Reclaiming Revenue An Innovative Approach to Produced Water Reuse for Hydraulic Fracturing in the Eagle Ford Shale

Transcription

1 Reclaiming Revenue An Innovative Approach to Produced Water Reuse for Hydraulic Fracturing in the Eagle Ford Shale Richard Weatherly 1*, Corrie Bondar 1 1 Freese and Nichols, Inc., Pearland, Texas * Richard.Weatherly@freese.com ABSTRACT Freese and Nichols, Inc. assessed the feasibility of developing an innovative water reclamation system for the purpose of reducing required freshwater supply and recycling produced and flowback water for hydraulic fracturing in the Eagle Ford basin. Flowback water consists of a portion of the frack fluid used to frack the well and produced water, which is the water produced along with oil and gas in hydraulic fracturing operations. The flowback and produced water is typically pumped into trucks which haul it to a disposal site where it is injected into a deep well. The sustainable reclamation system Freese and Nichols designed would collect and convey all produced and flowback water to a central treatment plant. After treating the water to remove contaminants, the water would then be recycled to new frack sites using a reclaimed water distribution system. KEYWORDS: Produced Water Gathering, Produced & Flowback Treatment, Hydraulic Fracturing, Reclaimed Water Distribution, Hydraulic Modeling INTRODUCTION Freese and Nichols, Inc. (FNI) performed a feasibility study for the Eagle Ford Shale area to determine if building reclaimed water infrastructure was cost beneficial for a client. Currently, the client pays a disposal company to truck out both their flowback and produced water to an offsite treatment facility. This feasibility study examines whether the cost of trucking and disposal is greater than the cost of a reclamation system: Trucking & Disposal Cost > Proposed Reclamation System Cost The Proposed Reclamation System would consist of the following: Treatment Units Produced and Reclaimed Water Pipelines Produced and Reclaimed Water Pumps Micro-turbines Meter Stations Air Relief Valves (ARVs) Storage Facilities

2 As part of this study, each component was evaluated in terms of its cost and performance. Using a water forecast for the next five years FNI developed the following: Trucking & Disposal Costs Produced Water Gathering System Capital Costs Produced Water Gathering System O & M Costs Treatment Costs Oil Recovery Profit Reclaimed Water Distribution System Capital Costs Summary of Key Assumptions The following assumptions were used for the Reclamation System Feasibility Study: Water Forecast Well Count: Phase 1: 249 wells Phase 2: 72 wells Phase 3: 72 wells Assumed 3 completed wells flowing back every BPD/well Used current type-curve with 1-day running average to determine flowback decline curve to 5 bpd, which is held for the life of the well Maximum of 2 completion crews required to supply flowback water One completion crew uses 10,000 BPD/stage completing 3 stages/day Trucking & Disposal Cost Trucking = $3.00/BBL Disposal = $1.50/BBL Increases 5%/year Produced Water Gathering System Specific Gravity = 1.05 High-temperature rated pipelines 80% safety factor maximum operating pressure All Central Production Facilities (CPFs) pumping at their maximum rate simultaneously Operation & Maintenance (O & M) of 2% of the total pump capital cost for each phase One meter station and one 65 kw micro-turbine required at each CPF Gas price = $3.60/mcf; 9 mcf/day at each CPF 200,000 BBL Flowback Pit at the Treatment Center (Capital Cost = $880,000) Treatment Cost $1.50/BBL

