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Thursday, September 4, 2014

Shale energy development will face water stress

A new report from World Resources Institute analyzes potential commercial shale resources worldwide and shows that limited water availability could pose challenges to their development.

Limited availability of freshwater could become a stumbling block for rapid development of shale resources through hydraulic fracturing. 
(The) report analyzes for the first time water availability in each shale play (prospective areas within the shale formation where gas and oil could be commercially extracted) for 11 countries: Algeria, Argentina, Australia, Canada, China, Mexico, Poland, Saudi Arabia, South Africa, the United Kingdom, and the United States.
This report reveals that lack of water availability could curtail shale development in many places around the world:
  •  38 percent of shale resources are in areas that are either arid or under high to extremely high levels of water stress;
  • 19 percent are in areas of high or extremely high seasonal variability; and
  • 15 percent are in locations exposed to high or extremely high drought severity.
Eight of the top 20 countries with the largest tight oil resources face arid conditions or high to extremely high baseline water stress where the shale resources are located; this includes China, Libya, Mexico, Pakistan, Algeria, Egypt, India, and Mongolia.
In general,
shale-energy production is vulnerable wherever surface or groundwater is limited. As water demands increase, other water users like farms and homes around these plays face higher competition for water. This could potentially spur water conflicts for the 386 million people who live on land above shale plays, particularly in regions where changes in precipitation and temperature could alter water supplies.
China has the world’s largest commercially viable shale gas resources. But over 60 percent of those resources are in areas with high water stress or arid conditions...
In the US, shale development faces these water availability constraints, according to WRI: 
  • Over 35 percent of U.S. shale resources are located in areas that are either arid or under high or extremely high baseline water stress.
  • For the most part, shale plays in the west (Texas, Colorado, and California) are located in areas of higher competition for water than those located in the more water-abundant east.
  • For the western plays, agriculture is the dominant water user across 80 percent of the area. In the east, the dominant water user is industry.
  • Most U.S. plays are in areas at least partially subject to high or extremely high baseline water stress and arid and low water use.
  • Ten plays...sit atop aquifers that are being withdrawn at rates that far exceed their natural recharge rate. 
I'd add another complicating factor- the industry's rapidly growing thirst in the Marcellus play.

WRI identifies these business risks: 
  • Increasing demand and competition for freshwater, which could potentially lead to uncertainty in regulatory changes that could cause financial, regulatory, and reputational risks to companies. 
  • In plays with very high levels of competition for freshwater…accessing water might represent additional costs to operators and financial risks, particularly in areas where depleted groundwater resources are already facing high demand from irrigated agriculture… 
WRI offers four major recommendations:
  • Conduct water-risk assessments to understand local-level water availability and reduce business risk.
  • Engage with local regulators, communities, and industry to learn as much as possible about existing water demands, and hydrological and regulatory conditions in any river basin, while increasing transparency around shale development.
  • Ensure adequate water regulations and participatory legislative processes to guarantee water security and reduce regulatory and reputational risks.
  • Minimize freshwater use and practice corporate water stewardship to reduce impacts on water availability.
Water availability is obviously a huge threat to shale gas development. But it's not the only water-related risk or cost facing the industry - by a long shot.

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