Energy Ink

Water scarcity a caveat to bullish IEA oil forecast

Lack of supply 'threatens to constrain' U.S. oil and gas production

November 14, 2012

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The shale gas and tight oil revolution is buoyed by a tremendous volume of water.

Such is the impression left once you get past talk of the “remarkable” rise in oil production in the United States described in the 2013 World Energy Outlook, published this week by the International Energy Agency. Collectively, “A volume of water which exceeds that carried annually by the Ganges River is needed by the energy sector each year,” the IEA says in its report, including electricity generation.

Among other things, and as Alex Morales at Bloomberg notes, the stark comparison serves as a caveat of sorts to the agency’s projections of abundance, including the scenario that says U.S. oil production will grow to rival Saudi Arabia’s output.

“Water scarcity threatens to constrain burgeoning domestic oil and gas production from shale formations in some parts of the country,” the IEA says of the U.S.

American tight oil production has grown exponentially, from 11,000 barrels per day as recently as 2005 to roughly 840,000 barrels per day in 2011, the agency says. The trajectory, underpinned by rapid growth in North Dakota’s Bakken and the Eagle Ford formation in Texas, could see U.S. tight oil production climb to 3.2 million barrels daily by 2025, the IEA says.

Even there, however, water is important. “In the Bakken,” the IEA authors write, “further expansion of production is contingent on water availability. Recent drilling activity has started to approach the limits of available water resources and developers believe that securing ample water will be a key challenge for continued development.”

It continues: “Texas is one of the driest regions in the country and recent extended periods of drought have heightened concerns about water availability.”

Canada is no different. “Although Canada is a water-rich country,” the IEA points out, “with annual per capita renewable water resources in excess of 85,000 cubic metres, extensive use of water in the extraction and upgrading of oil sands (or bitumen) in parts of Alberta and Saskatchewan … could have significant implications for the oil production outlook and water resources in the surrounding area.”

The anxiety over water withdrawals has recently registered in Fort Nelson, British Columbia, ground zero for the West Coast shale gas boom and the launching pad for exports of liquefied natural gas.

Last week, the B.C. Environmental Appeal Board granted the Fort Nelson First Nation the right to appeal a water withdrawal license held by Nexen Inc. that gave the Calgary oil and gas producer permission to tap 2 billion liters per year from the North Tsea Lakes.

In a statement that could serve as a check on supply bulls everywhere, Chief Sharleen Wildeman promised to fight “all water license decisions” unless the province addresses “this new and unprecedented rush for water in our land.”

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