Tuesday, 22 June 2010

Global Market for Water Treatment Products at $35 Billion

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The global demand for water treatment products should rise at 6.6 percent per year between 2002 and 2007 and reach almost $35 billion by the end of that period. China will record the highest rate of growth among major markets with a 17 percent annual rise through 2007. Gains in the developing world will reflect ongoing efforts to deliver safe drinking water to the more than one billion people who currently lack access. The most promising markets are those in the Pacific Rim and Latin America. Gains in highly industrialized countries will be governed by stricter laws and regulations, increased recycling in manufacturing, and the desire for advanced filtration and disinfection. As for major end use sectors or applications, the industrial and energy markets will overshadow the more stable municipal markets. Nonchemical water treatment products are projected to register faster growth than water treatment chemicals, but the two categories are often complementary rather than competitive in various applications. The industry making this wide variety of goods is highly fragmented, since there are hundreds of product vendors and suppliers. The three top producers--Veolia Environnement (France), General Electric (U.S.), and Nalco (U.S.)--together account for only one quarter of total shipments. Smaller firms can compete with narrow product lines that focus on niche markets.

Key External Variables and Trends

The demand for water treatment products is generally linked to the overall health of a national or regional economy. Robust economic growth implies heightened manufacturing activity and energy use; these in turn boost demand for water treatment products. Population growth and demographic shifts also have an important influence on the demand for water pollution control goods, though the impact is weaker as it takes time to build infrastructure. Environmental laws and regulatory edicts mean mandates that affect both water and wastewater treatment; but it is the enlightened action of users, conservation trends, performance standards, and the actual enforcement of government rules that bring about higher demand for water treatment products.

Demographics and Economics

Increases in population and formation of new households generate demand for more potable water. Urbanization and migration patterns also affect the situation by putting added pressure on existing water distribution systems. We estimate that world population will grow from 5.8 billion people in 1997 to 6.6 billion in 2007, while urban population will rise from 2.7 billion to 3.3 billion during the same period. The shift from rural to urban areas, especially strong in Africa and Asia, means that investments must be made in at least a minimum level of housing and associated infrastructure in these regions. All public and private structures require at least an elementary water and wastewater network.

In plotting data on a country-by-country basis, we found a strong, positive correlation between manufacturing value added per capita and water treatment per capita. Countries with higher levels of manufacturing output and energy usage, such as Germany, France, and Japan, use substantial amounts of water treatment products. (Of course, they also have stricter environmental standards.) Developing countries, such as Brazil, India, and China, with less developed infrastructures, are less intensive users of such products. These countries, however, are industrializing rapidly and thus are likely to show faster growth in demand for water treatment goods in the future. Manufacturing sectors in developing countries that are major users include food and beverage, tobacco, electronics, and pulp and paperboard. Energy generation--especially the electric power sector--is also a leading end user.

Table 1 shows the worldwide demand for water treatment. To put the water treatment figures into context although they are in current dollars, manufacturing value added in 1998 dollars stood at $7,900 billion or 20.7 percent of world GDP in 1997, with the corresponding figure at $11,750 billion or 21.8 percent of world GDP in 2007. We estimate that gross fixed investment should rise from $8,750 billion in 1997 to $12,900 in 2007 and world energy output should go from 382 quadrillion Btus in 1997 to 451 quadrillion Btus in 2007.

Water Use and Water Pollution

The world used nearly 4,000 cubic kilometers of water in 2002, yet supplies were still insufficient in many areas, as more than one billion people lacked access to safe drinking sources. Demand for water is forecast to increase slowly, at about 1.2 percent annually through 2007. The Asia-Pacific region will remain the largest water user by far (at 56 percent of the global total), with Africa-Mideast showing strong gains. While water use is a key factor in the demand for water treatment products, the percentage of water and wastewater treated varies widely across countries and regions.

Water pollution comes from non-point and point sources. The former category includes agricultural runoff and motor oil leakages. By their nature, these are difficult to monitor or control. Indeed, while much water is used in agriculture, relatively few if any water treatment products are utilized to treat farm runoff. Point sources of pollution are manufacturing effluent and municipal sewer waste. These tend to be regulated heavily by the various levels of government (especially in developed countries). Specific categories of point source water pollution are radioactive substances, heat (from cooling towers, etc.), sediments, chemicals and minerals, plant nutrients, disease causing agents (infectious organisms), and oxygen-demanding wastes. Each of these requires a different management/treatment strategy.

Various economic studies indicate that freshwater quality improves at higher levels of income. However, a World Bank study of 25 rivers in more than 50 countries showed a more complex situation with regard to one specific form of pollution. Fecal pollution got worse up to about $1400/capita income, after which rivers got cleaner; but fecal pollution got worse again when income exceeded $11,500. According to B. Lomborg (2001), at that stage, people start using less river water and more groundwater. This author cites convincing evidence to show that various forms of water pollution declined sharply in the rivers and lakes of North America and Western Europe.

Legal and Regulatory Issues

The laws, rules, and standards applicable to water quality and wastewater cleanup vary widely from country to country. The regulations have a profound impact on all who use water and discharge wastewater. The prevailing trend in recent decades favored stricter regulations, with higher levels of monitoring and penalties. Water testing has become routine; companies can be fined for a full day for a momentary lapse. Thus, operators are more vigilant in ensuring that plant effluents meet the mandated minimum levels.

