Quantifying The Total Costs Of Recycling Water In Tight Oil Plays To 

Determine How A Treatment Program Will Affect Overall Well 

Economics

Phil Winner, President, Layne Energy Services 1 
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ACKNOWLEDGEMENTS 

• Layne Christensen Corp 

• Our clients 

• Ken Carlson, Colorado State University (Colorado Energy Water Consortium) 

• George Kast, Produced Water Solutions 

• Zane Meekins, Cawley Gillespie and Associates 

• Jeanie Oudin, Wood Mackenzie 

• Jim Raney, Anadarko 

• John Seidle, MHA Petroleum Consultants 
WHAT SUCCESS LOOKS LIKE 

3 
4 

OVERVIEW 

Oil and Gas Prices 

Gas $/

Mcf 

Oil $/

Bbl 

2008 Economic crash 

2011 Shale gas crash 

2008 Economic crash 

2011 Shale gas crash 

Unconventional oil 

Unconventional gas 

Conventional oil 

Conventional gas 

Unconventional 

oil has the most 

activity AND uses 

the 5-10x the 

water as vertical 

wells! 
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Finance 

Plant 

Construction 

HR

Sustainability 

Safety 

Diamond Core 

Drilling 

Legal 

Marketing Ground Stabilization 

IT 

Pipeline Rehabilitation 

5 

OVERVIEW 

Unconventional oil plays 
Finance 

Plant 

Construction 

HR

Sustainability 

Safety 

Diamond Core 

Drilling 

Legal 

Marketing Ground Stabilization 

IT 

Pipeline Rehabilitation 

6 

OVERVIEW 

And so these men of Hindustan 

Disputed loud and long, 

Each in his own opinion 

Exceeding stiff and strong, 

Though each was partly in the right 

And all were in the wrong 
Finance 

Plant 

Construction 

HR

Sustainability 

Safety 

Diamond Core 

Drilling 

Legal 

Marketing Ground Stabilization 

IT 

Pipeline Rehabilitation 

7 

OVERVIEW 

• Requires focus on full cycle economics of water. Sourcing to disposal, “cradle to grave.” 

• Goals: Add value in two ways... 

• Tangible: Cost saving adds monetary value, 

• Intangible: Increase sustainability, become “operator of choice,“ maintain public trust. 

• Trends in controlling water costs: 

• Increased interest in fracking with formation (produced) water. 

• Lowers initial cost, lowers treatment cost, minimizes formation damage. 

• Ability to cross-link relatively high-salinity brines. 

• Logistics optimization: Reduces trucking and local impact. 
E&P WATER CYCLE 

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Courtesy of Jim Raney, 2012 Anadarko Director, Engineering 

Global Engineering & Technology, with permission 

Chairman, API Committee for the Standardization of Oilfield Equipment and Materials (CSOEM) 

Transfer 

Treatment 
INTEGRATED SOLUTIONS 

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SOURCING 

• Hydrology and new wells 

• Collector wells 

• Recycled water 
INTEGRATED SOLUTIONS 

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TRANSFER 

• Temporary: Rapid deployment flat 

hose, high volume, low impact 

• Permanent: Buried steel or poly pipe 
INTEGRATED SOLUTIONS 

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• TREATMENT 

• Mobile and scalable 

• Oil/water separation 

• Filtration 

• Chemical treatment, biocides 

• Distillation, evaporation 
UNCONVENTIONAL OIL 

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Source: Used with permission from J.Oudin, Wood 

Mackenzie, Water Management for Shale Plays 

Rockies: Home to two major unconventional oil plays: 

• Bakken 

• Niobrara 

Integrated water management: What is the “size of the prize?” 
BAKKEN EXAMPLE 

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Historically, drilling economics focused primarily on forecasts (“decline curve”) of oil and/or 

gas rate. Why the interest in water? 

• Hz wells use 5-10x more water than vertical wells, 

• Most wells now are Hz wells, and 

• High oil prices have increased and intensified activity. 

Source: with permission from J. Seidle, MHA Petroleum consultants, 2012: Economics of Selected US Shales 

http://copascolorado.org/assets/files/education/ED12-EandP.pdf 
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WATER LIFE CYCLE WATER LIFE CYCLE 

Frac water 

Bbls water/month 

Months 

Approach: apply decline curve economic analysis to evaluate water cost savings. 

Production data sources: NDIC (Bakken), K. Carlson, CSU, 2nd Water Management for Shale Plays, Assessing specific shale plays-Niobrara 

Frac volume sources: J. Oudin, Wood Mackenzie Bakken Shale Water Management for Shale Plays, Niobrara: Western Resource Advocates . 

