natural gas Archives - Artemis Water Strategy

Dec 08 2015

Water tech leaders build during grim times on the drillpad

Some of the best known companies have their roots in tough times: Apple, Disney, GE and IBM all built their markets during economic downturns. “Scarcity forces a focus on developing creative ways to deliver customer value,” notes business expert Scott Anthony. Tough economic times force innovators to risk new approaches. Recent data suggests that the current slump in onshore natural gas drilling may be fostering a new wave of water tech giants.

Even for an industry that has been defined by booms and busts, the current downturn in the oil and gas industry is the stuff of epic struggle. Deployment of operational rigs is the lowest since 2002, down 65% from a year ago in the sharpest collapse of US drilling in history. In its hour of reckoning, many producers and services companies are turning to water technologies to survive.

Despite the downturn in the number of rigs, water usage has remained stable.

: Source: Digital H20, PacWest/IHS Water IQ

Operators are focusing upon existing wells that produce more water, and using longer wellbores to extend their productivity. “Water represents 10%-30% of overall well capital expenses,” notes Piers Wells, CEO of Digital H20. “Water is becoming even more relevant in the current market environment where margins are being squeezed and there is an increasing emphasis upon operational efficiency and cost reduction.” In the face of the biggest collapse in history, “the energy sector to assess alternative sources of revenues, use of advanced technologies, and innovative practices,” notes Richard Seline, the CEO of H20 Accelerelate, a water tech accelerator in Texas. Water management provides cost savings that could determine survival.

Companies like Gradiant are watching their sales grow during this extended collapse of drilling. CFO Luke Johnson notes: “We have seen a continued but more focused need for our water treatment services over the last 12 months. Customers are looking to reduce their LOE [lease operating expense] over their alternative procurement and disposal options.” According to Johnson, equipment and disposal cost savings were the primary driver for Gradiant’s recent 12,000 bpd recycling plant in the Permian Basin, commissioned just over a month ago. “We’re looking at a robust pipeline of opportunities in the US O&G market despite the macro-environment.” Johnson noted.

Combining financial innovation with technology
Some of the most promising water tech companies are tuning their strategy to support lean drill pad operations. “The current oil price is impacting all O&G players, resulting in large reductions in their capital programs, and an increasing emphasis on operating efficiency and cost reduction,” notes John Coburn of XPV Capital. Filterboxx, one of XPV’s investments, has tuned its marketing strategy to “match their solutions to the changing needs of their customers, combining outright sales with equipment rental and turnkey operations services.” “This non-capital service offering provides customers with solutions to both their restricted capital reality and their high transportation and disposal costs – resilient water solutions, combining technology and economics.” Coburn explains.

Positioning for the next boom
“We saw a similar situation in 2009 when it entered the oil & gas market and in 2015 when the market hit another down cycle.” notes Watertectonics CEO Jason Mothersbaugh, “These down cycles require operators to re-focus on costs. Cycles open opportunities for us to provide cost reduction solutions for clients during the downturn, and put them in a better position in the next boom cycle.”

Forging lasting competitive advantage
Texas has seen that there is upside in oil and gas market lows–rig closures, layoffs and plummeting revenues have brought out innovation and entrepreneurship. Seline notes that Texan grit in the face of earlier downturns have the made companies that survive into global leaders in oil and gas production. “Texas has become a globally recognized ‘platform’ for solving unique energy-water challenges. These downturns show market-gaps, inefficiencies, and identify additional opportunities for optimizing assets.” In the face of the collapse of the pillar of its economy, and a crippling drought, the State of Texas is looking to partner with the energy sector to make its economic woes an engine for long-term growth. Accelerate H20 has just announced the Texas Innovative Water Demonstration Hub – located in Gonzales County – to test, evaluate, demonstrate and showcase technologies that clean and reuse produced water from the oil and gas field. The Hub is convening industry leaders to validate technologies to reclaim water that is typically disposed and never recovered. “We have already identified a number of interested firms and companies – including inquiries from Kuwait, Canada, Germany, Australia, and Brazil.” Seline sees the energy sector integrating technologies proven outside of O&G as part of their standard operations. “Oil and gas drilling rigs are ideal platforms for deploying next generation technology products to reduce waste, to recycle water, and integrate data in off-grid operations.”

Jul 09 2010

MIT Natural Gas Report Glosses Over Environmental Issues

Editor’s note: The energy exploration industry is the first to demand advanced water technology for economic reasons: water efficiency during hydraulic fracturing means cost savings. Advances in on-site water treatment for energy exploration will drive down costs for the technology to a point where it can be implemented in break-even or non-profitable situations, like personal housing and small to medium-size businesses, where demand will grow as current water infrastructure decays. Vikram Rao and peers will present on topics surrounding water use in energy exploration at an upcoming Artemis Project webinar.