As a general rule, the richest countries have the most restrictive rules about water quality. In North America, Canada and the United States have strong legislation and high standards, and enforcement is becoming more stringent. Canada's system is relatively decentralized, with authority shared among federal, provincial, and local authorities. In the United States, the Environmental Protection Agency administers primary government directives. Mexico's environmental regulations are considered the weakest of these three North American countries. Regulations in Western Europe are among the toughest in the world. The European Union adopted directives in 1991 vis-a-vis urban and industrial wastewater with deadlines in 2005. In other regions, rules are uneven and enforcement is non-existent or spotty. Along with others, we see a general trend toward stricter laws and improved enforcement.

Major Product Categories for Water Treatment

As seen in Table 1, water treatment products can be classified into non-chemical products and supplies and chemical goods. The former embraces two subcategories: (1) filtration and separation goods and (2) disinfection and other products. The latter has four subgroups: (1) corrosion inhibitors, (2) coagulants and flocculants, (3) oxidizers and biocides, and (4) all other. On a global basis, nonchemical products accounted for 55 percent of the total and chemicals for 45 percent in 1997; we estimate the corresponding percentages at 60 percent and 40 percent by 2007. Nonchemical products and chemical goods compete directly in some applications, notably disinfection, but for the most part the product lines are used together. For example, chemical coagulants are used in conjunction with physical filtration processes.

Non-chemical Products

In this large grouping, filtration and separation goods account for 90 percent, disinfection and other products for the remaining ten percent (with the total valued at $14.4 billion worldwide, as of 2002). We project, however, much faster growth for the latter, with annual rates during 2002-2007 projected at seven and 18 percent, respectively. Technological advances are present in both categories. Conventional filters are now used in tandem with membranes that take out finer particles. Disinfection product orders are expected to rise sharply as operators turn to ozonation and ultraviolet radiation that are safer techniques with few byproducts or chemical residuals. (Note: We are using the term "non-chemical products [or goods]" because we are excluding related equipment used in a general fashion to move any kind of water or wastewater--e.g., valves, pumps, pipes.)


In this large grouping, corrosion inhibitors account for 33 percent, coagulants and flocculants for 25 percent, oxidizers and biocides for 21 percent, and "all other" for 21 percent of the total dollar value of shipments (put at nearly $11 billion globally in 2002). Corrosion inhibitors protect metal equipment and piping from the effect of prolonged contact with water. Nitrites and other conventional corrosion inhibitors offer low cost and good performance and are favored by many industries in most regions. Newer, proprietary, higher cost formulations are now used in high-income countries. Coagulants and flocculants assist with the clumping of suspended solids for quick settlement of sludge. There is a shift from cheaper, inorganic coagulants such as alum to more expensive organic polymers due to more effectiveness, implying that the higher price is justified by better performance (e.g., much less sludge).

Oxidizers and biocides are used to kill biological organisms in boiler, cooling, process, supply, and wastewater. Increased recycling in industries creates opportunities for this group of chemicals, because recycled water is more prone to biological contamination than fresh water. Growth in the long term, however, will be constrained by the move to non-chemical treatment such as ultraviolet disinfection, membrane filtration, and ozonation. The cheapest biocides are chlorine and its derivatives. They are still widely used, but operators are seeking less toxic alternatives. The fourth category is a vast panoply of "all other" chemicals such as pH adjusters (needed for neutralization), softeners, defoamers, chelating agents, and fluoridation chemicals. Growth in this category is affected by both price/performance ratios and regulations.

Major End User/Application Segments

In all countries, three major user segments purchase water treatment products, both non-chemical and chemical: industries, municipalities, and commercial/residential users. Table 1 provides absolute numbers and growth rates, on a global basis, between 1997 and 2007. At the start of this period, the distribution among the three sectors was 50, 42, and eight percent; the change by 2007 will be slight--to 49, 44, and seven percent, respectively. In the industrial sector, power generation facilities, chemical/petroleum processors, and pulp/paper producers are the top users. Municipalities around the world, regardless of location, are concerned with clean supply water and cleansing wastewater. The commercial/residential segment uses treatment equipment and chemicals in structures, service operations, and recreational facilities.


The demand for water treatment products in this sector is driven by continuing industrialization in the developing world, increased recycling in developed countries, and solid growth in several key markets. While every sector uses water and hence needs some treatment products, a relatively small number account for a vast majority of both water usage and the purchase of water treatment products. Power generation was responsible for 15 percent, chemical/petroleum sector for 11 percent, and paper/pulp production for nine percent of the industry total in 2002. Other large users are food and beverages, pharmaceuticals, electronics, rubber, and metals. Country patterns vary, of course, depending on type of prevalent industries. Certain industry sectors (such as electronics and fine chemicals) require high purity standards.

The volume of water used by electricity generating utilities is vast due to heating, cooling, and process requirements. However, the water is treated less aggressively than water used in many other industrial markets. The chemical/petroleum processing industry is a heavy user of water treatment chemicals, ranging from corrosion inhibitors to coagulants/flocculants. Gains in sales here will come from increased petroleum refining, an improved outlook for chemical production, and higher effluent standards in many countries. In pulp/paper production, there is a long run trend toward less water use per ton of output due to closed loop systems and other conservation and efficiency efforts. Still, constantly recycled water requires more aggressive treatment. We foresee gains for sales of disinfection equipment, flocculants, and defoamers.


