American Oil and Gas Reporter - June 2023 - 60

SpecialReport: Permian Basin Playmakers
Water Treatment,
Infrastructure Capacities
Expanding Across Permian
By Danny Boyd
By some estimates, the United States
will be producing 55 million barrels a
day of produced water by 2025, with the
Permian Basin-the epicenter of development
and production activity-accounting
for the lion's share. That is obviously
a tremendous volume of water to manage
on an around-the-clock basis, making
midstream water service providers an integral
part of the succuss equation for
producers all across the Permian.
Midstream players continue to install
pipe, pumps, retention ponds, disposal
capacity, and produced water treatment
and recycling facilities as producers endeavor
to eliminate dependency on freshwater
for hydraulic fracturing. " On-thefly "
chemical treatment, high-rate solids
filtration, and last-mile logistical technologies
continue to advance to connect
the dots between active frac sites and
nearby produced water supplies and transportation
infrastructure.
Outsourcing produced water gathering,
transportation and recycling functions to
dedicated midstream service providers
has one huge overarching benefit for operators:
lower costs. The need for producers
to continually improve environmental and
sustainability efforts provides additional
benefits, says Larry Richards, president
of the Permian Basin International Oil
Show and a 35-year executive and leader
in Permian oil field services and manufacturing.
" Certainly,
it has other tangible benefits
for operators, but what drives the entire
model is the ability achieve cost reductions, "
Richards observes. " Being able to drive
down water-related costs in a spread-out
basin like the Permian can represent onethird
to one-fifth of total production cost. "
The evolution of water midstream mirrors
that of natural gas and crude oil midstream
before it, he observes, with companies
launching and adding to their positions
through organic growth, strategic asset
bolt-ons and acquisitions, he says. Former
executives from operating and service companies
are among those who have started
enterprises, giving the segment a readymade
vision on how to apply expertise to
further reduce costs, Richards adds.
" There are still tremendous opportunities
for deals to be done, and like any
technology, it will go for the low-hanging
fruit first where the economic payback is
unassailable, " he comments. " As it gets
more efficient and cost-effective, it will
begin to draw down and then have 90%
of the basin with water going through
pipe and not over the road in a truck.
However, we're a long ways from that
right now. "
Large-Diameter Pipeline
Marking its 10th anniversary, Houston-based
XRI Holdings LLC is in the
process of expanding its Delaware Basin
presence with an additional large-diameter
pipeline and incremental recycling capacity
to serve multiple operators, says John
Durand, vice chairman and chief sustainability
officer.
Construction is expected to begin in
the second half of the year and be completed
in early 2024, he says. The project
complements XRI's existing 65-mile-long,
20-inch diameter line that traverses the
heart of the western part of the Wolfcamp
play in Eddy and Lea counties, N.M.
Fueled chiefly by organic growth over
the past decade, XRI's position includes
450 miles of pipeline infrastructure in
the Midland and Delaware basins, where
31 large-scale recycling locations treat
1.2 million barrels a day of produced
water, says Durand.
For XRI, a portfolio company of Morgan
Stanley Energy Partners, growth continues
to be funded primarily from securing
sponsorships and anchor tenants, including
in some cases multiple operators per project,
he explains.
The planned Delaware Basin line is
XRI Holdings LLC plans to soon begin construction of a new large-diameter pipeline and
recycling infrastructure to expand its Delaware Basin capacity. The new line is expected to
match volumes of XRI's 45-mile-long, 22-inch Evolution line in the Midland Basin, which
moves 500,000 bbl/d of water.
60 THE AMERICAN OIL & GAS REPORTER
expected to match volumes of XRI's Evolution
Pipeline already in operation in
the Midland Basin. Completed in February,
the 45-mile-long, 22-inch Evolution line
can move up to 500,000 bbl/d of water
from infrastructure in Midland County
to treatment facilities and disposal wells
in Reagan and Upton counties to the
south, which XRI acquired from Hibernia
American Oil and Gas Reporter - June 2023

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