Point Roberts, WA (PressExposure) August 11, 2009 -- http://www.Water-Stocks.com, an investor and industry portal for the water sector within Investorideas.com, presents a sector close-up on water stocks by Lisa Springer CFA, Equity research analyst, on the market opportunity for remediating oil- contaminated water.
Market Opportunity Remediating Oil-Contaminated Water Lisa Springer CFA, Equity research analyst and financial writer
Stocks Covered: Cameron Intl Corp (NYSE:CAM), General Electric (NYSE:GE), Nalco (NYSE:NLC), National Oilwell Varco (NYSE:NOV), Veolia (NYSE:VE), Wescorp Energy (OTCBB: WSCE), Weatherford International (NYSE:WFT)
Although oil spills capture headlines, a greater environmental challenge for the oil and gas industry is remediating water polluted in their production operations. Water that comes up with the production of oil and gas is called âproduced water.ââ Produced water is tainted with hydrocarbon solids, sand, drill cuttings and salts. Oil companies spend an estimated $50 billion every year remediating and/or disposing of produced water to comply with local, state, provincial and federal environmental laws.
The volume of produced water worldwide is estimated at tens of billions of barrels each year. On average, every barrel of oil produced results in three barrels of produced water. That equates to managing or disposing of more than 250 million barrels of produced water each and every day. The hydrocarbons trapped in produced water are, not only an environmental hazard, but also a source of lost revenues. Data indicates that, on average, nine tons of oil is released via produced water for every million tons of hydrocarbons produced.
Disposal costs for produced water add to already high energy bills. These costs typically include trucking, pre-treatment, injection and desalination, and can run as high as $15 per barrel. Disposing of the hydrocarbon solids that remain after the water is treated is even costlier, estimated at nearly $72 per barrel.
Remediation costs for produced water are likely to continue to rise because regulators are pressing for more stringent environmental laws. Penalties for non-compliance are severe; for example, Suncor was recently fined $850,000 for an environmental violation. Costs are also increasing because oil companies are producing more oil to meet the worldâs insatiable appetite for energy. Producers are stimulating production from older wells through re-fracturing, a process requiring massive amounts of fresh water, and tapping unconventional oil field plays such as the Alberta Oil Sands and the Barnett Shale.
Canadian producers are already consuming over 540 million barrels of fresh water in Alberta Oil Sands operations, resulting in paying water clean up and disposal costs exceeding $100 million annually. Despite the fact that globally fresh water is becoming a scarce commodity, more water is being used, leading to demands that producers reduce water consumption. The problem is that todayâs unconventional oil productions require more water than ever â as many as 20 barrels of water for every barrel of oil produced.
The management of produced water is a large market and several companies are marketing technologies for cleaning produced water. The Petreco Wemco division of Cameron (NYSE:CAM) markets a heat treatment technology that separates hydrocarbons from water. National Oilwell Varco (NYSE:NOV) manufactures and sells equipment that mechanically removes suspended solids from produced water. Nalco (NYSE:NLC) offers an aeration technology called Induced Gas Flotation that removes suspended particles from water. Privately-held Welco Expediting and Process Group market centrifuging technologies for cleaning produced water. The GE Zeon segment of General Electric (NYSE:GE), Siemens Water Technology and Veolia (NYSE:VE) offer treatment methods based on filtering membranes. Although all of the above-mentioned methods remove some of the pollutants, most single technologies leave behind residential oil content ranging from 500 to 50,000 parts per million in the water. Having residual hydrocarbon in their produced water has a major impact on producersâ operating expenses.
Wescorp Energy (OTCBB:WSCE) recently began marketing a novel remediation technology called H20Maxx, which the company claims offers a safer, more effective and economical process for cleaning and separating oil and solids from produced water. H20Maxx employs a patented aeration technology that creates microscopic nitrogen bubbles several orders of magnitude smaller than conventional methods. These bubbles attach to oil droplets and break the oil/water interface, allowing oil to be separated. Third party laboratory tests have shown that H20Maxx reduces oil content in produced water to less than 10 parts per million. Because H20Maxx-treated water is more hydro carbon-free, it dramatically reduces both operating costs and water consumption and also provides the producer with a resalable oil stream. For producers operating in areas where water is in short supply such as the Barnett Shale and Alberta Oil Sands, the ability to re-cycle water is a major advantage.
Oil and gas producers recognize the benefits of H20Maxx and have begun using Wescorpâs technology. Last December, Wescorp received 3rd party verification of the H20Maxxâs efficiency and scalability, which led to the signing of a letter of intent with Weatherford International (NYSE:WFT).Weatherford is one of the worldâs largest energy services providers, with operations in more than 100 countries and annual revenues of nearly $10 billion.
In 2009, Wescorp has made significant progress deploying its technology. The company shipped its first H20Maxx unit to an oil/gas operator in Kansas in May. The unit began operating in July, providing remediation services for one conventional oil well, and is performing well. The oil company in Kansas has now ordered a second unit. H20Maxx units are leased on a day lease rate with a 2,000 barrels/day unit leasing for approximately $1,500/day. In June, Wescorp announced the leasing of an H20Maxx unit to Western Canadian Oil Sands, which plans to deploy the unit at its Athabasca Oil Sands operations in Northern Alberta. In late July, Wescorp announced a 50/50 joint venture with Cancen Oil Canada Corporation to initially install a combined 12 H20Maxx water units and HXCT solids units over the next 12 months at Cancenâs facilities. The joint venture will then build additional units to provide onsite remediation to oil and gas producers in western Canada. Cancen will fund, operate and manage the joint venture, as well as fund construction and deployment costs of the units.
Lisa Springer Bio/ Disclaimer: http://www.investorideas.com/About/Lisa-Springer-CFA/
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Featured Water Stocks Showcase Company: Wescorp Energy Inc. (OTCBB: WSCE ) Wescorp Energy Inc. (OTCBB: WSCE) is an Oil and Gas solutions provider focused on deploying its water remediation and environmental technologies that overcome tough operational challenges facing oil and gas operators today on a global basis. Virtually anywhere in the world oil is produced contaminated water is produced, this includes associated formation water in conventional oil and gas production and potable water used in unconventional oil production such as the massive Oil Sands development in Alberta Canada.
Using conventional oil/water/solids separation technology, between 0.05% - 5% (500 ppm - 50,000 ppm) residual oil content remains in the water, Wescorp's patented, proven and highly scalable H2Omaxx microscopic aeration technology addresses this crisis by being able to increase the recovery of oil and reduce the amount of hydrocarbons in the contaminated water to less than 0.001% or 10 ppm. Wescorp's H2Omaxx is extremely economical and environmentally friendly eliminating the use of chemicals, filtration systems, high temperature systems and high pressure vessels. Wescorp Energy Inc Showcase Profile Page: http://www.water-stocks.com/CO/WSCE/Default.asp Wescorp Energy Inc Company Website: [http://www.wescorpenergy.com/]
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