Municipal water systems are involved in the supply of water and the cleansing of wastewater for both households and commercial establishments. These, in turn, use water for drinking, cooking, bathing, gardens, recreation, and other purposes. As a general rule, municipalities are conservative in their product and technology choices, so changes in treatment tend to be slow and modest. Municipal water authorities favor conventional filtration over membranes and other advanced technologies. Still, we expect that reverse osmosis systems will register robust gains. Chemicals will remain the dominant mode for disinfection, but some operators are embracing ozonation and ultraviolet radiation. In some countries, there is a move toward privatizing municipal water systems; this may portend a wider embrace of the latest technology in water and wastewater treatment.


Hotels/motels, amusement parks, health clubs, and other sports/recreational facilities are the major commercial outlets for sale of water treatment equipment and chemicals. These establishments feature swimming pools, spas, or elaborate water parks for their clientele. Various filtration, separation, and disinfection products as well as chemicals are used by such customers. In the household sector, easy-to-install home filtration kits are being marketed along with filtration systems for residential pools and hot tubs. Such goods are the hallmarks of rich countries; home water treatment products are still considered luxuries in most industrializing countries. Yet, even in developing countries, members of the growing upper and middle classes are turning toward such offerings, paralleling their consumption of store-bought bottled water and other amenities.

Regional Patterns

In 1997, North America accounted for 35 percent of all water treatment products, with Western Europe, Asia/Pacific, and all other regions at 30, 25, and 10 percent, respectively. Only a very slight shift is expected in this distribution by 2007: North America is projected at 34, Western Europe at 27, Asia/Pacific at 29, and all other regions combined at ten percent of the total. Such stability implies widespread and continued use of water treatment products around the globe. As a general rule, however, we expect rich countries to turn toward increasingly sophisticated cleanup techniques and technically advanced goods and services.

North America

This region of 421 million persons with a gross domestic product of $11,500 billion in 2002 (1998 dollars) experienced extensive industrialization in the past. Canada and the United States have become mature economies with services dominating; Mexico continues its development with intraregional trade, technology transfer, and commercialization. All three countries have suffered loss of manufacturing jobs to Asia/Pacific and Latin America. The changes taking place have not adversely affected the market for water treatment products. The region is still home to a wide-ranging array of resource extractive, manufacturing, and service industries. The U.S. municipal sector, consisting of hundreds of different authorities, is under pressure to provide consumers with cleaner potable water and to discharge less effluent into the environment. Many municipalities increased their use of disinfectants as well as higher value coagulants; they also started to experiment with more sophisticated combinations of equipment and chemicals.

Western Europe

As of 2002, this region had a resident population of 391 million and its gross domestic product reached the $8,900 billion mark (1998 dollars). While economic performance has been uneven in the past decade, the drive toward unification continued. In May, 2004, the European Union expanded from 15 to 25 countries, and the euro is now in use across much of the continent. As in North America, certain operations and jobs moved offshore. Just the same, the region is home to extensive manufacturing and vast commercial operations as well as utilities and construction-related industries. Demand for water treatment products has been enhanced by concern for environmental protection. A 1991 directive by the European Union focused on reducing the impact of wastewater from both municipalities and the vast array of food processors. Many facilities in the region must upgrade to meet a 2005 deadline.

We have chosen France to illustrate the type of numbers collected and then analyzed on a country-by-country basis in order to arrive at total figures for regions and the world. France is the second largest economy in Western Europe, with a sophisticated industrial sector; and it is a major exporter of motor vehicles and engineered products. France's economic performance has been somewhat volatile since 1993, with halting growth during 1993-1997, strong gains in 1998-2000, and another slowdown in 2001-2002. Over the next three years its growth is expected to lag slightly behind the Western European region, but with indicators rising at a steady pace as illustrated in Table 2.

France boasts several major water-consuming manufacturing industries, such as petroleum refining, chemicals, primary metals, food and beverages, and textiles. France also has a large power generation industry, with heavy reliance on nuclear plants that use large cooling towers. As a result, the country's industrial sector uses all types of water treatment products in moderate to sizable quantities. Chemicals are widely used. Details are shown in Table 3. The total market for France is slated to increase at about 4.3 percent per year to 2007, lagging slightly behind the Western European pace. This is due in part to slower growth of fixed investment activity in France. The country is host to some leading companies in the making of both non-chemical products and chemicals. At the top of the list is Veolia Environnement (formerly Vivendi). Suez Ondeo spun off its Nalco division to a consortium of private equity firms. Other firms with facilities in France include BWT, CUNO, General Electric, Great Lakes Chemical, Hercules, and Kemira. Other suppliers with a presence include Arch Chemicals, Ionics, Pall, Pentair, Rohm & Haas, and WEDECO.


This vast region encompasses many countries at varying stages of development, ranging from prosperous to impoverished and from emerging to mature. The three dominant forces are the loose democracy of India, rich but slowly recuperating Japan, and the vast economy of China, which has been booming recently despite tight political controls. Though hit by the Asian financial crisis of 1997-1998 and the slowdown of the global economy in the early 2000s, the region appears to be rebounding from currency adjustments and other economic/financial problems. Growth, industrialization, and structural reforms are taking place concurrently in many countries.

The market for all water treatment products in the region hit the $6.6 billion mark in 2002, third largest in the world behind Western Europe and North America. In that year, Japan dominated with 40 percent of the total. By 2007, the percentage breakdown should be roughly one third Japan, one third China, and one third the remaining countries. Rising energy consumption, infrastructure construction, and water utilization in China as well as Indonesia, Malaysia, South Korea, Taiwan, and Thailand will be the key factors aiding the sale of products. In the past, these countries have rushed into energy exploration, manufacturing, and service activities, paying little attention to diminished water resources and water quality. Governments, private sector firms, and environmentalists now all call for a change of direction and in policies.

