PERMIAN’S IN­SA­TIABLE THIRST FOR WA­TER.

Houston Chronicle - - TEXAS INC - By Ser­gio Chapa STAFF WRITER ser­[email protected] twit­ter.com/ser­giochapa

New York in­vest­ment firm Black­stone is fund­ing a new com­pany to pro­vide wa­ter man­age­ment ser­vices for oil and nat­u­ral gas com­pa­nies in the arid Permian Basin of West Texas, in­clud­ing pipe­lines, stor­age tanks and dis­posal wells for the vast amounts of waste­water from drilling op­er­a­tions.

The firm’s en­ergy in­vest­ment arm Black­stone En­ergy Part­ners has in­vested $500 mil­lion in the newly formed Water­field Mid­stream LLC. Head­quar­tered in The Wood­lands, Water­field will fo­cus on de­vel­op­ing and ac­quir­ing projects rang­ing from de­liv­er­ing fresh­wa­ter to hy­draulic frac­tur­ing sites to treat­ing, re­cy­cling and dis­pos­ing of waste­water from oil and nat­u­ral gas wells.

Black­stone Prin­ci­pal Erik Belz said his firm de­cided to in­vest in Water­field be­cause of the grow­ing de­mand for wa­ter man­age­ment as hy­draulic frac­tur­ing, or frack­ing, uses greater vol­umes of wa­ter and as the drilling boom pro­duces more of the wa­ter that comes up with the oil and gas. Among other ca­pa­bil­i­ties, Belz said, Water­field’s engi­neer­ing has un­locked large un­der­ground reser­voirs for waste­water dis­posal.

“We be­lieve that Water­field ad­dresses a crit­i­cal need of pro­duc­ers in the Permian Basin,” Belz said in a state­ment.

Water­field is led by co-CEOs Scott Mitchell and Mark Cahill, who de­vel­oped wa­ter projects for Anadarko and Western Gas in the Permian Basin. In ad­di­tion to the in­vest­ment from Black­stone, Mitchell and Cahill are launch­ing Water­field with two con­tracts in hand.

Water­field holds a 15-year con­tract to pro­vide waste­water gath­er­ing and dis­posal ser­vices for Mid­land oil com­pany Guidon En­ergy in Martin County as well as a con­tract to op­er­ate wa­ter pipe­lines and salt­wa­ter dis­posal for Ea­gleClaw Mid­stream in Reeves County.

“They are both ex­cep­tional com­pa­nies with tech­ni­cal ex­per­tise, op­er­at­ing ex­cel­lence, fi­nan­cial dis­ci­pline and in­tegrity,” Cahill said in a state­ment about the two con­tracts. “We be­lieve Water­field Mid­stream brings those same qual­i­ties to the wa­ter man­age­ment mar­ket in the Permian Basin.”

Wa­ter is quickly be­com­ing a multi­bil­lion-dol­lar busi­ness in the Permian Basin, where a num­ber of com­pa­nies are set­ting up shop to pro­vide fresh­wa­ter drilling and haul­ing, re­cy­cling and dis­posal of waste­water.

A byprod­uct of oil and nat­u­ral gas pro­duc­tion, wa­ter is of­ten found with crude oil and nat­u­ral gas in ge­o­log­i­cal for­ma­tions. Be­cause it is mixed with salts, met­als, hy­dro­car­bons and other com­pounds, it must ei­ther be cleaned or dis­posed of.

The high costs to re­cy­cle and clean that wa­ter leads most com­pa­nies to dis­pose of it by in­ject­ing it deep un­der­ground in dis­posal wells. Mov­ing oil field waste­water via pipe­line to dis­posal sites is con­sid­ered a cost­sav­ing and safer method than haul­ing it on tanker trucks be­cause it re­duces ve­hic­u­lar traf­fic to and from re­mote oil and nat­u­ral gas wells and low­ers the risk of ac­ci­dents.

Good­night Mid­stream, a Dal­las com­pany that op­er­ates dis­posal wells, re­cently put two pipe­line sys­tems into ser­vice that will move waste­water from oil and nat­u­ral gas wells in the Permian Basin to dis­posal sites.

The Llano Pipe­line Sys­tem in­cludes 45 miles of gath­er­ing pipe­lines to move wa­ter pro­duced from oil and nat­u­ral gas wells in Lea County, N.M., to three salt­wa­ter dis­posal wells. The Rat­tlesnake Pipe­line Sys­tem in­cludes 25 miles of gath­er­ing pipe­line to move wa­ter pro­duced from oil and nat­u­ral gas wells in Texas’ Ward County to nearby dis­posal sites.

Com­bined, the two pipe­lines will be able to move 600,000 bar­rels of wa­ter per day, or roughly 25 mil­lion gal­lons per day.

Cal­laghan O'Hare / Bloomberg

A pond used in hy­draulic frac­tur­ing is shown in West Texas’ Reeves County in Au­gust. Wa­ter is quickly be­com­ing a multi­bil­lion-dol­lar busi­ness in the area’s Permian Basin.

Michael Cia­glo / Hous­ton Chron­i­cle

A tank holds wa­ter for use in hy­draulic frac­tur­ing. Wa­ter is also a byprod­uct of en­ergy pro­duc­tion in the Permian Basin.

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