The definitive answer to Texas’ drought, concerns about future supplies of potable water, and oil industry fears of fracking drying up is next generation technology that hits out at the water dilemma on three fronts simultaneously.
Developed in the Netherlands by Salttech, the DyVaR Zero Liquid Discharge (ZLD) water processing technology was licensed in July 2014 by Texas-based STW Resources Holding Corp. (OTCQB: STWS) in the giant oil and gas venue of the Permian Basin. Now the proven next generation technology is moving across the state to provide local citizens and oil producers alike with more water than they ever imagined.
For the dry state of Texas, this is nothing short of revolutionary. As NASA predicts a decades-long ‘mega drought’ later this century, and as the state is already in an unprecedented drought situation, the urgency of this revolution is felt far and wide—particularly in the oil and gas industry, where fracking is dependent on huge supplies of water.
Not only does Texas have the massive Permian Basin and the Eagle Ford oil and gas shale reserves, but it also has the Gulf of Mexico and its endless billions of gallons of seawater that are now economically treatable thanks to the STW Salttech water processing technology.
Onshore, STW Resources is drilling deep under the Texan surface to access new sources of brackish and slightly salty waters and then using its Proprietary Hybrid Reverse Osmosis Technology and its exclusively licensed Salttech system to process these new resources into potable water and supplies for the industrial sector, municipal sector and the oil and gas industry.
Offshore, its plan is to tap into the Gulf of Mexico, desalinating ocean water and turning it into potable water.
The Salttech systems can be manufactured to process as many gallons of water per day as is needed, according to STW Resources, which has the exclusive license for this technology not only in the US, but also options for use in Canada, the Caribbean, Mexico and Central America.
Green All The Way: Economical And Environmentally Friendly
Not only is STW unlocking never-before accessed sources of water deep underground, but its water processing technique is economically feasible.
Economics has always been the bane of desalination, and this has kept it from being undertaken in a more aggressive and commercial way.
Until now, the price of desalinated produced water projects in the oil and gas industry has hovered around $4.50-$8 a barrel, but STW’s project comes in at around $1.50-$2.50 per barrel, which makes it competitive with drilling for and transporting fresh water.
In the ocean desalination business, the key to the economics is the fresh water recovery percentage and the environmental aspects to disposing of the salty concentrated reject fluids.
Before the rise of Salttech, conventional desalination technologies could only recover about 35%-45% of fresh water from a gallon of seawater. STW’s Salttech technology recovers approximately 97% of the fresh water at an economical cost with no potential environmental disposal problems associated with the concentrated salty reject.
At the same time, the new technology uses no chemicals or filtration, rendering it quite possibly the ‘greenest’ water processing technology in operation today.
Adding to the environmental lure is the fact that STW’s Salttech Technology can be operated entirely on solar and/or wind power energy.
The Water Revolution: Mentone and Beyond
Last July saw the first Salttech system operation in the United States launched in Mentone, Texas, in the Permian Basin. The Salttech desalination system is now providing the residents of Mentone with more drinking water than they could have ever hoped for.
But Mentone is just the beginning. STW has even bigger plans for other Permian Basin projects.
In the Capitan Reef Aquifer, on property owned by the city of Fort Stockton, Texas, STW is now drilling its first production well and planning to drill several additional wells into this and other brackish aquifers about 2,000-4,500 feet under the surface The goal is to start selling water in the 2nd-3rd quarters of this year.
The Capitan Reef Project is a highly ambitious one with a price tag of $42.5+ million. This project is tapping into possibly 14 million acre feet of water—or about 5.6 trillion gallons, with a potential production rate of 100+ million gallons per day. In the first phase, the project will drill up to 11 production wells to pump up to 10+ million gallons per day. The plan is to provide potable water to thousands of west Texans in several municipalities in west Texas that are still in drought status.
Beyond this, the coming years foresee giant leaps forward in the water revolution.