Other Regions

Three other disparate regions constitute "the rest of the world"--Latin America, Africa-Mideast, and Eastern Europe. In 2002, together they accounted for 30 percent of global population, but for only 18 percent of world gross domestic product, and ten percent of total water treatment product shipments. The growth of GDP in the three regions combined will trail slightly the global average through the current mid-decade. This will not be sufficient to raise living standards meaningfully on an across-the-board basis, particularly in Africa/Mideast and Latin America. A number of countries have the potential to become more prosperous, but these are the already better-developed countries of Israel, South Africa, Turkey, and Brazil. Eastern Europe, given its higher level of industrialization and economic reforms, should achieve more meaningful levels of prosperity as this decade comes to a close.

The demand for water treatment products in the three regions combined should increase at the rate of about 6.7 percent per year between 2002 and 2007. This rate is significantly lower than projections for other developing countries, especially China and India. The reasons for this include countries facing general civil unrest, ethnic strife, actual war, and other political or social problems. Economic instability, lack of reforms, and inadequate infrastructure in many countries are another cluster of causes for slow growth. This includes neglect of water supplies, insufficient treatment of wastewater, and widespread water pollution from industrial and commercial facilities. External aid is coming and internal reforms do occur, albeit slowly. In the three regions, Eastern Europe accounted for 52, Latin America for 26, and Africa/Mideast for 22 percent of the total demand for water treatment products in 2002.

Industry Structure, Business Strategies, Marketing Activities

Many large and small companies participate in the global water treatment market. Some focus on nonchemical goods, others on chemicals, and many offer a wide array of both types of products. Several leading firms feature a range of services in addition to product lines. Large customers prefer "one stop shopping" with such vendors. This is not a new arrangement, but it continues to reshape the market as clients streamline their relationship with suppliers. This still leaves room for producers supplying specific goods to niche markets.

Company Lineup

Among the major suppliers to the global water treatment market in 2002, the following firms offered a broad product line: Ashland (Drew), Buckman Laboratories, ChemTreat, General Electric, Great Lakes Chemical, Kemira, Nalco, and Veolia Environnement. Those with a more specific, narrow product line included: Arch Chemicals, Clorox (Brita), CUNO, Cytec Industries, Ionics, and Pall. Market share leaders worldwide in 2002 were Veolia with 12, GE with eight, and Nalco with six percent of the total. Clearly, the industry is not highly concentrated. The market leaders offer an integrated, diversified product line; but for most of them, water treatment is still a small, though growing, part of their total sales (Bayer, Dow, General Electric). In the next tier, are the midsize water treatment chemical firms; for them, the water treatment market is a significant share of their sales (Buckman, ChemTreat, Ionics, Nalco, Pall).

Business Strategies and Tactics

Manufacturers of water treatment products utilize a variety of long- and short-run moves to strengthen their positions. Large companies generally emphasize low-cost manufacturing, customer service, internal growth coupled with smart acquisitions, and a strong research and development program. For bulk chemicals--such as lime, chlorine, alum--firms stress high volume, low cost, and location as even tiny per-unit cost savings can bolster profits and market share. At the same time, aggressive growth and/or acquisitions come into play, such as General Electric choosing to enter the field via its purchase of BetzDearborn and Osmonics. Others, such as Nalco, stress their diverse offerings of water treatment goods, energy, and cleanup services (e.g., waste and fuel management).

To compete with the large, full-service water treatment companies, smaller firms often rely on in-depth offerings in a narrower product family and a market focus strategy. Thus, CUNO and Pall offer filters and membranes, Cytec Industries features coagulants and flocculants, and Ionics emphasizes separation technologies. Customers include food and beverage, energy, electronics, paper and pulp, and other industrial sector facilities. Cooperative arrangements are often forged between medium-size U.S. and foreign firms, such as Arch Chemicals and Votorantim (Brazil), Ashland and Chembonds (India), Calgon Carbon and Datong Huibao (China), Ionics and Toray Industries (Japan). Even as large firms are closing some manufacturing facilities--as Procter & Gamble did with its PUR operation in the United States--smaller companies open new ones abroad, as Buckman Labs did in China.

Marketing Activities

Small as well as large vendors emphasize the "4P's" of marketing: product, price, promotion, and place. For commodities--such as basic inorganic chemicals--service support is stressed rather than the products themselves. For specialty chemicals, the emphasis is on advanced features and performance characteristics. Customers expect technical support to operate their large water systems, and vendors locate their technicians on-site and even around the clock. Pricing is aggressive for commodity goods, less so for specialty items. Advertising is prevalent in trade journals but has even spread to mainstream media (e.g., General Electric water ad on NBC). The Internet/World Wide Web has become important with buyers and sellers since they now have access to each other's websites, auctions, and so forth, and can link up in a streamlined supply chain. Finally, vendors promote loyalty bonds with clients via "relationship" marketing. An early example of this in the United States was a national award given to Mogul (later acquired by Dexter). Mogul offered a warranty that its water treatment chemical service met government guidelines. That is, the customer was in compliance with all requisite rules. If, by chance, a violation did occur, Mogul would play the penalty.