Water forecasts by Cawley, Gillespie, Associates. 

WATER PRODUCTION 

Produced water 

About 30 years... 
WATER LIFE CYCLE 

Niobrara forecast to dewater faster than Bakken 

• 50% of flowback water recovered in first 2 years 

• 70% of flowback water recovered in first 5 years 

CUMULATIVE WATER PRODUCTION 

Large change in water production over time impacts: 

• NPV of operating expenses 

• Facility requirements 

• Supplemental source requirements 

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Months 
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WATER COST STRUCTURE 

Source: Produced Water Solutions, George Kast

Source: http://www.spe.org/ogf/print/archives/2012/02/02_12_10_Feat_Water_Hydraulic.pdf 

Source: Used with permission from J.Oudin, Wood 

Mackenzie, Water Management for Shale Plays 

Explanation: Water Cost Structure 

• Capital investment: Frac Water (Source), direct impact on NPV 

• Expense (LOE): Produced water, expensed over life of well. 

Must be discounted to see NPV impact 

Source: Halliburton, N. Colorado Bus. Report 10/19/12 
COST SAVING SENSITIVITY 

Bakken savings per well NPV of total 

savings 

Expense Reduction ($/Bbl) 

NPV of total 

savings 

Expense Reduction ($/Bbl) 

Frac water cost = $272,000 (0% savings) 

Frac water cost = $136,000 (50% savings) 

Frac water cost = $0 (100% savings) 

Frac water cost = $163,000 (0% savings) 

Frac water cost = $81,500 (50% savings) 

Frac water cost = $0 (100% savings) 

Niobrara savings per well 

Assumes base case frac

water cost of $1.63/Bbl for 

100 Mbw = $163,000 

Assumes base case frac

water cost of $3.80/Bbl for 

71.5 Mbw = $272,000 

• Every 10 % cost reduction in frac

water adds $27,000 of value 

• Every $1.00/Bbl of water handling 

savings adds $50,000 of value 

• Every 10 % reduction in frac water 

costs adds $16,000 of value 

• Every $1.00/Bbl of water handling 

savings adds $30,000 of value 

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COST SAVING SENSITIVITY 

Annual Bakken savings 

(1,700 wells*) 

NPV of total 

savings 

Expense Reduction ($/Bbl) 

NPV of total 

savings 

Expense Reduction ($/Bbl) 

Frac water cost = $272,000 (0% savings) 

Frac water cost = $136,000 (50% savings) 

Frac water cost = $0 (100% savings) 

Frac water cost = $163,000 (0% savings) 

Frac water cost = $81,500 (50% savings) 

Frac water cost = $0 (100% savings) 

Annual Niobrara savings 

(500 wells) 

*Source: Used with permission from J.Oudin, Wood Mackenzie, Water Management for Shale Plays 

• Every 10 % cost reduction in frac

water adds $47.5 MM of value 

• Every $1.00 /Bbl of water handling 

savings adds $100 MM of value 

• Every 10 % cost reduction in frac

water adds $8 MM of value 

• Every $1.00 /Bbl of water handling 

savings adds $12 MM of value 

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Finance 

Plant 

Construction 

HR

Sustainability 

Safety 

Diamond Core 

Drilling 

Legal 

Marketing Ground Stabilization 

IT 

Pipeline Rehabilitation 

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SUMMARY AND CONCLUSIONS 

• Significant value can be created by reducing water management costs. 

• Bakken: $200 MM – $300 MM in gross, un-risked annual savings. 

• Niobrara: $40-$50 MM in gross, un-risked annual savings. 

• Standards yet to be set for managing large volumes of water at lowest possible cost. 

• Integrated water management has best potential to provide lowest costs solution. 

• Best way to evaluate options and alternatives to optimize logistics. 

• Greatest economic benefit comes from reducing capital for frac water. 

• Well over half of total water handling costs in transportation. 

• Puts premium on transfer, storage, and pad drilling/logistics. 

• Safety and sustainability earns public trust and is key to sustaining long term operations. 
INTEGRATED SOLUTIONS 

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PHIL WINNER

President, Layne Energy 

LAYNE | water + mineral + energy 

1675 Broadway, Suite 2260 | Denver, CO | 80202

Office: 303-830-0757 x101 | Cell:303-884-3398 

phil.winner@layne.com | layne.com

Transfer 

Treatment 

Sourcing