## Produced Water Reuse: Rockies Shale Plays Initiative 2013 October 29-30, 2013 Denver, Colorado BY: 

### Pat Jackson Tom Murphy 

# PRODUCED WATER CHALLENGE AND AN INTEGRATED PLANNING SOLUTIONComet Ridge Resources
Denver based oil & gas explorer Backed by NY-based private equity Projects in Colorado, Washington, and Montana Fully bonded Committed to responsible development3

Source: Stephen Trammel, Research Director & Advisor in Energy, HIS North American Tight Oil: Plays That Deliver Energy M&A & Financing Forum February 15, 2013 Denver Recent Exploration Plays

### Location of our two presently active plays

Comet Ridge Resources
As an explorer we spend significant time and energy predicting the economic viability of our projects before investing.

Efficient Water management (especially

in Tight Oil) is a critical economic factor!!

# Objectives of Presentation

! Demonstrate that Produced Water Management analysis is a complex issue ! Present an approach for evaluating disposition and treatment technologies on a cost per barrel basis ! Analyze and define how key drivers for water management impact the economic viability of a project ! Assess how environmental regulations, environmental issues, and public perception can impact water management strategies and cost ! Analyze the magnitude and disposition of produced fluids through time to support ongoing field development

# The Challenge: A Lot of Water

! 21 billion BBL of produced water generated each year in US (NETL) ! Estimated 56 million BBL of produced water generated daily in US (GOA 12-156, 2012) ! Water-to-oil ratio is 5:1 to 8:1 for mature fields; lower in tight shale and sand plays (NETL) ! High volumes of water needed for short periods during horizontal drilling and frac operations (50,000 to 200,000 BBL) ! Management of flowback (short term) and produced water (long term) wastewater streams throughout life of well/field ! Generally poor water quality

# Water Management Costs

Activity BAKKEN FIELD
Acquisition Costs Cost, USD / BBL
Raw Water 0.25–1.75 Transportation 0.63–5.00 Disposal Costs Transportation 0.63–9.00 Deep-well Injection 0.50–1.75 Average Total Costs 2.00–16.80

Source: University of North Dakota’s Energy and Research Center 2010

# Challenges Related to Produced Water Use and Disposal

Produced Water Increased Regulation Availability

of Water

Water Quality Public Perception Disposition of Waste

Stream Environmental Impacts

Reservoir Characteristics

Corporate Governance &

Stockholders

Long-Term

Financial


## All these impact the cost of water management

# The Solution: Integrated Produced Water Planning Approach


# Develop a quantitative economic evaluation and planning tool that can provide operators with the ability todevelop detailed, regulatoryacceptable scenarios regarding the use, treatment, and disposition of flowback and produced water

# Objectives for a Planning Model

! Overall

! 

### Identify best management practices for the water management in O&G development operations from a cost basis ! Early-Stage Project Objective

! 

### Inform the operator of possible produced water strategies available and how to approach their evaluation and implementation ! Ongoing Project Objective

! 

### As the project matures and more concrete water information is captured, support decision-making regarding an optimal water management strategy

# Specific Frac Water Objectives

! Optimize flowback/produced water use
! Handle frac water/formation water/formation (solid/fluid) chemistry
! Recognize balance of frac water reuse and purchase of “Makeup” water
! Show meaningful metrics for frac water treatment and disposition

# Applications of Planning Models

Planning

Model

Acquisition of

Field/Land Field Development Planning

Future Water Management Approach Water Management Impact on NPV

Monitor Existing Field

Operations Alternative Water Sources

# Key Functionality of a Planning Model

• Demonstrate the magnitude and disposition of produced water through time in terms of ongoing field development 

### Analysis Over Time

• Optimize comprehensive water management, lower per-unit operating expenses and improve field economics 

### Technical Evaluation

• Demonstrate the potential financial impact that a selected water management approach has on the profitability of the project 

### Financial Impact

• Monetize issues related to environmental impact, corporate governance, and public perception 

### Environmental Issues

• Simplify the inputs to distill the solution down to a common denominator: 

### $$$ through time Simplify Magnitude Down to Costs

# Planning Model Decision Process

Produced Water Inputs

Oil & Gas Production Inputs ( as required ) Impact of Produced Water Approaches on Project Treatment &

Disposition Time Weighted Analysis Key Metrics & Costs

Challenges & Opportunities Inputs Iterative Selection

Process Outputs Strategic Planning

Results

# Technical Functionality of the Model

! Complex field development plan through time ! Water mixing and mass balances ! Flexible frac’ing and water flood handling ! Sequential water treatment stages ! Flexibility in changing capacities through time ! Variety of water treatment options and mechanisms ! Multiple water disposition streams ! Multiple water disposition options ! Complete flexibility in project metrics

# Evaluation Over Time

! Select alternative periods: month, quarter, or year
! Change input parameters over time
! Compare multiple disposition scenarios at a time
! Evaluate chemical changes over time
! Demonstrate water management costs through time