Methodology and Sources

This study is based on a major monograph published in March, 2004 by The Freedonia Group. Historical data for 1997 and 2002 and forecasts to 2007 are provided for demand at manufacturers' level in current dollars. Demand refers to sales or apparent consumption and denotes production plus imports, less exports. Information came from primary sources via consultations with vendors and clients. Secondary sources ranged from government agencies to trade associations, from online databases to trade journals. Data on companies came from annual and 10K reports, product brochures, and security analysts. Macroeconomic indicators were based on The Freedonia Group's own consensus forecasts. GDP and other historical data rely on various national income and product accounts (NIPA) from the Organization for Economic Cooperation and Development (OECD), International Monetary Fund (IMF), European Bank for Reconstruction and Development (EBRD), and the World Bank. The methodology is further discussed in A. Gross et al., "Analyzing and Forecasting Global Industrial Markets," Proceedings of the 3rd Annual Conference on International Business (San Francisco, January, 2004), and the paper is available on request from the author.

TABLE 1 GLOBAL WATER TREATMENT DEMAND BY MAJOR REGION, TYPE OF PRODUCT, AND END USE, 1997-2007 (MILLION US DOLLARS)  Item                                                  % Annual Growth                             1997    2002    2007    1997-2002  2002-2007  Total World Water           20,153  25,200  34,700   4.6        6.6   Treatment Demand By Region   North America:             7,073   8,850  11,875   4.6        6.1     United States            5,853   7,270   9,765   4.4        6.1     Canada & Mexico          1,220   1,580   2,110   5.3        6.0   Western Europe             6,090   7,270   9,260   3.6        5.0   Asia/Pacific:              5,065   6,645  10,195   5.6        8.9       China                    740   1,455   3,220  14.5       17.2       Japan                  2,585   2,810   3,390   1.7        3.8       Other Asia/Pacific     1,740   2,380   3,585   6.5        8.5   Other Regions:             1,925   2,435   3,370   4.8        6.7       Latin America            565     640     895   2.5        6.9       Eastern Europe           980   1,275   1,745   5.4        6.5       Africa/Mideast           380     520     730   6.5        7.0 By Type of Product     Non-chemical Goods      11,015  14,380  20,820   5.5        7.7     Chemicals                9,138  10,820  13,880   3.5        5.1 By Major End User/Market     Industrial              10,135  12,220  16,930   3.8        6.7     Municipal                8,401  10,956  15,209   5.5        6.8     Residential/Commercial   1,617   2,024   2,561   4.6        4.8  Source: Deneen (2004).  TABLE 2 FRANCE: SELECTED ECONOMIC AND MARKET INDICATORS, 1997-2007  Item                                       1997      2002       2007  Resident Population(mil persons)               58.5       59.5      60.7 GDP/capita (1998 US $)                     21,570     24,300    26,440 Gross Domestic Product(bil 98 US $)         1,262      1,446     1,605 Gross Fixed Investment (bil 98 US $)          224.5      287.5     316.0 Manufacturing Value Added (bil 98 US $)       230        261       288 Food, Beverages, Tobacco.   Mfg Value Added (bil 98 US$)                 31.7       32.0      32.5 Paper & Board Production (mil metric ton)       9.1        9.8      11.2 Energy Production (quadrillion Btu)             4.9        5.2       5.5 Water Use (cubic km)                           39         40        42  Source: Deneen (2004).  TABLE 3 FRANCE: WATER TREATMENT PRODUCTS 1997-2007 BY TYPE AND MAJOR END USER/MARKET (MILLION US DOLLARS)  Item                                   1997     2002      2007  Total Water Treatment Demand            925     1150      1420   By Type:     Non-chemical                        480      625       815       Filtration & Separation           465      580       720       Disinfection & Other               15       45        95     Chemical                            445      525       605       Corrosion Inhibitors              140      175       195       Coagulants & Flocculants          130      160       185       Oxidizers & Biocides               70       80        95       Other                             105      110       130   By Major End User /Market:       Industrial                        490      585       740       Municipal                         350      460       570       Residential/Commercial             85      105       110 West Europe Water Treatment Demand    6,090    7,270     9,260   Percent Accounted for by France        15       16        15  Source: Deneen (2004). 


Deneen, Michael. 2004. World Water Treatment, Study #1769. Cleveland: The Freedonia Group.

Lomborg, Bjorn. 2001. The Skeptical Environmentalist: Measuring the Real State of the World. Cambridge University Press.

Michael A. Deneen is a senior industry analyst at The Freedonia Group in Cleveland, Ohio. Andrew C. Gross is professor of marketing and international business at Cleveland State University in Cleveland, Ohio.

This paper is based on a 280-page monograph written by Michael Deneen that was published in March, 2004 by The Freedonia Group (Deneen, 2004). In the April, 2003 issue of Business Economics, we covered the U.S. market for water treatment products. This article covers the rest of the world.

Produced Water - Exceeds $4.3 billion - Contaminated Water from Energy Production

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‘Produced’ Water an Economic Opportunity

What is produced water? It bubbles up from the ground when you drill for oil.

When the Massey coal mine exploded last month, other mines continued to produce. When an oil platform in the Gulf of Mexico exploded a few weeks ago, other platforms kept pumping. The natural gas industry has weathered its own tragedies, as it will in the future.

Until renewable and sustainable energy sources enter mass production, citizens in the developed world will ensure that demand for carbon-based energy remains steady. And so long as demand for carbon-based energy exists, there will be an industry devoted to treating thewater produced during energy exploration and extraction.

