PERMIAN’S INSATIABLE THIRST FOR WATER.
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.