Among other plans over the next couple of years, one of STW’s ports of call will be the Gulf Coast of Texas; once ocean water is being processed on the Texas coast, businesses will flood in.
“With the shortage of fresh water worldwide, our technology can help in many areas to relieve the shortages. We can also assist in any ocean desalination reverse operations to exclude the need to dispose of the concentrated brine reject into local waterways and oceans thus preventing any possible detrimental effects to the highly sensitive balance of the ecosystem. The STW Salttech DyVaR system is a major technological breakthrough since we can now economically process high chloride water into potable water and not have any detrimental effects on our environment,” Stanley Weiner, CEO of STW Resources, said in a January 2015 press release.
What It Means For The Oil Industry
For the oil industry, this is a breakthrough technology that could save untold sums of money by reclaiming the massive volumes of precious water used in drilling and fracking and also processing produced water that accompanies oil and gas production.
Water-starved Texas is a highly competitive playing field and the competition between oil companies and other heavy users of water is intense. The shale boom and the hydraulic fracturing revolution have exponentially raised the stakes in this competition as demand for fresh water has soared, alongside an influx of thousands of new residents to Texas.
Producers are surrounded in a pincer movement, both by critics of how much water they use and by internal pressure to ensure enough supplies of water to keep drilling and fracking.
Three-quarters of the some 40,000 wells drilled since 2011 have been in areas where water is scarce, according to a 2014 report by the Ceres investor network. Of those, 55% were drilled in areas of drought.
When you add to this the fact that fracking those thousands of wells required 97 billion gallons of water, a picture emerges not only of general water scarcity, but of an end to the shale boom due to lack of water.
As such, it is only appropriate that water revolution begins exactly where the shale revolution emerged.
As an energy and water services company, STW Resources is rather unique. It recognized a great need to enhance and expand its operations, and set out to add the most precious element of all to its portfolio—water.
As an integrated provider of water management and oilfield services, the company’s level of integration resembles that of the supermajors. The company provides a vast range of services through three subsidiaries, STW Water, STW Energy Services and STW Pipeline Maintenance and Construction Services.
“Water is why we founded the company,” according to STW Resources CEO Stanley Weiner.
According to Weiner, STW’s initial goal was to target frack water in the oil business, but his team soon realized the endless possibilities of actually accessing and processing water that had never before been considered for human consumption. As such, “We are actually increasing the supply of fresh water into our ecosystem,” he said.
Growth has been impressive. In October 2013, STW had only 8 employees; now it has 150. In 2014, the company booked $20 million in revenues.
STW’s pipeline subsidiary, which both maintains and builds new pipelines, is poised to see growth double this year, as Texas’ hundreds of thousands of miles of aging existing pipelines have many anomalies that need repair, and the state is in constant need of new pipeline connects.
On the STW Energy side of the equation, the company is sitting pretty because it avoids aspects that it considers ‘too upstream’ and vulnerable to today’s low oil prices. Here again, the company is poised to see growth in its oil services segment.
And when it comes to water, there is no turning back the tide now. Over the next six months, STW plans to initiate several projects, including a major desalination project for a large NYSE-listed oil and gas company.
The deal is a major breakthrough: After years of experimenting, it will be the first time STW turns a profit from selling processed water to the oil industry using hybrid reverse osmosis technology and its Salttech desalination technology.
For the oil and gas companies, it is also a breakthrough—one that will ensure it a hearty, long-term supply of water and to help preserve precious fresh water resources.
The next six months are key for potential investors because this is when STW will achieve full commercialization: Supply, access to market, customer agreements and permitting in place.
Even more growth is in store for this company which highly prioritizes technological innovation and integration. The company is also exploring a creative purification technology that turns toilet water into tap water. STW will be conducting a pilot on this technology in a major Texas city in the coming months.
For Texas, the water revolution has begun—simultaneously for citizens, local governments and the oil industry. And what happens in Texas is likely to spread to other dry US states, and beyond.
By James Burgess of Oilprice.com
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