Drill beside Produced Water containment pit

Drill beside produced water containment pit, photo courtesy of the Produced Water Society

The term 'produced water' refers to effluents that rise to the surface during energy drilling or extraction. This includes water naturally occurring alongside energy deposits, as well as water injected into the ground during a drilling process called 'hydraulic fracturing.'

Current energy exploration and extraction in the United States creates 15-20 billion barrels of produced water each year. Worldwide, estimates top 50 billion barrels. According to the U.S. Department of Energy, for every barrel of oil produced globally, an average of three barrels of water are produced. In the United States, the water to oil / gas ratio (WOR) averages seven barrels of water to one of oil. In the worst cases, the WOR reaches 50 to 1. Energy companies pay between $3 – $12 to dispose of each barrel of produced water.

That’s a lot of water to clean -- and a steep premium to pay. Further, traditional practices face increased opposition by environmentalists, local and state governments, and public lawsuits that allege produced water is escaping containment pits and entering streams and ground water.

Traditionally, produced water is stored temporarily in containment pits. It is then handled one of two ways: either trucks haul the water to treatment facilities or the water is evaporated in pits and then the dry dregs are trucked to landfills or designated dumping sites.

During hydraulic fracturing, a line of trucks brings clean water to use in the fracturing procedure. After the fracture is complete, another line of trucks hauls the contaminated water to treatment facilities. Hauling water to the site just to haul more water out later is inherently inefficient compared to methods that promise to keep the entire treatment process on-site.

Produced Water

Produced water

A number of companies are announcing new technologies to mitigate the costs, inefficiencies and risks associated with open treatment pits and hauling toxic water via trucks.

The technologies, including forward osmosis and self-contained evaporation, are intended to please energy companies and the public alike: energy companies win because water is treated on-site, saving on transportation costs. The public and the environment win because water emerges from treatment clean and reusable (some is so clean it can be reintroduced into the rivers from which it was extracted).

These technologies, each already producing profits, make environmentally sound water treatment affordable for energy companies faced with narrowing margins.

Companies like 212 Resources, Hydration Technology Innovations, Ecosphere Technologies and Aqua-Pure Ventures are entering an expanding market at the perfect time: last year, legislation entered in the House and Senate to cancel the energy industry’s exemption from the Clean Water Act. If the legislation becomes law, energy companies will face heightened standards of water treatment -- and they’ll likely be required to retire traditional containment pits in favor of new, self-contained, on-site water treatment.

The current market for treating produced water is estimated to exceed $4.3 billion for the next five years, and that market will expand whether or not regulations increase.

The public thirsts for energy. Until alternative energy sources enter the mainstream over the next few decades, energy exploration and hydraulic fracturing will continue, and as long as they continue, they will contribute to the growth of the produced water industry.


This post comes from the BlueTech Blog, an open forum for discussion on water issues sponsored by the Artemis Project. Artemis will announce its list of the top 50 water companies at its BlueTech Innovation Forum June 8 in San Francisco. (Disclosure, I'm participating. Water is one of the biggest issues out there.)

Wednesday, 16 June 2010

Saturday, 12 June 2010

Reliance on Oil Sands Grows Despite Environmental Risks

May 18, 2010

Reliance on Oil Sands Grows Despite Environmental Risks

CONKLIN, Alberta — Beneath the subarctic forests of western Canada, deep under the peat bogs and herds of wild caribou, lies the tarry rock that is one of America’s top sources of imported oil.

There is no chance of a rig blowout here, or a deepwater oil spill like the one from the BP well that is now fouling the Gulf of Mexico. But the oil extracted from Canada’soil sands poses other environmental challenges, like toxic sludge ponds, greenhouse gas emissions and the destruction of boreal forests.

In addition, critics warn that American regulators have waived a longstanding safety standard for the pipelines that deliver the synthetic crude oil from Canada to refineries in the United States and have not required any specific emergency plans to deal with a spill, which even regulators acknowledge is a possibility.

Oil sands are now getting more scrutiny as the Obama administration reviews a Canadian company’s request to build a new 2,000-mile underground pipeline that would run from Alberta to the Texas Gulf Coast and would significantly increase America’s access to the oil. In making the decision, due this fall, federal officials are weighing the environmental concerns against the need to secure a reliable supply of oil to help satisfy the nation’s insatiable thirst.

The gulf accident adds yet another layer of complexity. Regulators and Congress are weighing new limits on drilling off the coastline after the Deepwater Horizon catastrophe, increasing the pressure to rely more heavily on Canada’s oil sands. At the same time, political consciousness of the risks has grown.

Canadian oil sands are expected to become America’s top source of imported oil this year, surpassing conventional Canadian oil imports and roughly equaling the combined imports from Saudi Arabia and Kuwait, according to IHS Cambridge Energy Research Associates, a consulting firm.

In a new report, it projects that oil sands production could make up as much as 36 percent of United States oil imports by 2030. “The uncertainty and the slowdown in drilling permits in the gulf really underscores the growing importance of Canadian oil sands, which over the last decade have gone from being a fringe energy source to being one of strategic importance,” said Daniel Yergin, an oil historian and chairman of IHS CERA. “Looking ahead, its importance is only going to get bigger.”

Last week, a phalanx of Canadian diplomats took advantage of a previously planned trip to Washington to promote oil sands as a safer alternative to deepwater drilling because leaks would be easier to detect and control.

