Until renewable, sustainable energy sources are fully developed, the demand for fossil fuels will continue to grow. Recently, however, there has been a global shift in both demand and production centers. According to the International Energy Agency’s (IEA) most recent World Energy Outlook (WEO2013), “Many of the long-held tenets of the energy sector are being rewritten. Major importers are becoming exporters, while countries long-defined as major energy exporters are also becoming leading centers of global demand growth. The right combination of policies and technologies is proving that the links between economic growth, energy demand and energy-related CO2 emissions can be weakened. The rise of unconventional oil and gas and of renewables is transforming our understanding of the distribution of the world’s energy resources.”
The capacity of technologies to unlock new types of resources, such as light tight oil, has driven up estimates of the amount of oil that remains to be produced. Although this does not mean the world is on the cusp of a new era of oil abundance, the development of the new resources is making the U.S. the largest global oil producer.
The IEA forecasts a bright future, even a golden age, for natural gas, especially for so-called unconventional gas, such as shale gas and coalbed methane (CBM). Unconventional gas now accounts for 50% of the estimated natural gas resource base. By 2035, unconventional gas is predicted to rise to 20% of total gas production, although the pace of development will vary considerably by region. The growth in output also will depend on the gas industry dealing successfully with the environmental challenges. “A golden age of gas,” says the IEA, “will require golden standards for production.”
The demand for carbon-based energy is a major market driver for products and services used to treat the water produced during oil and gas exploration and production (E&P). Produced water and flowback, the effluent that rises to the surface during E&P, includes naturally occurring water in energy deposits and water injected into formations during hydraulic fracturing. This water comprises approximately 98% of the total waste volume generated by the industry. With the need to manage such large water volumes, the oil and gas production industry has become as much about water as it is about energy.
In addition to large water volumes and high disposal costs, energy developers using traditional produced water practices are facing increased opposition from environmental activists, local and state governments, and the public. These groups are concerned that the water is leaking from traditional containment pits and entering groundwater and surface water bodies. Historically, produced water has been contained temporarily in pits and then either transported to treatment plants or evaporated.
Throughout the well’s service life, the produced water must be separated from the oil it contains. Following treatment, the water may be handled via one of three methods: safely discharged (used mainly in offshore applications), reinjected into the hydrocarbon formation (deep well disposal), or reused (subsequent fracking jobs or in other beneficial applications). In most world regions and for all of the end uses/disposal options, treated water quality must meet certain standards, including low toxicity, high biodegradability and low potential for bioaccumulation in the food chain.
A number of water treatment technologies and equipment types are commercially available for use at oil or gas production sites. These processes can reduce the cost, inefficiency and risks associated with treatment pits and the transport of toxic water. The treatment technologies include methods for de-oiling, desanding, desalinating and disinfecting produced water. Numerous systems types are on the market. Choices include: separators; hydrocyclones; and distillation-, ion exchange-, adsorbent- and membrane-based units; as well as proprietary equipment and combinations of equipment.
Some of these products and technologies enable the treatment of produced water to a quality suitable for beneficial reuse. Presently, most of the water reused is employed for reinjection in enhanced oil recovery (EOR) operations. However, there is also future potential for recycling the water in agriculture or as a new source of municipal or industrial water supply, especially where water scarcity is an issue.
Implementing these technologies will likely require regulation. Although some operators may adopt best practices, standards must be implemented to give all oil- and gas field developers equal opportunity. If applied properly, the regulations could drive innovation by creating a market for new technologies. The implementation of such technological innovation is essential to making hydraulically fractured hydrocarbons sustainable resources.
STUDY GOALS AND OBJECTIVES
This report is intended to provide an in-depth analysis of the market for equipment used in oil and gas wastewater treatment in North America. To date, this region is the world’s largest purchaser of systems and services for treating flowback and produced water. BCC Research assesses the North American market by country, by equipment type and by hydrocarbon resource. In the country analysis, market data are presented for the U.S., Canada and Mexico. Existing and expected regulations, unconventional oil and gas production levels, as well as the oil and gas industry’s desire to conserve water and improve its environmental stewardship will be examined as driving factors for market growth.
The market evaluation by equipment type looks at produced water treatment systems within three broad categories: primary and secondary treatment oil separation equipment (minimizes oil-in-water content to 25 parts per million [ppm] to 30 ppm); tertiary treatment equipment (further reduces oil in water to less than 10 ppm); and advanced treatment (processes for desalinating produced water and/or enabling zero liquid discharge [ZLD]).
