Accenture: US shale gas operations offers lessons for other countries

Countries embarking on shale gas development worldwide stand to benefit from lessons learned in US shale gas operations and water management, according to a recent report from Accenture. Operators, meanwhile, could cut both costs and water use in unconventional plays worldwide by collaborating with regulators and sharing infrastructure with other operators in the same basin, said the Accenture report, “Water and shale gas development: leveraging the US experience in new shale developments.”

Accenture analyzed how countries with proved shale gas reserves, specifically Argentina, China, Poland, and South Africa, can look toward experience gained in US water regulation and management to develop shale gas economically and sustainably.

“Successful oil and gas operators will be those that understand the local water challenges, leverage the learning from the US plays, and develop the right water sourcing, use-reuse, treatment, disposal, and supply chain strategy,” said Melissa Stark, managing director and Clean Energy lead for Accenture's energy industry group. “One key opportunity for new geographies where infrastructure is a challenge is to explore sharing the development of infrastructure, water treatment facilities, and the development of the local supply market.”

Different countries will encounter different water issues depending upon regional geology and the characteristics of individual shale plays, Stark said in an earlier interview with OGJ while Accenture was working on the report (OGJ, July 2, 2012, p. 44).

Lessons learned

The development of US shale plays has demonstrated that data collection and data management systems need to be planned early.

US operators want simplification and standardization of reporting across states to reduce compliance costs. A key concern for US regulators has been availability of data upon which to base regulations, and regulators have increasingly sought more disclosure from operators.

Although regulators in emerging locations might not align with US regulations, policy-makers worldwide contemplating hydraulic fracturing rules and water use-disposal rules could draw upon a large volume of US operating and environmental data.

“Regulators should also take a lesson from the United States and take the opportunity to be proactive in regulating water resources from the early stages of basin development, particularly implementing cumulative water monitoring and tracking approaches early to confirm the leading practice is ingrained,” Stark said.

The report went on to list the following lessons:

• There needs to be a balance between standard national legislation and regulation optimized for local characteristics of the shale. US regulations vary considerably between states, with different requirements for well casing, disclosure for drilling fluids, and wastewater management. Coordination across regulatory agencies also is important. This involves natural resources, environmental, and water agencies.

• Water management options can change as a play is developed so regulators and operators need to work together to set clear directions for development. For instance, when operators first started operating in the Marcellus, they assumed underground injection wells would be used for storing wastewater. But geological constrains of the Marcellus quickly ruled out this option for lack of injection wells. Although one operator started to build an injection well, the volumes of produced water were too large to be contained within it. The preferred option for disposal of long-term produced water in the Marcellus has been trucking it to Ohio.

• Differences in the geology of a particular shale will determine water management options available to operators for a particular region. Factors to consider include the local regulatory landscape, the geology of the shale and its water management characteristics, local infrastructure, and regional water availability. Geology will frame the conditions for managing water volumes required in shale production.

• Investment in water treatment is worthwhile for operators and likely to give them a competitive advantage in the long run, Accenture said. Water treatment providers need to increase efficiencies. Fort Worth-based independent Range Resources Corp. was among the first operators in the Marcellus to test using a mixture of fracturing flowback water and freshwater for fracing in August 2009. In 2010, Range said it reused more than 90% of its produced water in Pennsylvania.

Another example is Devon Energy Corp., Oklahoma City. Although operating in the Barnett shale where thousands of injection wells exist in Texas, Devon since 2005 has recycled much of the water it uses in the Barnett. Devon has a long-term program with Fountain Quail Water Management to create distilled water and concentrated brine from wastewater.

• Many emerging shale plays are in regions having limited oil and gas development. Planners in these areas need to consider congestion as well as water demand and water transport logistics. In early development, many operators bundle water management activities with drilling and fracing activities under full-service contracts. “However, as development accelerates and becomes more mature in these regions, there is a greater case for operators to unbundle some of the supply chain activities such as water supply and self perform these as a single integrated supply chain,” Accenture said.

Contact Paula Dittrick at [email protected].