3 Oil Recovery 0.25% of each barrel of water is recoverable oil Oil price: $90/BBL Reclaimed Water Distribution System Deliver psi from the Treatment Center to each phase Place ARVs every 305 m (1,000 ft) 75,000 BBL Reclaim Pit at the Treatment Center (Capital Cost = $460,000) Freese and Nichols challenge was to develop a hydraulic model of the two proposed systems and use that model to determine the produced water line materials, pressure classes and sizes, the produced water pumps and the reclaimed water line materials, pressure classes and sizes needed. METHODOLOGY Freese and Nichols designed a proposed system to gather the produced water to a central treatment location and developed a hydraulic model to address three critical issues: temperature, pressure, and conveyance. The temperature of the produced water was routinely above 37.8 C (100 F) and the pressures in the system were typically above 6,895 kpa (1000 psi). These two issues would require an appropriate pipe material not commonly used in water distribution systems. The third issue was that the water would need to be pumped from thirty-one (31) locations to a central treatment facility. To select the correct pumps, FNI used the hydraulic model to develop hydraulic grade lines (HGLs) and system curves for each location. The reclaimed water distribution system was comprised of two pipelines pumped from the treatment plant to the frack sites. Using the hydraulic model, FNI developed HGLs and system curves which defined the system operation to each frack site. After developing and using the hydraulic model to determine the requirements of the two systems, FNI developed a cost estimate using the capital, O & M and trucking & disposal costs for the system. This cost estimate showed that revenue could be reclaimed by investing in this innovative, sustainable system, as opposed to continuing to truck and dispose of the produced and flowback water. Freese and Nichols then broke the system into three implementation phases and developed a cost analysis model to determine the payback period for each of three phases. FNI evaluated five alternatives and recommended the system that the model indicated had a payback period of less than three years and allowed the client to utilize the most produced water for fracking operations.

4 Water Forecast The client provided FNI with a forecast of flowback water broken down by phase as seen in Table 1. This forecast assumed a maximized well count of 249 wells in Phase 1, 72 wells in Phase 2 and 72 wells in Phase 3 which equates to 393 wells across all phases. Year Table 1. Five Year Flowback Water Forecast Volume of Flowback Water (BBLs) Phase 1 Phase 2 Phase 3 All Phases 1 2,353,466 2,245,199 2,252,980 6,851, ,653, , ,925 3,047, ,804, , ,760 3,067, ,044, , ,400 1,306, , , , ,730 TOTAL 9,309,953 2,840,718 2,841,465 14,992,133 The client also provided a produced water forecast for the existing wells and wells expected to be completed before the reclamation system is in service. This forecast indicated produced water flows of 3.65 million barrels over 5 years, or 23,548 barrels/cpf/yr. These barrels of produced water were distributed across the three phases and resulted in the produced water forecast shown in Table 2. Table 2. Five Year Existing Well Produced Water Forecast Year Volume of Existing Well Produced Water (BBLs) Phase 1 Phase 2 Phase 3 All Phases 1 376, , , , , , , , , , , , , , , , , , , ,000 TOTAL 1,883,777 1,177, ,710 3,649,906 FNI used the combination of these two forecasts, as shown in Table 3, to determine the costs for each year of each phase.

5 Year Table 3. Five Year Combined Water Forecast Volume of Flowback & Existing Well Produced Water (BBLs) Phase 1 Phase 2 Phase 3 All Phases 1 2,730,146 2,480,624 2,370,875 7,581, ,029, , ,820 3,777, ,181, , ,978 3,799, ,420, , ,295 2,036, , , ,295 1,447,730 TOTAL 11,194,385 4,018,485 3,431,263 18,644,133 Trucking & Disposal Costs Currently, the client pays a disposal company to truck out both their flowback and produced water to an off-site disposal facility. Based on current data, the following costs are assumed in regards to the trucking and disposal of produced and flowback water: 1. Trucking and Disposal in Year 1 costs $4.50/BBL 2. In each succeeding year, assume that the cost of disposal increases 5% 3. Trucking accounts for 66% of the total disposal cost Based on the combined water forecast shown in Table 3, the annual trucking and disposal cost for each phase over the next five years is summarized in Table 4. Year Table 4. Trucking & Disposal Costs for Five Years Annual Trucking & Disposal Costs ($) Phase 1 Phase 2 Phase 3 TOTAL 1 $12,285,657 $11,162,808 $10,668,938 $34,117,403 2 $14,315,781 $2,061,900 $1,473,350 $17,851,031 3 $15,786,658 $1,824,897 $1,240,203 $18,851,758 4 $7,401,610 $1,910,906 $1,298,656 $10,611,172 5 $4,548,722 $2,006,451 $1,363,588 $7,918,762 TOTAL $54,338,428 $18,966,962 $16,044,734 $89,350,125

