By: Adrian Hedden – Carlsbad Current-Argus – A joint venture between a midstream water company and a major oil and gas producer in the Permian Basin increased the region’s capacity for managing produced water between Eddy and Lea counties.
Solaris Water Midstream and Concho resources already partnered on infrastructure projects in Eddy County but announced on July 29 the companies were expanding their water facilities in neighboring Lea County.
In total, Solaris now manages Concho’s water gathering, transportation, disposal and recycling facilities for an area of about 2.3 million acres.
The transaction saw Solaris taking ownership of nine saltwater disposal wells and about 80 miles of produced water gathering pipelines previously owned by Concho.
That meant Solaris’s total water infrastructure in the northern Delaware Basin on western side of the larger Permian contained more than 500 miles of water pipelines in service and under construction, with 1 million barrels per day of disposal capacity and another 2.2 million barrels of additional permitted capacity.
The company also increased its treatment and recycling capacity to 500,000 barrels per day, per a news release from Solaris.
Combined, Solaris’ system spans 1 million acres in Eddy and Lea counties, and in Culberson, Reeves and Loving counties in Texas, serving 24 oil and gas producers including Concho.
Concho President Jack Harper said deal was intended to increase the company’s water recycling efforts in the region.
Produced water results from oil and gas drilling, brought to the surface from underground along with crude and natural gas.
In the Permian, up to four barrels of water can be produced for every barrel of oil. Other areas see up to 10 barrels of water per a barrel of oil.
In recent years, operators sought to recycle and reuse the water in subsequent drilling operations and well completions as water scarcity increased in the region, instead of the traditional method of reinjecting the water back underground.
“This new agreement provides a comprehensive water solution for our northern Delaware Basin footprint and advances our water recycling efforts,” Harper said. “We are excited to broaden our partnership with Solaris Water to include effective water management solutions in Lea County, New Mexico.”
Solaris Chief Executive Officer Bill Zartler said the deal expanded on Solaris’ presence throughout the Permian Basin in southeast New Mexico and west Texas and would continue to grow its offerings for major oil and gas producers such as Concho.
“The growth of Solaris Water’s relationship with Concho provides us with a long-term partner and the scale to continue to provide effective water management services for our customers across the entire northern Delaware Basin, including the rapidly increasing use of our extensive infrastructure for water treatment and recycling for water reuse,” he said.
Chief Operating Officer Amanda Brock said Solaris was focused on creating infrastructure for large-scale water recycling and management projects, serving companies such as Concho that might not have their own water management sectors.
“The Solaris Water team has proven its ability to deliver complete, integrated water management solutions to the industry, including large-scale produced water recycling,” she said. “We are excited to work with all our customers, including Concho, as we identify and implement sustainable water solutions that support our customer’s needs.”
Zartler said the Permian is especially in need of produced water and water management infrastructure as the area is one of the cheapest places to produce and is seeing an early resurgence as the market recovers from the historic lows in spring driven by the COVID-19 pandemic.
“The most economic oil produced in the country is coming out of Eddy and Lea counties in New Mexico, so that means it’s higher on the attractive list to start coming back as prices come back,” he said. “I think we’re seeing some of that now where completions activity is picking back up.”
And operators in the Permian target much deeper shale rock containing oil and natural gas than in other basins, Zartler said, meaning more water is needed initially for fracking.
“There’s a decent amount of water demand for fracking. Because of the land situation, the operators are drilling mostly 10,000 foot laterals today, which means there’s a large need for water upfront in fracking operations,” he said.
“Ultimately, the wells are highly productive for oil and a decent enough oil to water ratio that it keeps the costs low, but it also gives us enough to keep the infrastructure full.”
The price per barrel of domestic crude did show significant growth in the past months from April’s historic drop below $0 per barrel as the COVID-19 pandemic led to shrinking fuel demands across the world.
On Tuesday, the Chicago Mercantile Exchange reported oil was at $42 per barrel, after steady growth throughout the summer but still below the pre-pandemic prices which ranged between about $50 and $60 per barrel.
That improved price meant more well completions and more need for produced water, Zartler said, amid growing optimism among oil and gas producers.
“Water recycling is coming back, and its coming with a vengeance as completions pick back up in the area,” he said. “We’re operating back at levels that are near pre-COVID levels in our system today.”