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Smart Technology Optimization Plan: Produced Water

NESI-SES Association researchers are currently engaged in a STOP (Smart Technology Optimization Plan) engineering design that includes the use of microgrid technologies, distributed energy resources, advanced distribution automation techniques and additional technology innovations that can decrease the cost of operations for stakeholders in an oil and gas formation. The STOP model is currently focused on the Mississippi Lime where cost and environmental concerns have escalated with the issues of produced water disposal.

Produced water is water from underground formations brought to the surface along with oil or gas. It is the largest volume byproduct or waste associated with oil and gas production. The Oklahoma Corporation Commission (OCC) and seismologists are in agreement that injection of wastewater into the Arbuckle formation, specifically, is suspected to be the cause of earthquakes in Oklahoma. The Arbuckle is a 7,000-foot deep, sedimentary formation which sits well below producing formations and is the farthest formation from groundwater, making it a seemingly ideal injection location. However, the Arbuckle is also very permeable and sits atop the crystalline basement. Experts believe it may be in hydraulic communication with the basement rock, where unknown faults are located, and experts have theorized wastewater injection may be reactivating these faults.

The oil and gas industry is very volatile and is currently in its deepest downturn since the 1990s. Companies that were making record profits just a few years ago are now shutting down two-thirds of their rigs. Many companies have laid off workers and some have gone bankrupt. More than 250,000 oil and gas workers are estimated to be without jobs. In the past three years, oil prices have dropped more than 70 from their peak in 2014. Oil prices have rebound a few times in the past three years, but still remain low making many wells unprofitable to operate. Analysts are unsure if and when we will see oil prices return to the $100 per barrel mark. Many oil industry reliant states, including Alaska, North Dakota, Louisiana, Oklahoma and Texas, are facing economic challenges.

A report from the Oklahoma State Chamber Research Foundation indicated the following economic analysis and impact of the oil and gas industry through 2012:
  • The oil and gas industry continues to have an outsized influence on overall state economic activity. Oil and gas firms account for only 3.2% of all business establishments but hire 5% of wage and salary workers, produce 10% of state Gross Domestic Product, and generate 13.5% of total earnings statewide.
  • Oil and gas served as the state’s key job engine the past decade. Between 2002 and 2012, Oklahoma oil and gas firms created 29,000 new wage and salary jobs while all other private industries combined added only 56,000.
  • Oil and gas drilling is the largest source of private capital spending in the state. Capital spending on oil and gas drilling activity totaled an estimated $11.7 billion in 2012. This is equivalent to the construction of nearly 67,000 new single-family homes annually valued at $175,000 each.
  • The oil and gas industry is the largest source of state tax revenue in the state. Oklahoma oil and gas firms, owners, and employees paid direct state tax payments of nearly $2.0 billion in 2012, or 22% of all state tax collections. Severance tax payments to the state the past ten years totaled $8.9 billion after rebates.
  • Oklahoma remains a Tier 1 energy state with an economic cycle highly influenced by activity in the oil and gas sector. The energy sector provided the state economy with a significant economic cushion during the recent national recession and has boosted the overall rate of state economic growth the past decade.
  • Growth in the oil and gas industry has pushed migration into the state to its highest levels in three decades. More than 118,000 new residents relocated to Oklahoma between 2002 and 2012, more than three times the rate experienced from 1991 to 2001. Recent state population growth exceeded 1% annually for the first time since the early 1980s.
  • Strong earnings gains in the oil and gas industry have propelled Oklahoma per capita income to 96% of the U.S. level. Oklahoma personal income per capita is up from 85% of the national average only a decade ago. The gains are largely traced to the performance of the oil and gas industry.
  • Oil and gas activity forms the core of entrepreneurial and investment activity in Oklahoma. Nearly 40% of all income produced by proprietors and partnerships statewide is derived from the oil and gas industry. Most of the largest and best-performing public companies based in the state are in the energy industry.
  • Oil and gas is driving much of the economic growth in the non-metro areas of the state. Oil and gas activity is having a transformative effect in many smaller, non-metro areas of the state. In the recovery years of 2010 through 2012, job growth in the non-metro energy producing counties totaled 5.3% versus only 1.1% in the non-energy counties.
  • Oklahoma is home to the second largest concentration of oil and gas activity in the U.S. Other than Texas, Oklahoma has the highest number of oil and gas wage and salary workers and proprietors and the highest total earnings from the oil and gas industry.
  • Energy states continue to enjoy faster long-run job growth than non-energy states. Since 1965, Oklahoma has added roughly 20% more jobs than the average of the non-energy producing states. Every energy state except West Virginia has outperformed the non-energy states in job growth since 1965.
  • Spillover effects from oil and gas are driving economic activity in other Oklahoma industries. Oklahoma oil and gas firms made an estimated $22.1 billion in purchases in 2011, of which $10.2 billion was spent within Oklahoma.
Source: The New York Times
Oil and gas production has always followed supply and demand, but the critical question and challenge for producers, utilities and consumers within specific formations is, "how can the cost of exploration and production be more competitive through advanced technology measures where all stakeholders work collectively to increase the competitive advantage for a formation and control area?" Within the Mississippi lime the challenges now expand beyond supply and demand with issues surrounding produced water. The NESI-SES Association research is focused on how to turn produced water into a competitive advantage with innovative solutions that converge technologies and industry.

