As oil fields mature and unconventional extraction methods gain ground, growth in demand for water treatment and reuse is set to outstrip the wider water services market for oil and gas, according to a report from GWI. In 2014, the global market for water management services and technologies in the onshore oil and gas industry is estimated to be worth US$37.9 billion. This figure is expected to grow at 6% a year, in line with increasing oil and gas production.
GWI’s research report, Water for Onshore Oil & Gas identifies that the volumes of produced and flowback water associated with the production of oil and gas are constantly rising. This is due to an increase in the production of unconventional oil and gas, which requires more water per unit of product recovered, and an increase in water to oil ratios (WOR) in mature oil fields. By 2020, the onshore oil and gas industry will generate over 500 million barrels of produced water a day.
The management of produced water is becoming highly challenging: disposal options are becoming more limited, regulations are getting stricter, and water sources more scarce. Exploration and production (E&P) companies are already experiencing these challenges and are becoming more aware that produced water is an asset rather than a waste stream.
The largest segment of the market is water management services, which will be worth an estimated US$34 billion globally in 2014. Demand is highly concentrated in the United States (71% of the global total), and is driven by increases in unconventional oil and gas production. In 2014, the US market is estimated to be worth US$24 billion, with water hauling the largest component of the services market.
The report predicts that capital expenditure on produced water treatment equipment is expected to grow from an estimated US$3.4 billion in 2014 to US$5.4 billion in 2020. There are four principal drivers of this growth:
- Increasing water cut – The ratio of produced water to oil production in mature fields is increasing rapidly.
- Growth in unconventional oil and gas production – In the future, the percentage of global oil production extracted by unconventional methods will increase. Technology providers and service companies who can efficiently manage the water from these operations will find substantial opportunities in this segment of the market.
- Stringent environmental regulations – The boom in hydraulic fracturing has focused an unprecedented amount of attention on the oil and gas industry. The report is designed to assist technology providers in the water industry sector to meet these challenges.
- Water scarcity – The most productive areas for the oil and gas industry frequently occur in regions with scarce water resources.
GWI expects that, with an average annual growth rate of 14.2%, investments in produced water treatment for unconventional resources will be the most exciting segment of this market going forward.
Oil-water separation equipment represents the largest segment of the market for produced water treatment, and will be worth an estimated US$2.1 billion in 2014. This reflects the necessity of separating oil, gas and water streams in all areas of production. Advanced treatment technologies are predicted to be the fastest growing area of this market, with a predicted annual growth rate of 20%. The technologies exist, and have already been used in coal seam gas produced water treatment in Australia, and for reusing water in the Canadian oil sands.