6 Produced Water Gathering System Costs Pipeline Selection & Design In designing and modeling the produced water system, it was important to take into account the specific gravity of the produced water is > 1.0. Based on Water quality data provided by the client, the specific gravity of the flowback ranges from 1.00 to To include a factor of safety in pipeline design, FNI utilized a specific gravity of After considering Flexpipe, Fiberspar and Flexsteel, FNI chose to recommend Fiberspar Line Pipe for the following reasons: 1. Fiberspar Line Pipe has multiple pressure classes including 5,171 kpa (750 psi) and 10,342 kpa (1500 psi) 2. Fiberspar Line Pipe is rated to 60 C (140 F) or 82 C (180 F) 3. Fiberspar Line Pipe has a large range of pipe diameter sizes After completing a hydraulic analysis of the system, FNI determined that line pressure could reach more than 6,895 kpa (1000 psi) in the Phase 1 areas of Carla & Stumberg and the Phase 2 areas of Chip East & Beinhorn. For that reason, FNI chose to use a combination of 5,171 kpa (750 psi) and 10,342 kpa (1500 psi) rated line pipe with an 80% safety factor. Therefore, the maximum working pressures allowed in our analysis were 4,137 kpa (600 psi) and 8,273 kpa (1200 psi), respectively. FNI also determined that 16.5 cm (6.5 ) line pipe in multiple pressure classes should be used to optimize system performance. Produced water transmission lines must be capable of handling high temperatures. Water quality analysis data for the produced water coming from the Catarina CPFs indicates temperatures near 37.8 C (100 F) are common. High-Density Polyethylene (HDPE) pipes are temperature-rated for up to 60 C (140 F). High-Temperature Polyethylene (HTP) pipes are temperature-rated for up to 82 C (180 F). Both HDPE and HTP pipes have a significant de-rating curve under high temperature. To accommodate high temperatures and include a factor of safety, FNI chose to use the 82 C (180 F) temperature-rated line pipe. FNI designed the produced water system using 5,171 kpa (750 psi) and 10,342 kpa (1500 psi) rated HTP Fiberspar line pipes. As part of the hydraulic analysis, FNI produced plots of hydraulic grade lines (HGLs) for each Produced Water CPF. These HGLs show the worst-case scenario when all CPFs are pumping at their maximum rate simultaneously and each HGL indicates the required pump discharge pressure for this scenario. Figure 1 provides an example produced water HGL for the Carla A CPF. Figure 2 indicates the pressure-rating required for each pipe segment in the produced water gathering system.

7 Figure 1. Example Produced Water CPF Hydraulic Grade Line

8 Figure 2. Pipe Pressure Rating Requirement in the Produced Water Gathering System

9 Pump Selection & Design As part of the feasibility study, FNI developed system curves and pump operating conditions for each CPF in the Produced Water Gathering System based on a worst-case scenario that all CPFs would be flowing back simultaneously. System curves were developed to represent the pipeline system s pressure response to adding additional pumped flow rates. FNI obtained quotes from pump manufacturers selected by the client. For the purpose of this feasibility study, FNI chose to use the most expensive pump quote to remain conservative in our cost estimate. FNI also chose to include in this feasibility analysis, four (4) back-up pumps that can be moved to any CPF in the event of pump outage. FNI assumed that the O & M costs would amount to 2% of the total pump capital cost for each phase. Power The client typically places 65kw Emerson, natural-gas-powered micro-turbines at each CPF for power delivery. Each micro-turbine costs approximately $110,000 installed. FNI analyzed the power required by the recommended pumps at each CPF and placed one 65-kw micro-turbine at each CPF to meet potential power requirements. Total Capital Costs The total capital costs for each phase of the Produced Water Gathering System are summarized in Table 5. All capital costs are incurred in Year 1. Item Table 5. Summary of Produced Water System Capital Costs Total Produced Water Gathering System Capital Costs Phase 1 Phase 2 Phase 3 TOTAL Fiberspar Line Pipe $15,000,000 $7,024,000 $7,240,375 $29,264,375 Meter Stations $400,000 $250,000 $125,000 $775, kw Micro-turbine $1,760,000 $1,100,000 $550,000 $3,410, hp Pump $1,200,000 $600,000 $300,000 $2,100,000 TOTAL $18,360,000 $8,974,000 $8,215,375 $35,549,375 Treatment Costs The client requested that FNI assume that the treatment cost accounts for 33% of the current disposal cost or $1.50/BBL. FNI assumed that the cost of treatment remains constant for the life of the plant. Based on the combined water forecast shown in Table 3, the annual treatment cost for each phase over the next five years is summarized in Table 6.