MIT’s most recent report on energy is on the Future of Natural Gas, following similar reports on coal and nuclear energy. It is co-edited by Ernest Moniz and Tony Meggs. The latter recently left BP as CTO. As reported in Forbes recently, the report emphasizes the role of shale gas in enabling natural gas substitution of coal. The authors see this as a transitional strategy for a low carbon future. We agree with that and have expressed similar ideas in the Directors Blog.

However, the report is surprisingly shy about discussing the environmental issues seen as facing shale gas exploitation. While we believe these are indeed tractable, they merit much more discussion than they were given. Accordingly we repair some of that omission here.The most significant issues center on three matters: fresh water withdrawals, flow back water and collateral issues, and produced water handling and disposal. [Read more…]

Jul 09 2010

Webinar: Managing Water Use in Energy Exploration

There’s an increasing concensus that natural gas will be America’s half-way house as we kick our fossil fuel habit. The difficulties lie in managing water use while extracting the transitional fuel.Because of the near surety of a long-term natural gas industry, technologies devoted to treating produced water form one of the few sectors where regulation and commercial interests are combining to create significant and immediate market demand for advanced water technologies, especially on-site water management systems, which will be critical to sustained hydraulic fracturing operations during shale gas extraction.However, as of yet, there isn’t a comprehensive description of the critical, functional elements of an on-site system capable of reliably, safely treating water produced by shale gas exploration.We do understand some of the requirements, including rugged design, reliable remote telemetry, and the capability to identify and remove salts and minerals, but we also recognize the necessity of gathering leading minds to further develop specifications that will meet the challenges inherent in shale gas drilling.For that purpose the Artemis Project is hosting a webinar that will gather an appropriately diverse group of experts to explore the challenges, solutions and investment opportunities surrounding efficient water management in energy exploration.Register nowThe webinar will occur on July 16 from 11:00am EST to 12:30pm. The webinar will be divided into two sessions.

Session 1: Trends and issues surrounding shale gas drilling.

Bob Puls, Director of Research for the EPA’s Ground Water and Ecosystems Restoration Division, will brief the audience on current research into the impact of shale gas drilling on drinking water.
Dr. Vikram Rao, the Director of the Research Triangle Energy Consortium and the former CTO of Halliburton, will discuss expected trends in shale gas exploration.
Kathleen McGinty, Operating Partner at Element Partners and the former head of Pennsylvania’s Department of Environmental Protection and the White House Council on Environmental Quality, will speak on how regulation and commercial forces are driving use of new approaches in shale gas drilling.
Kate Sinding, Senior Attorney at the National Resources Defense Council (NRDC) will speak on concerns that have emerged as shale gas drilling has begun in the United States.

Session 2: Relevant advanced water technologies addressing drilling issues.

Precision design tools for rugged, reliable on-site water reclaim.
Sensors to provide accurate remote oversight in rugged environments.
Advanced water treatment approaches — from forward osmosis to electrolysis to remove contaminants from produced water.

Jun 01 2010

The Oil Plateau and the Precipice Beyond

Autos queue for diesel in Cairo — Autos queue for diesel during a shortage in Cairo. Photo credit: madmonk on flickr

Vikram Rao is Executive Director at Research Triangle Energy Consortium and a former CTO of Halliburton. He will present a keynote address at the BlueTech Innovation Forum on June 8th.

I’m certainly not the first to raise the specter of an oil plateau. This is not the same as Peak Oil, although there are similarities.

The first intimation of the concept was by Christophe de Margerie, the CEO of Total S.A., based in France, who first described this issue back in the fall of 2007. Subsequently PFC Energy went public with their research.

de Margerie’s statement made quite a splash. Here was one of the top five oil companies in the world, and the CEO was saying there’s a plateau coming. He put the plateau at 100m barrels a day. At that time the world was producing about 85m.

After that I personally, publicly asked a CEO of a major oil company to comment on de Margerie’s prediction. He acknowledged the plateau was real. He said, “I’m not sure I’m going to subscribe to the 100 number, but there’s a plateau coming.”

Shortly before that I spoke to the head of the the French Petroleum Institute (IFP), and they confirmed that their modeling showed the same thing. They pegged it at a somewhat lower number.So here we have substantial people saying there’s a plateau coming and yet nobody acknowledges it publicly. Nobody wants to discuss it. Nobody really wants to act on it.

Causes

Now you’ll ask the reasons for the plateau. First of all there is a technical model that predicts a plateau, courtesy of PFC Energy in DC, but if you want to speak conversationally, the reasons are multifarious. [Read more…]