# Input Parameters

Produced and Flowback Water Volume Data Water Chemistry Data
Possible Water Disposition Methods Production Data

# Iterative Selection Process

Initial Produced Water Treatment Selections 

### • Volume

• Unit Costs

• Chemistry

Optimal Disposition

Selection

Chemical Limits Time Constraints Distance Model Inputs Model Outputs

Corporate Governance Regulatory Issues Environmental Constraints

# Selection of Dispositions

Water Disposition Options Class II Injection Well Irrigation Impoundment Industrial Use Stream Discharge Recycling for Frac’ing Wildlife Watering Water Flood Municipal Wastewater Evaporation Pond Stock Animal Watering 

## Site Specific Recycling
Injection Well

Stream Discharge
Evaporation

# Assessing Treatment Options

Treatment/ Proprietary Options Cyclones Skimming Aeration Flocculation Reverse Osmosis Forward Osmosis Ion Exchange Evaporation Distillation Electro-Coagulation Micro-Filtration Ultra-Filtration Ultraviolet 

### Custom Treatment System Filtration

Aeration

Rev. Osmosis

Proprietary System Pre-Treatment

Treatment

Polishing

# Does Selected Treatment Meet Regulatory/Management Requirements

Treatment Package 1

Treatment Package 2

Treatment Package 3

# Transport Distance as a Key Factor

# Challenges Become Evident from Analysis

Vegetation & Wildlife Effects of Trucking

Pre & Post Frac Fluid Management Fresh Water Demand

### Key Metrics and Data Volumes and $$ Over Time Trucking Costs
Treatment Costs 

# Decision Model Outputs

Iterative Selection

Process



### Challenges & Opportunities Dust & Erosion

Fluid Management

Affects on Hydrologic Cycle Strategic Planning

Results

# PETRANERO Project Produced Water Integrated Planning Model

! The Produced Water Integrated Planning Model ! Secondary Water Flowback Table ! Tables for Production Inputs ! Water Treatment Strategies Inputs ! Quantitative Results of Selected Treatments ! Graphical Results of Disposition Options ! Critical Variables and Measures of Performance ! Logic Test Table to Test Model Results ! Cost/Benefit Calculations 

### Table of Contents

# Fluid Tracking Over Time

Oil Production

Total Produced

Water Treated Water

Produced WaterBBL Produced & Treated WaterBBL Oil & Flowback Water

# Case Study

! 10 well/group ! Initial Oil Production 100 BBLs/day/well; Decline/yr of 10% ! Price of Oil at $85/bbl ! Initial WOR 10; Change in WOR/yr of 10% ! Initial Water Production 10,000 bbls/day ! Production days 325 days/yr for 20 yr period ! One Frac at year 7 ! 200,000 bbls water/frac ! Four alternative disposition solutions evaluated ! 

### Class II injection well ! 

### Evaporation pond ! 

### Stream discharge ! 

### Reuse for frac’ing

# Case Study: Graphical ResultsResults' Class'II'Injec.on' Well' Evapora.ve' Pond' Stream' Discharge' Reuse'for' Frac'
Total'Oil'Revenue' $309,305,726* $309,305,726* $267,018,257* $320,681,211*

Total'Produced'Water'Cost' $160,914,860* $206,069,389* $285,528,761* $196,945,594*

Total'Produced'Water' 72,343,118* 72,343,118* 55,230,882* 77,933,497*
Average'Cost'of'Produced'Water/'BBL' $2.22* $2.85* $5.17* $2.53*

Total'Treated'Water' 72,343,118* 48,268,951* 38,172,927* 64,440,440*
Total'Treated'Water'Capital'Cost' $0* $3,330,000* $6,584,225* $12,861,800*
Total'Well'Capital'Cost' $40,000,000* $40,000,000* $40,000,000* $40,000,000*
Total'Well'Opera.ng'Cost' $5,400,000* $5,400,000* $4,320,000* $5,760,000*

Net'Present'Value'of'Water'Costs' ($91,777,474)* ($127,859,109)* ($95,414,478)* ($87,359,684)*
Net'Present'Value'of'Total'Project' $164,217,004* $161,599,504* $161,421,177* $166,009,858*
Trucking' $109,714,677* $81,435,159* $4,592,582* $62,276*
Pipeline'Capital'Cost' $0* $0* $150,000* $0* 

# Case Study: Cost ResultsEffect on NPV Meeting Projects

Water Needs

Minimize Treatment Costs

Public Relations 

# Strategic Planning Results

Unacceptable Impact? Iterative Selection

Process Model Outputs Impact of Produced Water Approaches on Project

# Summary – Integrated Produced Water Planning Model Solution

Water Planning

Models Quantitative economic evaluation tool

Evaluate detailed scenarios for water management solutions

Capable of characterizing operational and

chemical data See produced water in terms of field development through time Should distill large set of parameters into $$$ Can calibrate environmental, public & regulatory challenges Show water management impact on NPV

# Questions?

Thank You!!