10 Table 6. Treatment Costs for Five Years Year Annual Treatment Costs ($) Phase 1 Phase 2 Phase 3 TOTAL 1 $4,095,219 $3,720,936 $3,556,313 $11,372,468 2 $4,544,693 $654,572 $467,730 $5,666,994 3 $4,772,988 $551,745 $374,967 $5,699,700 4 $2,131,263 $550,238 $373,943 $3,055,443 5 $1,247,415 $550,238 $373,943 $2,171,595 TOTAL $16,791,578 $6,027,728 $5,146,895 $27,966,200 The approximate construction of a 200,000 BBL flowback pit at the Treatment Center would be $880,000 while the approximate construction cost of the 75,000 BBL reclaim pit would be $460,000. These costs were assumed to occur in Year 1 of Phase 1. Oil Recovery Profit The client requested that FNI assume oil recovery of 0.25%/BBL water and assume that each barrel of oil recovered is worth $90. This equates to earnings of $0.23/BBL of produced water treated. Based on the combined water forecast shown in Table 3, the profit from oil recovery for each phase over the next five years is summarized in Table 7. Table 7. Summary of Oil Recovery Profit for Five Years Year Annual Oil Recovery Profit ($) Phase 1 Phase 2 Phase 3 TOTAL 1 $614,283 $558,140 $533,447 $1,705,870 2 $681,704 $98,186 $70,160 $850,049 3 $715,948 $82,762 $56,245 $854,955 4 $319,689 $82,536 $56,091 $458,316 5 $187,112 $82,536 $56,091 $325,739 TOTAL $2,518,737 $904,159 $772,034 $4,194,930 Reclaimed Water Distribution System Costs The client requested that FNI determine the optimal line type and size to deliver 80 BPM from the Treatment center to each of three reclaimed water phases. FNI performed a hydraulic analysis of the three phases of the proposed reclaimed water transmission system. As part of the hydraulic analysis, FNI produced plots of HGLs for each line in the Reclaimed Water System. These HGLs indicate the required line size and required pump discharge pressure to deliver 80 BPM. FNI also developed system curves for the Reclaim System pumps at the Treatment Plant.

11 The hydraulic analysis showed that the most cost-effective delivery method is a DR 17 line in multiple line sizes with ARVs placed a maximum of 305 m (1,000 ft) apart. Two inch (2 ) ARVs can be used in most locations; however, three inch (3 ) ARVs are required at controlling high points. Figure 3 indicates the line name and line size required for each pipe segment in the reclaimed water transmission system. FNI analyzed the power required by the recommended pumps at each Treatment Center as shown in Table 8. FNI assumed that sufficient power would be available at the Treatment Center and did not place any additional micro-turbines. Phase 1 Table 8. Reclaimed Water Distribution System Pump Power Requirements Power Requirements CPF Pump Flow Pump Requirements (BPD) Pressure Required Recommended kw (psi) hp hp North Main Line 115, South Main Line 115, Northwest Main Line 115, Southwest Main Line 115, FNI assumed that reclaimed water pump O & M would be included in the treatment costs and did not include pump O & M in the reclaimed water distribution system capital costs. Construction cost estimates for each phase of the reclaimed water system is summarized below in Table 9. All capital costs are incurred in Year 1. Table 9. Summary of Reclaimed Water Distribution System Capital Costs Item Total Reclaimed Water Distribution System Capital Costs Phase 1 Phase 2 Phase 3 TOTAL 18" DR17 $5,271,000 $1,806,000 $2,037,000 $9,114,000 20" DR17 $690,000 $0 $1,552,500 $2,242,500 22" DR 17 $537,500 $2,512,500 $0 $3,050,000 2" ARV $196,000 $136,500 $164,500 $497,000 3" ARV $38,500 $0 $3,500 $42,000 Pump $45,000 $0 $0 $45,000 TOTAL $6,778,000 $4,455,000 $3,757,500 $14,990,500

