Water management will be critical to the US to realize the “once-in-a-generation opportunity” brought by innovations in unconventional oil and gas production,” according to a new report by Harvard Business School and the Boston Consulting Group America’s Unconventional Energy Opportunity.
“Unconventional gas and oil represents perhaps the single largest source of competitive advantage and economic opportunity for the United States over the next decade or two, Harvard Professor Michael Porter notes. The report argues that the U.S. can capture the full economic benefits of unconventional gas and oil while addressing environmental impacts, and even make “major strides toward a lower-carbon energy system.”
However, the report warns “there is a real risk that American citizens, companies, and communities will fail to capitalize on this historic opportunity because of misunderstanding and distrust… Industry is facing stiff opposition, local environmental performance is not improving as rapidly as it can and should, and large-scale progress toward a cleaner-energy and a lower-carbon future remains fiercely contested.”
The report calls for stronger, more comprehensive regulation and enforcement to mitigate “the local environmental impacts of hydraulic fracturing.” It notes that “real progress is being made in managing these risks at a cost that does not threaten competitiveness.” With sound regulation and strong compliance, the report argues the cost of good environmental performance is modest. Mitigating the environmental impacts, such as through water recycling and reduced flaring, can actually reduce costs.
According to the report, the U.S. has had a 10- to 15-year head start in commercializing unconventional resources versus other countries. Although the recent decline in world oil prices has affected the short-term prospects of U.S. unconventionals, low prices are unlikely to significantly impact the fundamental U.S. competitive advantage over the next several decades.
Numbers Behind the Unconventional Revolution
Unconventionals have already created major economic benefits for the U.S., adding more than $430 billion to annual GDP and supporting more than 2.7 million American jobs that pay, on average, two times the median U.S. salary. Fully 50 percent of the unconventionals production jobs are middle-skills jobs, accessible to the average citizen.
The U.S. now has a global energy advantage, with wholesale natural gas prices averaging about one-third of those in most other industrial countries, and industrial electricity prices 30–50% lower than in other major export nations. That means major benefits for industry, households, governments, and communities, while reducing America’s trade deficit and geopolitical risks.
The benefits are just beginning America’s energy advantage is in the early stages of spreading into downstream industries and throughout the economy. For example, low-cost natural gas feedstocks have made the U.S. competitive in petrochemicals, plastics, and inorganic chemicals, driving more than $138 billion in new U.S.-based investments.
Even Bigger Gains for Water Tech
Unfortunately, the report falls short of defining the competitive advantage that companies in oil & gas can achieve through proactive leadership. Companies like Intel and Texas Instruments have built long-lasting global leadership by anticipating regulation and applying advanced water technologies in their operations. What kinds of benefits are the big O&G giants realizing with their water strategies today? What kinds of value are independents realizing with their own advanced water solutions?
The water innovation that will be critical for achieving and maintaining our leadership in unconventional energy stands to be a decisive driver for a new water tech industry, perhaps even bigger and more important than energy. Developing onsite water treatment, reclaim, storage and monitoring capabilities for hydraulic fracturing oil and gas operations will drive the development of water tech solutions for chemical, electronics and food manufacturing worldwide. The water wisdom that comes out of the oil fields of Texas might redefine water management around the world.