An unprecedented amount of produced water is accompanying surging hydrocarbon volumes in the Permian. Some produced water forecasts are topping 30 million b/d as water cuts from targeted formations are rising quickly in older horizontal wells. In some cases, water-to-oil ratios (WOR) in the Delaware Basin can reach 10:1.

Water handling is already expensive, and in some cases, unit costs will rise to over US$5.00/bbl as simple solutions are exhausted. Increasing volumes and expanding costs pose a growing risk to Permian production growth as they shift the entire Permian cost curve. Under a scenario of continually inflating disposal costs, we see the potential for 20% of undrilled Permian barrels to become non-commercial.

Nearly 400,000 b/d of crude production is at risk by 2025 after taking into account the updated breakevens in our unconstrained Permian supply model. Annual production growth is 15% slower through 2025 because of less cash flow available for reinvestment. The Delaware Basin accounts for roughly 65% of the supply reduction due to the highest water costs and volumes.


The Permian is today's most important oil supply growth region. Over 2 million b/d of oil supply growth over the next five years is expected as operators add more rigs and ramp-up completions. While attainable, the number of operational risks and bottlenecks continues to grow.

Modern Permian produced water management presents a unique set of challenges compared with years prior. The sheer volume of water is unprecedented. Record drilling activity is compounded by more water used in completions and water cuts from the targeted formations rising quickly in older horizontal wells. This latter point is of material concern. In some cases, water-to-oil ratios (WOR) in the Delaware Basin can reach as high as 15:1 and operators are unable to cheaply reinject all those volumes.

Water handling is expensive, and unit costs are also expected to rise as simple solutions such as local shallow disposal become exhausted. Growing volumes and rising costs are a bad combination that poses a supply risk to the region.

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