When Oil & Gas Journal readers mention water, the likelihood is high they are speaking in terms of the compound’s use in oil and gas field operations. Managing the logistics of water supply and the challenges of its scarcity remains high on the list of concerns for drillers and producers alike.
Earlier this month, in an industry brief from Raymond James & Associates, energy research analyst Pavel Molchanov posed an important question for industry: “How serious is the global challenge of water scarcity?”
Today, he said, there are large portions of the world “where physical water scarcity presents a serious problem (all the way to actual rationing)—and the supply-demand balance will only become tighter over time.”
In the brief, Molchanov provides a global perspective on the issue of water scarcity, quantifying where the risks are the greatest as well as outlining some solutions “that increasingly will be required to manage the slow but steady demand growth for a crucial, non-substitutable commodity whose underlying supply is essentially static.”
Baseline water stress
While stressing that “‘the running out’ of water, in the literal sense, is not a risk any time soon,” Molchanov said that scarcity is already a problem in many countries.
South Africa, India, and in California in the US—“where large populations are compelled to ration daily water consumption”—are just a few examples of baseline water stress.
Baseline water stress, as defined by the World Resources Institute, is a metric represented by the ratio of demand and supply, or more clearly put, total water withdrawals (sum of agriculture, residential, and industrial consumption) divided by total of renewable water availability (sum of surface and groundwater).
“The higher the ratio, the more water users have to ‘compete’ for each unit of supply,” Molchanov said.
Five of the world’s major economies have demand-supply ratios higher than 3x, indicating a high level of water stress, he explained. The top five countries with the highest levels of baseline water stress were found to be Italy, 3.01; Turkey, 3.56; Mexico, 3.86; India, 4.12; and Saudi Arabia, 4.35. The next seven countries fall between 2x and 3x or have medium water stress. These are Indonesia, 2.07; Germany, 2.14; France, 2.19; China, 2.4; South Korea, 2.55; Australia, 2.67; and South Africa, 2.89.
“To emphasize, this is not purely—or even primarily—a matter of which countries have the highest temperatures or the most arid deserts,” Molchanov said. “Climate and geography play a role, but so do population density and economic dynamics (e.g., the mix between agriculture and manufacturing).”
He noted, “Countries with high and medium levels of water stress can be found in both the Eastern and Western hemispheres, as well as both north and south of the Equator; and they comprise industrialized, middle-income, and low-income economies. Simply put, this is truly a global phenomenon—contrary to conventional wisdom that it is only present in the Middle East and parts of Asia.”
Water stress severity
So, the report postures: How severe could water stress become in the future?
“To state the obvious, global water consumption—much like oil in this regard—tends to rise over time,” Molchanov said. He notes, however, that a “disproportionately large share” of the demand growth (about half) is coming from manufacturing.
“On an all-in basis, the International Institute for Applied Systems Analysis forecasts global water demand increasing by an average of 0.6%/year during 2010-50, or 26% in total,” he said.
“In contrast to demand, aggregate water availability—at least using conventional harvesting and extraction means—does not change in any meaningful way over the long run,” Molchanov explains.
“With demand up and supply flat, it is by definition the case that the aforementioned water stress ratios will, for most countries, be worse by midcentury than they are today,” he said.
Considering solutions—of which there are many, Molchanov said—it’s a matter of how quickly any will scale.
“Whether the solutions are demand-side or supply-side, they all require investment—which, of course, creates opportunity for water technology providers and project developers-operators,” he said.