Amid regulatory and public sentiment pressure, water has become one of the hottest topics of discussion across all groups within unconventional plays. As operators explore economically and environmentally sustainable management options, oil field service providers are quickly offering water treatment, transportation and disposal products and services. While the incumbent oil field service companies are well positioned to support the industry, the nature of the industry and complexity of water management can yield a barrier to entry for newcomers.

Challenges faced by newcomers include:

• Poor awareness of their brand, technology or service
• Little demonstrated history for their technology or service within this industry
• Limited market awareness and/or no established customer base to leverage
• Changes in water chemistry - making every well and each play a unique challenge
• Disaggregated water production - constrains opportunity to leverage economies of scale
• Variation over time - different needs for Flowback vs. Produced water management
• An uncertain and evolving regulatory framework, with potential variations across jurisdictions

Need for water treatment often driven by transportation and disposal cost While there is regional and seasonal variability, the United States is a relatively water rich country. Within water scarce southwestern states the total water demand for hydraulic fracturing can account for less than 0.1% of the consumable water. Depending upon the play, hydraulically fracturing a well can require two to seven million gallons of water; which may only cost ten to twenty thousand dollars - a tiny fraction of the well's lifecycle opex.

If not cost, what is driving the decision to treat flowback and produced water? This is one of many questions that we are exploring in the Future of Water in Unconventionals multiclient study. Our research highlights this decision being made in response to regulatory pressures and the highly variable costs associated with transportation and disposal.

Decisions must factor in economic, technical and regulatory components I recently chaired the Briefing sessions at the 2nd Water Management for Shale Plays conference in Denver Colorado; during the panel discussions, the unique characteristics of each major shale play was discussed. We highlighted the influence that geology, regulatory position, technology and public sentiment can have on the water management strategy for a given well or play. As a continuing thread throughout the meeting, treatment, transportation and disposal were highlighted as key considerations within the decision framework.

Implications for the water industry?

Technology companies are seizing the opportunity The oil and gas industry is looking to implement water management practices which are economically and environmentally sustainable. In our recent white paper Water Management in Shale Gas Plays our estimate of water production for the Marcellus play is shown to increase by over 30 percent, yielding over 4 Billion gallons per year by 2025. Technology providers are looking at these growth rates to develop go-to-market strategies for new technologies, products and services.

Sharing expertise and advancing technology Traditional oil-field service companies are supplementing their expertise with new colleagues, products and services from within the water sector. Conversely, large water technology providers have developed dedicated oil and gas teams with E&P expertise to lead their business development and strategic planning. Throughout the market, a plethora of small and mid-sized companies look to demonstrate the improved functionality or economic advantage that their widget can provide. While many water-treatment technology companies strive for a share of the global desalination market, they are hungry for the opportunity to generate revenue and further develop their technology on the back of the domestic oil & gas market.

Future thoughts: Collaboration and planning to include water infrastructure Produced and flowback water chemistry (influent) is highly variable across both plays and wells. Additionally, the effluent specification from a given treatment process is driven by the desired final use - disposal or reuse. To account for this large flexibility, mobile treatment systems tend to apply 'brute force' (energetically-costly) water treatment processes or are 'over engineered' with multiple unit-operations and process-trains capable of handling variance in flow-rate and water quality. A migration towards modular or centralized water treatment facilities enables storage and blending to homogenize influent specifications - increasing process efficiencies.

Traditionally water and waste water treatment technologies experience economies of scale; however the highly disaggregated water production 'market' will act to constrain this opportunity. The lack of water conveyance infrastructure at present drives the market towards 100's or 1000's of smaller sized systems, each servicing a reduced footprint. With the projected growth for water production in the industry, a compelling market for technology providers, I expect to see significant capital investments building conveyance and treatment infrastructure.

Collaboration between the oil and gas industry and water technology providers during early stage play development is going to become critical in supporting the 'Hub and Spoke' water management model. I believe, technology providers selling widgets rather than turnkey scalable solutions will potentially struggle to find a long-term position as the industry evolves.

Learn More from IHS Download our complimentary white paper Water Management in Shale Gas Plays.

Learn more about our new multi-client study The Future of Water in Unconventionals here.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.