Oil Companies Utilizing Recycled Water For Hydraulic Fracking

Includes: SLB, TMEN
by: Jake Mitchell

Not all investors may be familiar with the notion of hydraulic fracturing, however, those that are hoping to invest in the next great industry boom would be wise to educate themselves on the topic. In short, hydraulic fracturing or hydrofracking, is a technique used to extract petroleum, natural gas and other resources from the earth by injecting highly pressurized fluid into previously inaccessible channels of rock, thus significantly improving the recovery rate of hydrocarbons.

While this is beneficial to recovering more oil, a secondary issue has arisen. What is to be done with the recycled water that was used in the process? The issue lies in the fact that recycled water can't yet be filtered enough for drinking or growing crops. In some places, oil companies have to pay up to $8 per 42-gallon barrel to contractors to haul wastewater for disposal elsewhere. This process can cut costs by as much as $2 per barrel in some areas when done on site, which could equate to a significant savings over the lifetime of a typical well. It's a multi-billion dollar problem that someone or some company is going to solve.

Companies around the country are racing to find ways to recycle the water used in hydraulic fracturing, in searching of a growing market that could be worth billions of dollars. Industry giants such as Halliburton Corp. (NYSE:HAL) and Schlumberger Ltd (NYSE:SLB) and emerging microcap companies such as ThermoEnergy Corp (OTC:TMEN) and ECOtality, Inc. (ECTY) are all attempting to perfect technologies that allow for the reuse of the "frack water" that comes out of wells after hydraulic fracturing.

Schlumberger predicts a million new wells will be fracked around the world between now and 2035. One can imagine the burden this will place on the demand for usable fracking solution. With this increase in demand new technologies are bound to be developed.

One promising solution is ThermoEnergy's TurboFrac™ technology, a cost effective application to recover and recycle clean, usable water from contaminated produce water created by the hydraulic fracturing ("fracking") of oil and gas wells. In addition to recovering usable water for reuse in fracking operations, the TurboFrack system can concentrate the chemicals and other impurities for recycling or safe, cost-efficient disposal.

Another idea comes from Schlumberger where the company has devised a way to add fibers to the mix of hard small grains used to hold open the cracks. The fiber is being seen as a major production improver. Much more flow for a longer period is the result. That flow, called conductivity, has been the problem of wildcatters for 150 years.

While we don't know what the future of the industry may hold, we do know that innovation and advancement are on the way. Which company will solve this billion dollar problem and reap the financial gains, only time will tell. However, investors would be wise to devote some attention to both emerging companies such as ThermoEnergy and established large caps like Schlumberger. Their management teams recognize the monumental task at hand, and already appear to be one step of the competition in finding a solution.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.