Earthquakes Increase Costs Even More For Texas Shale Producers

A series of recent earthquakes in Texas are poised to hike production costs even more for U.S. shale oil producers, Reuters said on Friday, with regulators looking to crack down on some wastewater disposal wells.

Wastewater is a vital part of the oil and gas production process, with water that comes up along with the oil and gas being injected back into the ground. This wastewater reinjection, however, has been accused of contributing to earthquakes in the area, bringing a new level of scrutiny to the practice.

There are now limits to how much water can be reinjected underground—with deeper wells facing tighter restrictions.

The recent series of earthquakes struck in mid-November, with a 5.4 magnitude. It was near oil and gas operations that were already under restrictions for reduced wastewater injections. Texas was required to reduce water volumes by 68% by mid-2023—a 68% decrease from earlier this year.

Subsequent earthquakes will cause regulators to clamp down even more.

Should another 4.5 magnitude earthquake or higher occurs within the same Northern Culberson-Reeves Seismic Response Area, all deep wells will be shut for 2 years from the date of the quake, regulators have said. Currently, there are 78 active disposal wells in that area, with 19 of them deep wells that took in 400,000 bpd of water, Reuters said, citing B3 Insight.

Shutting in those deep wells could cause serious logistics issues, infringing on oil and gas producers’ ability to produce oil in both West Texas and New Mexico. In order to continue to pump oil and gas, producers would need to transport the wastewater elsewhere—instead of injecting it into the ground. While it wouldn’t stop oil and gas production, it would certainly add to their costs.

Chevron is among those affected by the new regulations, with 10 of its deep wastewater wells capable of handling 745,000 barrels of water per day under new limits.

By Julianne Geiger for Oilprice.com

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