In an interview afterward, Alberta’s premier, Ed Stelmach, said he was not trying to capitalize on the gulf disaster, but merely promoting “what we have to offer, which is security of supply” and “a safe stable government.”

From a supply standpoint, there is much to recommend oil sands, also known as tar sands. Canada has 178 billion barrels of proven oil reserves, virtually all in oil sands. Only Saudi Arabia has more proven oil reserves.

The United States produces about five million barrels of oil a day and imports 10 million more. Canada accounts for about 1.9 million barrels of the daily imports, roughly half of it from oil sands.

“If you need crude to fuel your economy, you’d really better be thinking about Canada,” said Chris Seasons, president of the Canadian unit of Devon Energy, an oil company based in Oklahoma City. Devon is already producing 35,000 barrels a day from oil sands around Conklin. It expects to expand its production to 200,000 barrels a day by 2020, in part through a second project, with BP. That would be roughly equivalent to current imports from Kuwait.

To increase delivery of oil sands crude, TransCanada is building the Keystone pipeline system. Two Keystone pipelines have been approved, with the first one delivering oil to Illinois in June. A much longer pipeline to Texas, called Keystone XL, is still under federal review. If fully developed as proposed, the system would allow Canada to export an additional 1.1 million barrels of oil a day.

In a world in which so many oil-producing nations are far away, unstable or hostile to the United States, Canadian oil sands hold great political appeal.

“It is undeniable that having a large supply of crude oil available by pipeline from a friendly neighbor is extremely valuable to the energy security of the United States,” said David L. Goldwyn, coordinator for international energy affairs at the State Department. The department is scheduled to decide this year whether to approve Keystone XL.

Complicating the calculation is the fact that Canada’s backup market for its oil is probably China. Plans are already under way for pipelines from Alberta to Canada’s western coast for shipments to Asia. Although those could take up to a decade to build because of land considerations, Mr. Stelmach, Alberta’s premier, flew to China on Friday on a trade mission to Shanghai, Beijing and Harbin. He said one of his messages was, “We’ve got energy.”

Whatever the advantages, serious environmental problems and risks come with producing oil from oil sands.

Most of the biggest production sites are huge mine pits, accompanied by ponds of waste that are so toxic that the companies try to frighten birds away with scarecrows and propane cannons.

Extracting oil from the sands produces far more greenhouse gases than drilling, environmental groups say, and the process requires three barrels of water for every barrel of oil produced because the dirt must be washed out. Already, tailing pools cover 50 square miles of land abutting the Athabasca River.

The mines are also carving gashes in the world’s largest intact forest, which serves as a vital absorber of carbon dioxide and a stopover point for millions of migrating birds.

Proponents of oil sands acknowledge the dirtiness of the extraction process. But they say that newer projects are using more efficient technologies.

For example, instead of surface mining, the Devon project injects high-pressure steam into the reservoir to enable the heated oil sands to be pumped out of the ground as a fluid, which is less invasive of the forest. Shell is also experimenting with ways to capture some of the carbon emissions, and other companies are trying to use solvents to heat the steam more efficiently.

Some analysts argue that imports from oil sands will replace conventional oil from places like Venezuela and Mexico, where heavy oil requires so much refining that it produces a comparable amount of greenhouse gas emissions. For the United States, “in the grand scheme of things, the actual emissions impact is very small,” said Michael A. Levi, a senior fellow at the Council on Foreign Relations.

But environmental groups are unmoved. “Having tar sands in our energy mix is simply inconsistent with the kind of climate and environment promises we’ve heard the Obama administration make,” said Susan Casey-Lefkowitz, who works on the issue at the Natural Resources Defense Council.

The high-pressure pipelines that transport the oil give rise to separate safety and environmental concerns, which have been spotlighted by local ranchers and other opponents during the current comment period on the State Department’s environmental impact statement for the proposed pipeline expansion.

One big question is whether TransCanada should get waivers to use thinner pipes on Keystone XL than is normally required in the United States.

The Transportation Department’s Pipeline and Hazardous Materials Safety Administration, which oversees oil pipelines, gave such waivers to TransCanada for the first two Keystone pipelines. TransCanada says the thinner pipes have been allowed in Canada for decades and pose no extra risk.

But Cesar de Leon, a former deputy administrator of the pipeline and safety administration who is now an independent pipeline safety engineer, said the thinner standard is appropriate only if pipelines are being aggressively monitored for deterioration. Although the safety administration required such monitoring in the Keystone permits, it “didn’t have the people to monitor compliance,” he said.

In a report in March on the agency’s broader permitting practices, the Transportation Department’s inspector general found that, in many cases, the agency had failed to check the safety records of permit applicants and had not checked to verify that permit terms were being followed.

Officials of the safety administration did not respond to interview requests. But in written testimony to a House committee in April, the agency’s new administrator, Cynthia L. Quarterman, acknowledged problems and promised to improve. “As you know,” she said, “we inherited a program that suffered from almost a decade of neglect and was seriously adrift.”

Senator Jon Tester, Democrat of Montana, said the whole situation was alarmingly reminiscent of the permit waivers that were routinely granted to offshore oil wells, including the BP well leaking in the gulf. “I think it is incumbent on myself as a policy maker to say ‘hold it,’ ” Mr. Tester said.

In another sign of concern among policy makers, on April 29 South Dakota’s Public Utilities Commission rejected TransCanada’s request for an exemption from a state requirement to notify affected landowners about spills of less than five barrels.

The gulf spill haunted local public hearings on the Keystone project last week in Murdo, S.D., and York, Neb.