The Mississippi Lime formation lies beneath north-central Oklahoma.
The STOP research project will concentrate on specific control areas and will address critical questions within the NESI-SES Pillars. STOP will analyze distributed energy resources with integration into existing infrastructure investments to optimize electrical energy and capacity to optimize energy creation and utilization. This optimization will put downward price pressure on energy and capacity to help reduce operating cost for the oil and gas industry making the Mississippi Lime play profitable again.

NESI-SES Research Questions Addressed

This NESI-SES research project will analyze five focus areas that we refer to as research pillars:

  • Shaping Policy
  • Advancing Technologies
  • Engaging Stakeholders
  • Enabling Solutions
  • Building Skills/Competencies

Shaping Policy Key Questions Addressed

  1. What are the current national, state and local policies or regulations?
  2. How can current regulations be adapted to support a STOP solution that includes Microgrid and DER (Distributed Energy Resources) technologies?
  3. What reliability and security measures will be required?
  4. What incentives would be available if the STOP solution were to increase tax revenues, decrease regulatory challenges and increase water capacity in the state?

Advancing Technology Key Questions Addressed

  1. What are the primary converging technologies that will enable solutions for cleaning produced water (Desalination)?
  2. What financial resources will be required to advance the multiple technology solutions within the control (microgrid) area?
  3. How can the technology be optimized with current restrictions?
  4. What will be the ongoing operations and maintenance requirements?

Engaging Stakeholders Key Questions Addressed

  1. What new relationships need to be forged by sector?
  2. What alliances will be required to ensure success within a STOP model (Produced water, micorgrid, DER, etc.)?
  3. What government agencies, vendors, suppliers or consultants need to be a part of the collaboration?

Enabling Solutions Key Questions Addressed

  1. What will be required to operate a microgrid?
  2. What contingency plans will be necessary?
  3. What systems or processes will be necessary?
  4. What technologies and opportunities exist for expanding opportunities and solutions?
  5. What data management requirements will be needed to facilitate, administrate and leverage the data related to assets?
  6. What will be the implications of insurance?

Building Skills/Competencies Key Questions Addressed

  1. What education will be required by sector?
  2. What new business modeling, training and education will be required?

Current Case Studies

Investments Currently Estimated at $1,000,000

  • Critical Staffing
  • Oil and Gas Pad sites
  • Smart Grid Technologies
  • Communication Network Integration (ProValue)
  • System Operations Center Analytics – Monitoring/Control Center
  • Data Storage/Management
  • NESI-SES Compliance Plan
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