could be. The global economy appears to be heading toward an uncertain future, and while it is not yet clear what the short- and long-term impact will be on the growth of the water sector, the current volatility in oil prices underscores again how inextricably water and energy are linked.
The International Monetary Fund in its October World Economic Outlook Report downgraded its growth forecast for the global economy for 2014 and 2015, citing an increase of risks, stagnation, low potential growth in advanced economies and a decline in potential growth in emerging markets. This report did not fully anticipate the impact of the recent rapid decline in oil prices, which have plummeted by more than 26% from a high in June. The International Energy Agency (IEA) followed this negative trend, and this month slashed its forecast for oil demand by 22%, citing the weakest growth in five years, while describing this drop in demand as “nothing short of staggering”. At the same time, the IEA highlighted the growing global glut of oil, fuelled largely by the unprecedented growth of US shale production.
Now Saudi Arabia has weighed in, and made it very clear that in order to maintain its market share, it is prepared to lower prices for a year or two, and will not support higher prices with unilateral cuts in production. Other OPEC and non-OPEC nations are following suit in a move analysts say will curb new investments in the US and global shales, and ultra-deepwater projects. Oil prices then suffered the single largest drop in price in over three years on 14 October, rattling global stock markets, with many assuming the worst is yet to come. In a 2013 article in the Telegraph, oil was referred to as both the lifeblood and poison of the global economy, with the unerring ability to play havoc, and that is exactly what oil prices are doing. What, then, does this all mean for the oil and gas water treatment sector?
Over the last few years, as opportunities for real growth in the global municipal water sector remained tepid, the upstream energy sector emerged as a promising new market, and water players rushed in to compete for market share. Among the larger companies, Veolia and Siemens are now firmly entrenched, with GE and Suez Environnement late to the game, but charting an aggressive course to succeed. Numerous smaller companies have also staked their future in the onshore shale markets. However, given the oversupply of hydrocarbons, there will be a fundamental slowdown in the upstream sector as costs are examined, projects delayed or even cancelled, and many shale development opportunities will be reconsidered and possibly shelved until prices and demand rise again. While there is no need to panic, the cyclical upstream water treatment market is not for the faint-hearted.
Sustainable water infrastructure continues to be the focus at many Water and Oil & Gas conferences this year. Come hear Amanda Brock’s thoughts on the subject. Lively discussion is expected during the Water Sustainability: Current Policies and Lessons Learned panel discussion to be held at the SXSW ECO conference in Austin, October 6-8, 2014. Amanda’s panel is scheduled for Tuesday, October 7 at 3:30 pm.
Amanda Brock will deliver opening remarks at the Sustainable Water Management in the Texas Oil and Gas Industry event at the Atlantic Council Headquarters in Washington D.C. on July 29, 2014. The focus will be on the use of water by the Texas oil and gas industry and critically examining the solutions at hand in Texas.
The event starts with a keynote presentation by David Porter, Commissioner of the Texas Railroad Commission and features a panel of experts from the Texas oil, gas, and water treatment industries.
Learn more about the Atlantic Council and this important issue by visiting www.atlanticcouncil.org
Read Amanda Brock’s June 2014 Column for Global Water Intelligence Entitled, “Regulatory Confusion Reigns…”
REGULATORY CONFUSION REIGNS… BUT THAT MAY BE GOOD FOR THE WATER INDUSTRY.
One thing is clear, environmental regulations have not kept up with the explosive growth of the US onshore energy industry. The regulatory process is moving at a glacial pace and is playing catch up to an industry where speed and efficiency invariably translates to success. Notwithstanding the absence of clear regulatory guidelines, oil and gas operators concerned with increased stress on surface and ground water supplies, continue to evaluate alternatives to better manage water throughout the hydrocarbon production lifecycle. That means opportunities for water treatment and technology companies. However, the challenge remains where and how water companies can build a sustainable long term businesses in this sector? The recent actions of the US Environmental Protection Agency (EPA) may provide some insights.
But, first a little history is needed here. Bush’s Vice President Dick Cheney, who had previously headed the giant oil field service company Halliburton, is viewed as leading the charge under the Energy Policy Act of 2005 to exclude Hydraulic Fracturing from the Safe Drinking Water Act except where diesel fuels are concerned. The US Congress at the time also gave the oil and gas industry other exemptions from environmental regulations, including the Clean Water Act (CWA). These exemptions are sometimes referred to as the “Halliburton loopholes”. Whether justified or not, and although timing and impact is uncertain, there is momentum to find ways to eliminate or undermine these existing loopholes and the EPA is central to this effort.
While the EPA continues to delay its much anticipated report on the impact of hydraulic fracturing on drinking water resources, it recently issued a series of reports and proposed rules relating to water use and the discharge of wastewater in energy production. These regulations and proposals, while designed to eliminate uncertainty, further muddy the waters.
