REDONDO BEACH, CA / ACCESSWIRE / November 18, 2015 / When oil was trading at 80 to 100 dollars per barrel, there was plenty of room to pay for the high cost of water management for fracking operations, however, now that the price of oil is falling and flirting with 40 dollars per barrel, profit margins are upside down, and continuing high water management costs are exacerbating widespread industry losses.
Water management for fracking operations includes the acquisition of source water that averages 4 million gallons per well, transportation of the source water to the well, transportation of the flowback and produced water from the well to the disposal site, and fees for disposal into an injection well. Southwestern Energy (NYSE:SWN) CEO Steve Mueller,
estimates that water transportation for a single well, primarily trucking, costs around $1.5 million or 25% of the $6 million that an average Marcellus well costs.
Trucks are the predominant method of transporting the water and a typical truck carrying about 100 barrels (4,200 gallons) of either fresh water or wastewater normally ranges between $95 an hour to $150 an hour just for hauling. Hauling time varies substantially depending on proximity of source water and disposal wells. With an average well requiring about 4 million gallons of water, that means about 1,000 truck visits are needed, plus an additional large number of truck loads to dispose of the flowback and produced water.
In addition to hauling,
disposal costs average about $1.00 per barrel and can frequently run substantially higher. In their advertisement for recycling technology, Halliburton claims that disposal costs can range from $3 to $12 per barrel. Arguably, water transportation and disposal costs may be the costliest elements of water management and also a very large percentage of total costs. On top of cost issues, strong public opposition to the heavy truck traffic associated with fracking operations should be considered because it can sometimes stall or prohibit drilling permits from being issued.
The following chart prepared by researchers at the University of Texas illustrates that transportation reliant freshwater is by far the most commonly used source water for fracking operations followed by the distant second choice of brackish groundwater. Recycling is the third and least used potential source of water, but if used on site, it could greatly reduce the big transportation costs and disposal fees.
The big question is, "With oil prices so low, and the need to slash water transportation and disposal costs, why is recycling being underutilized?"
The answer is that existing recycling methods are based on older and less efficient technologies that are simply too expensive and not cost-effective. For example, Halliburton, a leader in oilfield services, has been advertising and promoting its own brand of recycling technology called H2OForward(TM), but has been conspicuously absent for the past year during the steep decline of oil prices. The high energy cost of UV and electro-coagulation combined with low oil prices have very likely slowed adoption of Halliburton's H2OForward(TM) recycling system probably causing the company to temporarily shelf it until higher prices return. West Virginia University published a report, "Zero Discharge Water Management," discussing other recycling technologies and claimed that the cost to treat fracking water with evaporation/crystallization runs close to a staggering $140 per 1,000 gallons as opposed to Reverse Osmosis that runs between $6 to $10 per 1,000 gallons.
In a research publication reviewed by the Department of Energy on June 30, 2015, the NETL (National Energy Technology Laboratory) of the DOE sums up the basic reasons why recycling is not being adopted today, "The U.S. Department Of Energy (DOE) is also interested in increasing the effectiveness of flowback water treatment processes because conventional water treatment technologies such as chemical treatment, filtration, reverse osmosis, distillation, etc., must be adapted to treat a range of flowback water chemistries and have disadvantages such (as) high cost, significant energy consumption, and low efficiency."
When oil prices were higher, Walter Dale, a business manager for water solutions at Halliburton said, "Let's not treat the water, let's not take the salt out. We can make frack fluids out of it." Vikram Rao who spent more than 30 years with Halliburton as senior vice president and chief technology officer partially agrees with Mr. Dale and is now a technical advisor to BioLargo. Dr. Rao points out, "Massive amounts of water used in new wells and in sweeping or flooding secondary recovery operations do not need to be freshwater. Reused water and underground brackish water are two obvious sources for replacement. In fact, brackish water and recycled water are even preferred over freshwater if its salinity is compatible."
On Site Recycling Could Slash Water Management Costs
Any technology that could greatly reduce transportation and disposal costs would be a windfall to operators because it could not only save money, but it could help restore many operators to profitability. To be cost-effective, this technology would have to be installed on site in close proximity to wells to eliminate or reduce costly truck hauling. BioLargo has been working on the problem of providing cost-effective water management for over 7 years, and now has a proven solution that is ready for commercialization.
