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IHS Markit's Onshore Services &
Materials team recently released our WaterIQ report for the
second half of 2018. The semi-annual report tracks the market size
and volumes for water used in drilling and completions operations,
and ongoing produced water.
The report determines that the water management market for
upstream oil & gas operations in the United States is worth an
estimated $33.6 billion in 2018 and projected to grow at a 3.9%
compound average growth rate (CAGR) through 2023. Due to a high
number of legacy wells and intense levels of ongoing activity, the
Permian Basin continues to produce and demand the largest volume of
oilfield water among all US onshore regions; water spending in the
region is estimated at $12.2 billion in 2018 under our base case
assumptions.
Figure 1: Base case market size by play ($
billion)
Figure 2: High case market size by play ($
billion)
Particularly, US land drilling and completions water demand
increased robustly in 2018. Frac water use is expected to grow in
the future owing to an intensification of completions design,
proppant intensity, and longer lateral lengths.
Within the cycle of water acquisition to disposal, the water
logistics segment (hauling, disposal, and transfer) drove over 65%
of spending in 2018. In this sense, the water disposal market
displayed some parallels with the proppant market to the extent
that beyond the challenges of procurement, getting the product in
the right quantities and on-time to the destination remains
difficult.
Just as the proppant market has made compromises in sand quality
to reduce transportation distance, the water market is looking to
mitigate logistics costs in various ways. Presently, reinjection is
the primary method to manage produced water. However, rapid
advancement of treatment technology and quick adoption of
recycle/reuse methods will contribute to this area having the
largest growth potential at a 15.9% CAGR through 2023.
Looking ahead, the water midstream sector will heavily impact
the industry: many E&P companies are looking at water
management as an integral part of their business model and are
looking to choose between internal or external water management
options. Furthermore, consolidation continues to be a strong
industry trend within the water management service sector. In 2018,
there were various M&A and partnership deals
targeting companies that provide integrated water solutions and
flowback/completion services; with water an ongoing issue in
upstream operations, this activity should continue in 2019.
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Figure 1: Base case market size by play ($
billion)
Figure 2: High case market size by play ($
billion)
