Going With the Flow

Posted in: Factoring Companies, frac, fracking, Invoice factoring, Oilfield Business Financing, Oilfield News, Permian Basin Financing News, Staffing Factoring- Sep 09, 2013 No Comments

By M.D. Wiseman

Fluid management is one of the fastest-growing aspects of the oil industry in North America. Driven by the growth of fracturing and horizontal drilling techniques, both of which rely heavily on oilfield fluids, demand for fluid services has grown rapidly over the last decade. As Key Energy Services CEO Dick Alario remarked, “We have made a lot of new hires. We’ve grown the transporting and storage tank fleet, and the number of disposal wells, starting in about 2004. It has involved adding personnel, equipment, and services under that area. That is the overall 9-10 year picture.”

The field of fluid management takes in a broad spectrum of services. According to Paul Pistono, senior vice president of sales and marketing at Rockwater Energy Solutions, the role of fluid management is “to manage the water, fluids, and chemicals needed in the oilfield. We handle the water required for hydraulic fracturing from start to finish.” The proper management of oilfield fluids goes beyond the task of transporting fluids to and from drilling sites. It entails the tasks of storage and disposal as well. However, as Pistono pointed out, the roles to be filled depend on the kind of oilfield fluid being handled.

Alario listed just some of the fluids which Key manages: “Produced water, [which is] water that is produced alongside oil and gas, salt water from the wells, and fracturing fluids. We transport, store, and dispose of fracturing fluids.”

A fluid management service delivers fracturing fluids to the drilling sites where they will be used. Once the oil or gas has been extracted, they transport the fluids from the site, along with any groundwater produced as a byproduct. These fluids are then either disposed of in disposal wells, or recycled for use in further drilling.

Not only is fluid management a growing field, it is also a changing field. New strategies and technologies are being implemented to meet the challenges of the market. Many of these changes are driven by new fields which have been opened by fracturing. Others have been developed to meet changing regulations, or environmental factors.

Fracturing has opened a number of shale formations to drilling that were previously unproductive. These new markets come with new challenges for fluid service providers, because many of them are in parts of the country that are not traditionally part of the oil field. “That has caused delivery routes to be longer, and storage requirements have increased,” said Alario. He added, “Take, for example the Eagle Ford Shale. A market where, five years ago, Key had little or no activity. Today, it’s a substantial market for our company. This is just one example where we have deployed people and assets which otherwise might not be utilized.”

Companies are therefore looking for ways to increase their storage and trucking capacities. Pistono pointed out that his company has begun using large Above-Ground Storage Tanks (ASTs) to increase storage and hauling capacity: “Our largest AST at 41,000 barrels of capacity can be erected in about ½ day with 3 trucks, and replaces 80 standard size fracturing tanks.” Pistono noted an additional benefit of the larger tank size: “Operators get a lot of pressure to reduce truck traffic, dust, noise, and emissions. Because one tank can replace 80 standard-sized fracturing tanks, it reduces dust, noise, and emissions.”

Others, like Alario, are focused on improving logistics and efficiency to meet this demand. Alario went on to indicate that the demands in this area may be changing again in the near future. “We are just beginning to hear about technology improvements in fracturing that require smaller volumes of water, applicable in certain areas under certain conditions,” he said.

In the area of disposal, fluid management companies are facing a new challenge: water availability. The costs of drilling fluids are increasing as the supply of water becomes more taxed, causing many companies to recycle more drilling fluids in order to keep costs down. This is an aspect of fluid management that some companies are actively embracing. “Recycling water used for hydraulic fracturing is a major focus for us,” Pistono said.

Used water is treated using a process of electro oxidation in order to remove solids, iron, oil, bacteria, and other contaminants that have become suspended in the solution. Once these are removed, the water can be safely used in other drilling operations, Pistono added.

Just the same, many companies are not yet getting involved in recycling. “Some companies also do recycling, but thus far that is mainly in the ballpark of other companies, not the large players in fluid management,” said Alario. “Key may get involved in [recycling] as it grows. We do see it as part of the future of the fluid management business, as water availability and cost become more stressed.” For now, though, Key is focusing on improving efficiency, and continues to deal primarily in fluids which cannot be recycled.

Pistono affirmed that the market for recycling fluids continues to grow. “We are also beginning to see more interest in recycling flowback and produced water for reuse for additional hydraulic fracturing jobs,” he said. This growth is, in some cases, being assisted by changing legislation. “There are some states, like Texas, that are streamlining regulations to make it easier for operators to recycle and reuse the water,” Pistono said.

Not every state has been as helpful, though, and Alario indicated that state regulations continue to prevent Key from expanding into certain regions. However, in spite of these restrictions, there is no lack of opportunities for fluid management to grow. As Alario observed, “Even in some of the traditional markets such as the Permian Basin, advent of horizontal drilling requires increased volume of drilling fluids.”

While fracturing is opening entirely new markets to the fluid management industry, horizontal drilling is increasing demand for these services in established fields. Said Alario: “The Permian Basin has typically produced its oil through vertical wells. We are now watching the genesis of the conversion of the Permian Basin from vertical to horizontal drilling. Horizontal drilling requires 2-4 times as much service intensity as vertical wells… So, demand is increasing in this traditional market, just as in some of the non-traditional markets.”

Fluid management is a growing, changing part of the oil industry. Although much of its growth is in new fields opened by fracturing, fluid management continues to play an integral role in established areas, including the Permian Basin.

Article Source:PB Oil & Gas