In the market analysis by hydrocarbon resource, value and growth are evaluated for equipment used in treating produced water from tight oil, tight gas, shale gas and CBM.
Technical and market drivers are considered in evaluating the current value of the technologies and in forecasting growth and trends over the next five years. The conclusions are illustrated with a wealth of statistical information on markets, applications, industry structure and dynamics along with technological developments.
Because of the diverse and somewhat fragmented nature of the produced water treatment industry, it is difficult to find studies that gather such extensive data from such far-flung resources into one comprehensive document. This report contains a unique collection of information, analyses, forecasts and conclusions that are very hard or impossible to find elsewhere.
Throughout this report, the term “produced water” is used to refer to both flowback and production phase water, since flowback is technically considered a subset of produced water. The generic term “wastewater” is also used to refer to both water types without differentiating between them.
REASONS FOR DOING THE STUDY
Global population growth and economic expansion are driving energy demand, while simultaneously driving significant increases in the demand for water. The challenge of meeting these demands is intensified by the nexus between water and energy. Large volumes of water are consumed to produce and generate energy, while vast amounts of energy are used to treat and distribute clean water. Furthermore, there is growing competition for water from the municipal, agricultural and industrial sectors, which exacerbates the mounting problem of global water scarcity. These issues pose a significant business risk to oil and gas companies seeking to achieve sustainable growth.
Major water-related challenges facing the oil and gas sector are: mature oilfields that increasingly require water-based enhanced oil recovery methods and produce more water over time; growing E&P complexity due to emerging unconventional hydrocarbon resources and their large water needs; and greater environmental and regulatory pressures related to water management and scarcity.
For these reasons, oil and gas companies must re-evaluate water as a strategic element in their value chain. Water is no longer solely an environmental issue but is increasingly tied to production growth and cost. As a result, it must be handled through a strategy that recognizes its status as a critical component to ongoing viability in the oil and gas sector.
This report is designed to be of value to a wide array of readers. Those expected to have the greatest interest are players already active in oil and gas production and/or produced water treatment. The study will be of value to start up companies with novel water treatment technology for the hydraulic fracturing sector, since that market is still emerging and has no dominant players. Oilfield services businesses should find the report useful for its overview of treatment technologies, which includes performance data, as well as capital and operating-cost information.
It should be of interest to venture investors, entrepreneurs and entrepreneurial companies interested in entering or expanding into the produced water treatment sector. Other public- and private-sector interest groups, market analysts and general readers wishing to gain broader knowledge of the dynamics of the produced water treatment-equipment market also are expected to find the report worthwhile.
SCOPE OF REPORT
The scope of this report is focused on the developing North American market for hydraulic fracturing flowback and produced water treatment equipment for the oil and gas industry. The market is broken down by several different parameters, including country, equipment type and wastewater source.
There are a number of expenses related to upstream oil and gas wastewater management, including expenditures for services and equipment for downhole water minimization, for lifting water to the surface, for treatment, for reinjection and for hauling and off-site disposal. This report will evaluate only oil- and gas sector purchases for treatment equipment.
The study covers the industry in the U.S., Canada and Mexico in terms of the manufacture and deployment of treatment systems. BCC Research examines government roles in support of global markets, including regulatory support, government requirements and promotional incentives for various technologies as relevant and available.
METHODOLOGY AND INFORMATION SOURCES
Both primary and secondary research methodologies were used in preparing this report. Research for this technical/marketing report began with an analysis of available technical and business literature related to sludge treatment. Conversations with industry experts and company representatives provide the backbone for the analysis.
Internet, literature and patent searches were undertaken, and key industry participants were queried. Capital equipment expenditure estimates are based on anticipated future treatment capacity, existing and expected regulatory standards, and alternatives for disposal of oil and gas field wastewater. Growth rates for each market were calculated based on expected revenues from sales of process equipment during the forecast period. Values and forecasts are given in current U.S. dollars. Construction, engineering and design costs are excluded from market size calculations.
During the past 18 years, Susan Hanft has authored more than 40 market research reports for BCC Research in the fields of membrane technology, water and wastewater treatment, and separations used in food and beverage manufacture, medicine and biotechnology.
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The information developed in this report is intended to be as reliable as possible at the time of publication and is of a professional nature. This information does not constitute managerial, legal or accounting advice, nor should it be considered as a corporate policy guide, laboratory manual or an endorsement of any product, as much of the information is speculative in nature. BCC Research and the author assume no responsibility for any loss or damage that might result from reliance on the reported information or from its use.