Like most oil producers, Legacy Reserves LP (
LGCY), Goodrich Petroleum Corp. (
GDP) and Halcon Resources (
HK) have been reporting growing losses over the past 2 years that appear to be increasing as the price of oil continues its downward descent. Reducing water management costs could significantly improve this situation for the companies and shareholders.
BioLargo AOS Filter
- Disinfects at less than 1/20th the energy cost of the nearest technical competitor, greater than 100 times the efficacy, and more than 10 times faster.
- Especially effective removing soluble organics like napthenic acids, 1,4 dioxane, sulfur compounds, benzene, and aromatics.
On August 17th, a team of researchers at the University of Alberta unveiled the BioLargo, Inc. (
BLGO) AOS Filter/Reactor to an audience of over 30 experts from oil & gas, water treatment, maritime, academia, government and finance. Findings from over 100 studies were presented and demonstrated the AOS Filter/Reactor's ability to disinfect pathogens 100 times more effectively than chlorine, at 10 times the speed, and at only 1/20th of the cost of the closest competitor. One year earlier, the AOS Filter/Reactor received the coveted Technology Star Award from New Technology Magazine, known as the First Word on Oil Patch Innovation.
Dennis Calvert, BioLargo CEO says, "We are confident that the AOS Filter is the best answer to Water Management issues that the industry is searching for, but we also know that successfully taking a revolutionary and disruptive technology to market is a Herculean task that will require a formidable industry partner and begs for public research dollars to sponsor the engineering and design work to deliver a scalable solution. Discussions with potential partners after the recent unveiling are accelerating as our company continues to seek the best-fitting partner to quickly bring the AOS Filter/Reactor to market. Industry is well aware that the stakes are high."
Calvert continuing, "The AOS Filter/Reactor combines iodine, water filter materials and electrolysis within a flow-through water filter device, generating extremely high oxidation potential that easily and quickly eliminates soluble organic contaminants and efficiently delivers extremely high rates of disinfection. The science behind the AOS Filter represents an astonishing discovery that will fundamentally change the way water is treated."
Remarkably, the BioLargo AOS Filter/Reactor uses commonly understood materials that are readily available, and it operates at ultra-low power levels. Its configuration essentially converts what would ordinarily be considered a typical filter into a safe and highly effective electrochemical reactor that generates extremely high levels of oxidation potential across the surfaces within the device. As a result, it can do the job at a fraction of the time and cost of any other known technology.
AOS Filter/Reactor CAP-X and OP-X Savings
BioLargo has already assembled hundreds of AOS Filter/Reactors from readily available parts as the company prepares for its first customer led commercial pilots. The cost to build one complete AOS Filter/Reactor system and the operating costs are a fraction of today's competing systems. BioLargo expects to save large industries billions of dollars per year.
In her thesis at Tallinn University,
"Advanced Oxidation Processes for Water Purification and Soil," Anna Goi calculated the energy costs to operate UV and ozone technologies at varying pH levels to promote advanced oxidation and found that they can run in a wide range of anywhere from $100 per acre foot to as high as several thousand dollars per acre/foot. Energy cost for the AOS Filter/Reactor in a high saline environment is less than 1/20th the lowest cost in Goi's study and is also less than 1/20th the energy cost of the nearest competing technology.
The AOS Filter/Reactor Is Very Close To Commercialization
The next step for BioLargo is to engineer the unit to fit customers' needs to provide cost-effective on-site recycling of flowback and produced water. A number of experts in this area are now working to identify the key challenges and begin the arduous process of refinement to tackle the very high volume and demanding challenges. The large cost savings the AOS Filter/Reactor can provide has the potential to help return profitability to the oil & gas industry and at the same time benefit global economic growth by providing greater quantities of cheaper energy. Any energy producer dedicated to pursuing best practices for increased sustainability and profitability will find the AOS Filter/Reactor very compelling. Investors searching for difficult-to-find pure water treatment plays will also find BioLargo compelling.
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SOURCE: Emerging Growth LLC