12 Figure 3. Reclaimed Water Distribution System

13 RESULTS Feasibility Analysis To determine whether the cumulative cost of trucking and disposal is greater than the cumulative cost of a reclamation system, FNI developed the costs of each item in the equation as summarized in Tables 4, 5, 6, 7 and 9, respectively. Using these costs, FNI then prepared a cost comparison summary between the current disposal method and the reclamation system capital costs to determine a payout point for each phase. The feasibility of each of the three phases was analyzed individually and as part of the whole system. Table 10 summarizes the Cumulative Cost of Trucking & Disposal. For Year 1, the trucking and disposal cost is relatively equal for all phases due to the relatively equal barrels of saltwater produced in each phase; however, in Years 2 & 3, while the saltwater produced remains nearly steady in Phase 1, it falls to a near constant in Phases 2 & 3. For this reason, 63% of the five year trucking and disposal costs are attributed to Phase 1 while Phase 2 and 3 each only account for 18% of the five year trucking and disposal costs. For this reason, it was not economically feasible to construct a reclaimed water distribution system for Phases 2 & 3. Year Table 10. Cumulative Cost of Trucking & Disposal Trucking & Disposal Cost ($) Phase 1 Phase 2 Phase 3 TOTAL 1 $12,285,657 $11,162,808 $10,668,938 $34,117,403 2 $26,601,438 $13,224,708 $12,142,287 $51,968,434 3 $42,388,096 $15,049,605 $13,382,490 $70,820,191 4 $49,789,706 $16,960,511 $14,681,146 $81,431,363 5 $54,338,428 $18,966,962 $16,044,734 $89,350,125 Table 11 summarizes the Cumulative Cost of the Reclamation System. For Year 1, the reclamation system cost is highest for Phase 1 because it includes the cost of the Phase 1 reclaimed water distribution system. Once the initial capital costs are incurred, the annual costs continue to increase more rapidly for Phase 1 than Phase 2 & 3 due to the higher volume of produced flow treated. Year Table 11. Cumulative Cost of Reclamation System Reclamation System Cost ($) Phase 1 Phase 2 Phase 3 TOTAL 1 $30,167,352 $12,267,056 $11,303,370 $53,737,778 2 $34,238,757 $12,953,701 $11,766,071 $58,958,529 3 $38,504,213 $13,552,945 $12,149,923 $64,207,080 4 $40,524,202 $14,150,907 $12,532,904 $67,208,012 5 $41,792,921 $14,748,868 $12,915,885 $69,457,674

