The Real Cost of Water – Going Up

As geoscientists we have a good understanding of many of the factors that can affect our industry – but one factor that we may understand the least is water.

We know about water saturation and irreducible water calculations. We know that the cost for disposal of produced water is a line item on lease operating expense statements – and in some fields it is a very significant cost.

We know that when oil prices decline, the first wells that are shut in are those with the highest water cut. Water injection is one of the primary methods of reservoir pressure maintenance and secondary recovery. Water handling is a cost of doing business that increases with the age of the field.

However, most of us do not have a good understanding of how the oil industry fits into the total U.S. usage, or even the magnitude of U.S. water consumption.

Two studies published in 2009 by the U.S. Geological Survey and Argonne National Laboratory help put our industry in perspective with all other water usage in the United States:

  • The USGS reports the U.S. water usage in 2005, as it has every five years since 1950.
  • The Argonne National Laboratory report attempts to quantify the amount of water used in ethanol and gasoline production.

Estimated use of water in the United States in 2005: U.S. Geological Survey Circular 1344 (Kenny, J.F., Barber, N.L., Hutson, S.S., Linsey, K.S., Lovelace, J.K., and Maupin, M.A., 2009, 52 p.); Consumptive Water Use in the Production of Ethanol and Petroleum Gasoline, Argonne National Laboratory ANL/ESD/09-1 (Wu, M., Mintz, M., Wang, M., and Arora, S., 2009).
Estimated use of water in the United States in 2005: U.S. Geological Survey Circular 1344 (Kenny, J.F., Barber, N.L., Hutson, S.S., Linsey, K.S., Lovelace, J.K., and Maupin, M.A., 2009, 52 p.); Consumptive Water Use in the Production of Ethanol and Petroleum Gasoline, Argonne National Laboratory ANL/ESD/09-1 (Wu, M., Mintz, M., Wang, M., and Arora, S., 2009).

The USGS study estimates that in 2005 the United States used an average of 410 billion gallons of water per day – 9.8 billion barrels per day. That is down slightly from the 413 billion gallons per day in 2000, and happens to be equivalent to the average daily usage over the past 30 years.

A summary of how the 410 billion gallons per day were used is shown in the attached table. Nearly half of it was used for thermoelectric power generation. Eighty percent of all water usage was allocated to power generation and irrigation. Sixty percent of the 410 billion gallons is groundwater and 40 percent is surface water. Freshwater withdrawals represent 85 percent of the total usage.

With total U.S. water usage in the range of 10 billion barrels per day, you would assume that the oil industry’s contribution would be modest, and it is. The Argonne National Laboratory study concluded that U.S. oil production operations use between 2.1 and 5.4 net gallons of water per gallon of oil produced, depending on the location and age of the field. Net gallons of water usage means that the produced water re-injected for pressure maintenance is not included in water usage calculations. This study also estimates that oil refining uses approximately 1.5 gallons of water per gallon of oil refined.

Based on 2009 U.S. oil production and refining statistics, the U.S. oil industry’s aggregate water usage is approximately 1.9 billion gallons of water per day, or approximately 0.5 percent of the United States’ total water usage.

This study did not address water associated with natural gas production; therefore, the figure is somewhat conservative. A half-of-a-percent does not sound like much, but it represents 44 million barrels of water usage per day.

The unanswered question is – what is the real cost of handling that much water?

It may be relatively small in comparison to the average U.S. oil price of $53.48/barrel in 2009, and even less so in comparison to $91.48/ barrel in 2008. However, it was much more significant in 1998, when the average U.S. oil price was $11.91/ barrel.

In 2005, Americans used an average of 1,367 gallons of water per day per person (410 billion gallons and 300 million people). Depending on location, we currently pay approximately $0.002 to $0.004/gallon for domestic supply. If we assume that $0.002/ gallon approximates the real cost of water, applying that to the total U.S. usage yields a cost of $2.73/day per person.

In the same year, the United States used an average of approximately three gallons of crude oil per day per person (21.1 million barrels/day). The average cost of crude oil in 2005 was $50.04/barrel or $1.19/gallon. That represents a daily cost of $3.52/person.

It is not difficult to envision a time in the near future when the real cost of water will have a greater impact on the world economy than the cost of a barrel of crude oil.

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President's Column - David G. Rensink

David G. Rensink, AAPG President (2010-11), is a consultant out of Houston. He retired from Apache Corp in 2009.

President's Column

AAPG Presidents offer thoughts and information about their experiences for the Association. 


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