Energy and water nexus : water management framework for the development of shale resources in Mexico

Date

2018-05

Authors

Galdeano, Carlos

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Abstract

Mexico is going through a historical moment due to eleven national structural reforms, including an energy reform approved in December 2013. This reform is expected to intensify production and other activities along the energy supply chain. Due to the relationship and dependency of energy and water systems, it is important to understand the impacts on water resources derived from the prospective increase on energy projects. In particular, an increase in water usage in water stressed areas could come from the expected development of shale resources through the combination of hydraulic fracturing and horizontal drilling (HF). The main goal of this research is to develop a framework to assist assessments of the current water available for HF in Mexico, and to analyze potential strategies that could increase the water availability to include HF users in Northern Mexico. The methodology conducted included (1) a spatial multilayer analysis that overlays the water availability in the watersheds and aquifers with the shale resources areas, (2) a decline curve analysis that estimates the potential produced water from HF users that could be reused to develop more shale resources, and (3) case studies that evaluate the potential increase in water availability for HF users due to a technology shift of current users (e.g. power plants and irrigation districts), including an estimation of the water prices required to offset the costs implied on these shifts. Results suggest the following: 1) Between 8 and 70 Quadrillion British thermal units (Quads) of energy in the typical 20-30 year lifetime of the HF wells could be supplied with the average annual water available in aquifers and watersheds overlaying the 5 prospective shale basins in Mexico (e.g. Burgos, Sabinas, Tampico, Tuxpan, and Veracruz). However, geographic variation in water availability could represent a challenge for extracting the shale reserves. Most of the available water is located closer to the Gulf of Mexico, but the areas with the larger recoverable shale reserves (e.g. Burgos and Sabinas basins) coincide with less water availability in Northern Mexico. 2) The potential produced water from HF activity in three prospective areas analyzed in Northern Mexico, could be reused to extract around 0.02 to 0.06 and 0.04 to 0.1 Quads of energy in the overlaying oil and dry gas areas in the Burgos Basin throughout a 20-year period. This energy would represent from 0.4% to 1% and 0.01% to 0.03% of the recoverable resources in these areas. 3) Shifting the technology of two coal red power plants (CPPs) to natural gas combined cycle (NGCC) in Northern Mexico would save enough water annually to supply HF wells that could extract between 0.7 and 1.2 Quads in a 20-year period, which would represent between 11% and 18% of the recoverable resources of the overlaying shale area. The water prices required to offset the technology shift of the CPPs would range between $1.3 and $6.3 USD/m³, which is similar to the price that HF users have paid in the Texas' Eagle Ford Shale (on average 3.9 USD/m³). 4) Shifting the irrigation technology in each of the two districts analyzed in Northern Mexico would save enough water annually to supply HF wells that could extract between 0.24 and 0.4 Quads in a 20-year period, which would represent from 0.1% to 0.15% and 4.2% to 7.5% of the overlaying shale areas of each irrigation district. The water prices required to offset the shift in irrigation technology in the districts would range between $0.03 and $0.09 USD/m³, which is about 2 orders of magnitude smaller that the water prices required to offset the shift in technology of the CPPs. The results of this research could inform decision makers and different players in the region (e.g. irrigation districts, and industrial users) of potential strategies and collaboration opportunities with the prospective HF projects in Northern Mexico. Future research could evaluate other water supply alternatives for potential HF users, such as (a) the use of degraded water quality sources, (b) the construction of potential projects to transfer water from different watersheds or aquifers, or (c) the use of nonaqueous fracturing fluids.

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