14 Table 12 presents the Cumulative Cost Difference by phase and year. By Year 3, Phase 1 has paid for itself and is realizing significant cost savings. Year Table 12. Cumulative Cost Savings Cost Savings ($) Phase 1 Phase 2 Phase 3 TOTAL 1 -$17,881,695 -$5,559,248 -$4,391,933 -$27,832, $7,637,318 -$4,183,993 -$3,381,284 -$15,202,595 3 $3,883,884 -$2,958,340 -$2,524,932 -$1,599,388 4 $9,265,504 -$1,645,396 -$1,609,258 $6,010,851 5 $12,545,507 -$236,906 -$628,651 $11,679,951 The original scenario investigated involved constructing the entire Produced Water Gathering and Reclaimed Water Distribution system. FNI analyzed five additional alternatives to determine the optimal overall Reclamation System: a. Alternative 1 Includes Entire Gathering System and Reclaim System b. Alternative 2 Alternative 1 without Southern Gathering Lines c. Alternative 3 Alternative 1 without Southeastern Gathering Lines d. Alternative 4 Includes Entire Gathering System and only Phase 1 Reclaim System e. Alternative 5 Alternative 4 without Southern Gathering Lines f. Alternative 6 Alternative 4 without Southeastern Gathering Lines s FNI determined the payback period for each Alternative, as shown in Table 13 and 14. The desired payback period for the client was less than 3 years. After analyzing each of the alternatives, FNI recommended that the client pursue Alternative 4 which includes the entire gathering system and only phase 1 of the reclaim system. Table 13. Payback Analysis with Reclaim Payback (yrs) Alternative Phase 1 Phase 2 Phase 3 All Phases 1 - Entire Gathering System No Southern Gathering Lines No Southeastern Gathering Lines Table 14. Payback Analysis without Phase 2 & 3 Reclaim Payback (yrs) Alternative Phase 1 Phase 2 Phase 3 All Phases * 4 - Entire Gathering System No Southern Gathering Lines No Southeastern Gathering Lines

15 Sensitivity Analysis FNI performed a sensitivity analysis on the Alternative 4 assumptions to determine a best and worst case scenario. The best case scenario assumed Oil = $90/BBL, Treatment Cost = $1.00/BBL, Trucking Escalation = 10%/yr. The worst case scenario assumed Oil = $60/BBL, Treatment Cost = $1.50/BBL, Trucking Escalation = 5%/yr. The payback period is summarized in Table 15. Table 15. Alternative 4 Sensitivity Analysis Worst Case Scenario Scenario Payback (yrs) Phase 1 Phase 2 Phase 3 All Phases * Best Case Worst Case * Weighted average of Phase 1, 2, and 3 DISCUSSION & CONCLUSIONS Based on the analysis summarized in the feasibility study, FNI recommended that the client proceed with Alternative 4 due to the fact that this alternative: Maximizes the volume of produced water which can be reclaimed Minimizes the payback period to less than the required 3 years This recommended system has a payback period of 2.5 years and could save the client $6.6 million by the end of the third year, as seen in Table 16. Table 16. Alternative 4 Three-Year Cost Analysis 3 Year Cost/Profit Cost (millions $) Phase 1 Phase 2 Phase 3 All Phases Trucking & Disposal $42.4 $15.0 $13.4 $70.8 Total Existing System Costs $42.4 $15.0 $13.4 $70.8 Produced Water Gathering System* $19.2 $9.0 $8.2 $36.4 Reclaimed Water Distribution System* $ $7.2 Produced Water Gathering System O & M $0.6 $0.4 $0.2 $1.2 Produced Water Treatment $13.4 $5.0 $4.4 $22.8 Oil Recovery Profit $2.0 $0.7 $0.7 $3.4 Total Proposed System Costs $38.4 $13.7 $12.1 $64.2 Total Savings with Proposed System $4.0 $1.3 $1.3 $6.6 * Capital Investment

16 Figures 4 7 graphically present this cumulative cost difference for each phase. The payout period can be seen on these Figures and is summarized below: Phase 1 with Phase 1 Reclaim: 2.7 years Phase 2 without Phase 2 Reclaim: 1.8 years Phase 3 without Phase 3 Reclaim: 1.6 years All Phases without Phases 2 & 3 Reclaim: 2.5 years Figure 4. Payback Analysis Phase 1 Maximized

17 Figure 5. Payback Analysis Phase 2 Maximized Figure 6. Payback Analysis Phase 3 Maximized

18 Figure 7. Payback Analysis The escalation cost of trucking and disposal, the cost of treating the produced water and the price of oil were each evaluated to determine their effect on the payback period. FNI delivered an innovative, sustainable system to the client that will result in reclaimed revenues and could impact the future of water supply for the oil and gas industry in Texas by demonstrating that sustainability can actually save you money.