Some people along the path of the proposed and existing pipelines complained that no one had required TransCanada to produce an emergency plan for a spill, even though the new pipes would traverse pristine territory, including the Ogallala Aquifer, which supplies water to a wide swath of the nation’s breadbasket and where even a small spill could have grave consequences.

Others demanded that thicker steel be used. And some asked how the pipeline would be monitored for wear and tear.

At the York hearing on May 10, Jim Condon, an engineer from Lincoln, Neb., said the amount of oil spewing from the leaking BP well was just a small fraction of what would be passing through the Keystone XL pipeline. “A rupture of the pipeline would be a huge problem,” he said.

Clifford Krauss reported from Alberta, and Elisabeth Rosenthal from New York.

This article has been revised to reflect the following correction:

Correction: May 20, 2010

An article on Wednesday about the United States’ increasing reliance on petroleum from Canadian oil sands misidentified the party affiliation of Senator Jon Tester of Montana, who likened the safety waivers being granted to pipelines from Canada to waivers granted to offshore oil wells. He is a Democrat, not a Republican.

Wednesday, 9 June 2010

Alberta sitting on nearly 1.5 trillion barrels, says ERCB

Alberta sitting on nearly 1.5 trillion barrels, says ERCB

Province hikes bitumen estimate

CALGARY - A re-evaluation of emerging oilsands areas and advances in production technology have pushed Alberta’s bitumen resources toward 1.5 trillion barrels in 2009, according to a report by the Energy Resources Conservation Board.

According to the ERCB’s annual reserve report, which will be officially released today, the increase was driven by a re-evaluation of the largely untapped Grosmont deposit, which is now said to contain 406 billion barrels in the ground waiting for the right technology to extract it.

In situ oilsands production grew 14 per cent last year, along with a 14 per cent increase in mining output due in large part to the startup of Canadian Natural Resources’ Horizon mine, the report notes. But in situ is expected to be the strongest driver of future activity, said Carol Crowfoot, the board’s chief economist and report co-author.

“Particularly on the in situ side, we’re forecasting quite a growth rate for the next 10 years, due to the SAGD (steam assisted gravity drainage),” she said.

In situ oilsands production now accounts for about half of the 1.49 million barrels of bitumen produced per day, a figure that is expected to double to 3.2 million barrels per day by the end of the decade, the report said.

The Grosmont is a lesser-known fourth oilsands area — after Athabasca, Peace River and Cold Lake — that is unique because the bitumen is contained in limestone instead of sand. Producers have known about the Grosmont carbonates for decades, but lacked practical ways of getting it out of the ground.

Although the resource potential rose nearly 30 per cent in the first evaluation of the Grosmont reserves since 1990, no commercial reserves were assigned due to the lack of production.

That could change later this year when in situ players such as Laricina Energy begin constructing pilot projects aimed at testing new production technologies, including the application of solvents, to the previously unattainable bitumen.

The company is moving ahead with a commercial pilot at Saleski and hopes to be producing oil by the end of the year, Laricina president Glen Schmidt told the Herald on Friday.

He said he wasn’t aware of the revised resource numbers, but confirmed his company worked with the ERCB to help prepare the estimates.

“It is very exciting to see the ERCB start talking about the Grosmont,” he said.

“It is clearly the second-largest in situ play, by far. We like to give ourselves some credit for leading the charge.”

Companies such as Unocal attempted pilot projects in the 1970s and ’80s to no avail. In 2006, Sure Northern, a subsidiary of Royal Dutch Shell, spent more than

$500 million to buy Grosmont rights adjacent to 75,000 hectares controlled by Husky Energy.

Unlike a conventional in situ development, Schmidt said carbonates require less steam at lower temperature and pressure to drain the oil. Laricina is hoping that will in turn translate into lower operating costs.

“The better Grosmont projects will do every bit as good as the McMurray,” he said.

In other highlights of the report, the more commonly known McMurray-Wabiskaw deposit — characterized by truck and shovel mining — declined 0.4 per cent to 959 million barrels. Cold Lake was also re-evaluated for the first time since 1999, resulting in a 20 per cent drop in available resources to

33.8 billion barrels. The region is host to Alberta’s largest and oldest in situ development, operated by Imperial Oil.

The report notes Alberta has produced about seven billion barrels of raw bitumen since oilsands production first began in 1967, or less than half of one per cent of the available resource, compared with 16 billion barrels of conventional crude oil since 1914.

While oilsands production continues to rise, conventional oil declined almost nine per cent in 2009 to 461,300 barrels per day. About

3.5 billion barrels of conventional oil remain to be developed, although the report notes that new technology is starting to unlock “tight oil” in places such as the Pembina Cardium play.

Other big revisions were made to the province’s inventory of coal bed methane, which increased

90 per cent. Gas from coal accounted for seven per cent of Alberta’s total gas production in 2009, a figure that is expected to rise to

20 per cent by 2019, the report said.

Shale gas was expanded in the 2009 report, but no reserves were assigned to what could be a major new supply source in Alberta. As part of the Alberta government’s royalty holiday on new shale gas wells, the province last week initiated a study by the Alberta Geological Survey to determine the exact size and location of a resource that could top

850 trillion cubic feet.

“At the moment we don’t actually see enough data to do a calculation,” said Kevin Parks, who oversees the AGS. “But you have to start somewhere. We’re ramping up to generate our own reasonable numbers, what’s out there are kind of bold estimates.”