Value Microcaps Junior Energy

[Ed Ajootian]

Increased Fracking Creates a Burgeoning Water Services Industry By G Joel Chury

Hydraulic fracturing or fracking is the process whereby hydrocarbons are freed from within shale rock deposits by pressurized water and additives. Such is the hunger for energy that 80% of all new North American oil and gas drilling now utilizes this technique, which, in its current form, is barely a decade old. Fracking requires enormous amounts of water, which has midwifed the birth of a highly lucrative water services industry.

For every horizontal well that is drilled, the fracking involved uses two to six million gallons of groundwater. This year, in the United States alone, the industry is projected to use anywhere from 70 billion to 140 billion gallons. Water services can amount to up to 30% of the initial costs of a new well.



These services include supply, transportation, disposal and treatment. Currently, about 60% of fracking water is recycled, 30% directly and another 30% over the life of the well. The big money is in continuous water reuse, especially when a water services company forms a relationship with a major producer with extensive drilling activities. For example, the relationship between Ridgeline Energy Services TSXV:RLE and EOG Resources NYSE:EOG.

“[A young EOG manager] identified four years ago that there were some problems coming down the pipe here,” recalls Tyler Heathcote, President of Ridgeline Energy Services and Ridgeline Water. “So he wanted us to start researching different technologies for him, and that’s how it all got started.”

Heathcote continues, “The big focus for our business is to provide a service where we can take the client’s contaminated water and recycle it so that they can reuse it over and over again, while not putting a strain on the surface water. Of course we’d like to charge on a per-gallon, per-litre or per-cubic-foot basis—[basically] to just charge on per-volume rate for treated water.”

Oil and gas newsletter writer Keith Schaefer has dubbed the idea of per-volume billing the “ Holy Grail” model. This model has yet to be monetized, but best guesses suggest $3 to $7 per barrel (42 gallons) of water.

Ridgeline began its work primarily in the natural-gas heavy Horn River Basin in northeast BC, only to concentrate later on oil plays after the gas-price collapse. Today, the company operates across North America, including such highly-productive regions as Texas’s Eagleford Shale and Pennsylvania’s Utica Shale. Each region has its differences, but all are faced with the need to reduce water consumption.


The potential is huge. I’ve never seen anything like it over my entire 20-year career in the industry —Tyler Heathcote


Water requirements for the fracking industry have increased almost exponentially over the last five years. So the challenge is obvious. “The potential is huge,” Heathcote declares. “I’ve never seen anything like it over my entire 20-year career in the industry. Companies need to continue developing these resources, but water remains a primary concern. This is coming as a result of the governing bodies finally implementing some very strong water-usage regulations, which were non-existent 10 years ago. It has all led clients to looking for ways to manage their water properly so that they can maintain their economic viability.”

Ridgeline helps maintain that viability in two ways. First, by recycling the water that has come out of the well for future use, reducing dumping costs and providing a supply for future drilling activities. And second, by separating oil and gas from the water during treatment, thereby providing greater production and efficiency.

Heathcote concludes, “The oil markets are extremely busy, and we’re in a situation right now where we’ve got more demand than supply for our services. We’re looking to rectify that scenario by ramping up and getting to a steady-state manufacturing situation where we can build a lot more of our systems and get them out in a shorter time frame. That would enable us to meet a lot of our budget projection.” In short, “Things are looking very good.”

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Above from "Resource Clips" with a web page showing today's date,

http://resourceclips.com/2012/04/03/liquid-gold/

Great to see RLE.V finally start to leak their ties to EOG to the media.