The EPA, for example, has now released proposed rules to clarify what US waters are covered by the CWA. One of the main goals of the revisions is to identify water bodies which have a significant “nexus” to waters currently covered by the CWA and to then evaluate these “other waters” on a case by case basis. The inherent uncertainty of what new waters are now covered which will require use permits, have many accusing the EPA of dramatically expanding federal authority over state and private water rights. These rules, if promulgated, will have a definite impact on how energy companies will source surface water and site their production facilities.
The EPA has also released 2 reports on waste generated by oil and gas production and concludes that the federal government should encourage the development of additional and improved “best practices”. Produced water is the largest oil and gas production waste stream with over 21 Billion Barrels generated annually in the US. However, waste from oil and gas operations falls under one of the loopholes and is currently largely exempt from federal waste regulations. This will change at some point and any changes will directly impact the use, treatment and disposal of produced water.
So what does this all mean for oil and gas operators that are keenly aware of their water usage, the need to be self-sustaining and that they are subject to greater environmental scrutiny than other water users? The emphasis has to be improved self-sufficiency, while efficiently managing the water life cycle using primarily either brackish water for as long as it is not further regulated, or produced water which operators already own and do not have to compete for. The opportunity then for water companies will be in developing solutions for sourcing, managing, treating, recycling and minimizing the disposal of the huge volumes of brackish and produced water needed as cost effectively as possible.
The EPA’s website identifies all of its areas of concern such as the impact of hydraulic fracturing on drinking water, ensuring the safe disposal of related wastes, underground injection of waste disposal fluids, and use of surface ponds. As it relates to recycling, the EPA concludes that recycling has “the potential to reduce discharges…minimize underground injection of wastewater and conserve water resources”. That’s about as certain as the EPA is going to get right now, but provides guidance the water industry should consider.
Global Water Intelligence held its Global Water Summit on April 7th – 8th in Paris, France. The theme of the 2014 Summit was “Water for Growth” which acknowledged water’s fundamental role in economic recovery and the opportunities for business development. Despite the increased use of water in the oil and gas industry, water is often overlooked in corporate strategies and in national planning. The discussions focused on how leadership and international cooperation can play a vital part in securing economic and social stability.
Water Standard’s Chief Executive Officer, Amanda Brock, served as the Summit’s Closing Plenary Session Chair, joined by a distinguished group of industry leaders and policy makers to discuss the value of water as one of the key global issues. The session focused on the Future of Water, discussing the global economy’s need for continuous growth.
The panel speakers included:
Karlene Maywald, National Water Commission Chair of Australia
Maureen Stapleton, the General Manager of San Diego County Water Authority
Jean-Michel Herrewyn, Executive Vice President at Veolia Global Enterprises
Professor Srinivas Chary, Dean of Research and Management in Staff College of India (ASCI)
Todd Gleason, Senior Vice President at Pentair Inc.
Ida Auken, Member of Parliament (RV) in Denmark.
Water Standard’s Chief Technology Officer, Lisa Henthorne, has been elected to serve as a board member to the Produced Water Society (PWS). The Produced Water Society is a collection of engineers and industry professionals with the goal to study and improve the separation, treatment, and analysis of Offshore and Onshore Produced Water to meet the discharge and reinjection requirements of the industry and environment.
Lisa will continue her work evaluating the feasibility of new technologies in produced water for the oil and gas industry. Lisa joins current Board members James Robinson, Chevron; Daniel Gallo, Shell; John Walsh, Cetco; and Tom Pankratz, Global Water Intelligence.
Ms. Henthorne served as former President of the International Desalination Association (IDA) from 2007-2009, where she has been a member of the Board of Directors for the past fourteen years and is recognized as a leading expert in water treatment worldwide. She formerly headed the desalination business for CH2M Hill and has been a technical advisor on many challenging desalination projects in the Middle East, Australia, North America, and Asia. Ms. Henthorne also holds three U.S. patents in water treatment, with multiple US and international patents pending.
For more information on PWS, please visit www.producedwatersociety.com
Water Standard has announced that its Chief Executive Officer, Amanda Brock, has accepted a position on the Advisory Board of the Harte Research Institute (HRI) for Gulf of Mexico Studies. HRI for Gulf of Mexico Studies is the only marine research institute dedicated solely to advancing the long-term sustainable use and conservation of the world’s ninth-largest body of water. Through its innovative “Harte Model” HRI integrates outstanding scientific research with public policy to provide international leadership in generating and disseminating knowledge about the Gulf of Mexico ecosystem and its critical role in the economies of the North American region.
For more information on HRI, please visit www.harteresearchinstitute.org
Water Standard has been awarded the ISO 9001 for excellence in quality management for the engineering design, procurement, operation and project management of water treatment and enhanced oil recovery facilities and systems. ...Read More