Deloitte report sees crucial energy role for water management

Water management will play an increasingly crucial role in energy globally as well as in the US, experts at Deloitte LLP’s 2012 Washington area energy conference forecast on May 21. Their assessments came as the financial services firm released a report, “No water, no energy. No energy, no water.”, as the conference got under way at National Harbor outside Washington, DC.

Businesses and governments accustomed to competing for energy are less experienced in competing for fresh water, another vital resource, the report indicated. “It takes vast amounts of water to extract, process, and produce many forms of energy, and it takes vast amounts of energy to extract, transport, and treat water…. A constraint in either resource limits the other, and this nexus of supply and demand poses substantial risks for virtually every government and every type of business,” it said.

Agriculture is the world’s No. 1 water user, but energy is close behind, according to John McCue, Deloitte LLP’s vice-chairman and its energy and resources leader. “It’s a future issue for the energy industry, getting water where it’s needed and at the right cost, and using it in a way that lets it be reused and protects drinking water supplies,” he told reporters at a luncheon.

Water-scarce countries already manage it most aggressively, observed Joe Stanislaw, a Deloitte independent senior advisor on energy and sustainability and co-author of the report with William Sarni, enterprise water strategy practice leader at Deloitte Consulting. “If we want to keep our high standard of living, we need to start managing our water as aggressively as we’re managing energy,” Stanislaw said.

Conservation gains

Deloitte’s Center for Energy Solutions said in a separate report that individual consumers as well as businesses are trying hard to use less electricity as the US economy recovers. “Companies are making significant energy-efficiency progress, reporting that they have achieved about 60% of their targets for energy savings when it comes to electricity, natural gas, carbon footprint, and transport fleets,” said Marlene Motyka, the firm’s US alternative energy leader. Businesses hope to reduce their energy use another 25% in the next 4 years so they can keep their competitive edge, she added.

As he addressed the conference’s general session, BASF Corp. Chief Executive Hans Ulrich-Engel said the current global energy consumption rate can’t be sustained. Industries are emphasizing energy efficiency because major problems will occur by 2050 if something isn’t done, he forecast.

Water management also is becoming more crucial, Deloitte’s new report said. Globally, controlling watersheds could determine where and how much oil and gas is produced, Stanislaw told reporters. Russia is water-rich, with massive supplies in Lake Baikal and other large freshwater bodies, while China, with its significant tight oil and gas resource potential, is water-poor, he said.

Alberta oil sands producers already have cut their water use in half, he continued. “The same thing will happen with hydraulic fracturing,” Stanislaw said. “It costs money to bring water in—a gallon diesel per mile.”

Community outreach

He suggested that oil and gas producers have learned a lot about the importance of good community relations in the last 5 years. “Even in areas where water is plentiful, it’s also used for drinking,” Stanislaw said. “More producers are reaching out because local communities are concerned. They’re excited about the prospects, but concerned about possible drinking water supply risks. Groups like the Ohio Oil & Gas Association have responded by requiring more transparent information about fracing and production so the public can understand what’s going on.”

Many Ohioans are excited, maintained Greg Leveille, unconventional resources technology manager at ConocoPhillips Co., during a general session discussion with retired Chevron Corp. executive Peter J. Robertson who now is a Deloitte senior advisor on oil and gas. “For years, they’d been told they were part of the Rust Belt and in severe industrial decline,” Leveille said.

A Deloitte public survey found most people believe the benefits of producing oil and gas from tight shale formations outweigh the potential risks, Robertson said. “The industry may think it’s done a lot to explain the situation, but it’s clear that much of the public still doesn’t understand,” he said.

Leveille said one of the biggest misconceptions centers on gas migrating great vertical distances through fractures to drinking water supplies. “Ironically, we’re finding that it doesn’t migrate enough, and we have to drill more wells,” he noted.

Contact Nick Snow at nicks@pennwell.com.

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