This is an extract from the LEIF Brief on Water Innovation in Oil and Gas, in association with Global Corporate Venturing, which will be presented on October 15th at a round table event in London, and published soon thereafter by Global Corporate Venturing. Click here to download an executive summary of the LEIF Brief, which is sponsored by Veolia.
Put simply, water-tech innovation in oil and gas falls into two categories:
– reducing the amount of water required in extraction to ‘flood’ oil or gas out (for example, by using chemicals instead of, or in addition to, water)
– treating the water that is produced as an unwanted by-product ahead of its disposal or reuse and recovering anything valuable
That’s because water is both an extractive tool of the oil and gas industry and its biggest waste by-product. Huge volumes are required for extraction. Even larger volumes are then produced alongside the oil and gas, often with a mix of naturally-occurring pollutants alongside any chemicals and other compounds that went into the water before use. In fact, more water is almost always produced than oil and gas. GWI reports that “The ratio of produced water to oil production in mature fields is rapidly increasing. The decline in easily accessible oil means that wells that may once have been shut due to high volumes of water are now being kept in production. In Oman, for instance, the water to oil ratio increased from 6 to 24 between 2006 and 2013.”*
One way to increase the efficacy of water used in oil and gas extraction is to add chemicals. Chemical enhanced oil recovery is one of the fastest growing markets for the chemical majors. Put simply, the cleverer the chemicals are at peeling away the oil and gas molecules from the reservoir walls, the less water is required to push the oil and gas out of the reservoir. As more and more conventional oil and gas fields reach maturity – meaning they yield their valuable contents less readily – more and better chemicals are required.
Novel chemical technologies that reduce or eliminate water use are a growing area of innovation and investment. Aqdot, a chemical encapsulation technology spun out of Cambridge University’s Chemistry Department, raised £1m at the end of last year in an A round led by Imperial Innovations (a pioneer in British university venturing). Oil and gas is one of its target markets.
Aqdot’s technology has the potential to activate chemicals at the time and place where they can work most effectively to extract oil or gas from a reservoir. This would reduce requirements for both chemicals and water because it would eliminate waste. It’s a company being watched carefully by oil and gas corporate venture capital and could one day be an acquisition target for the large chemicals companies.
Taxon Biosciences, a Californian microbe technology business whose investors include BP, is also working at a molecular level in the oil field. Its bespoke microbes can reduce the viscosity of heavy oils such as those found in Canada’s tar sands, thereby greatly reducing or potentially even eliminating the need for water in their extraction. Currently, extracting oil from tar sands is extremely water-intensive.
There are several more mature chemical innovations businesses aimed at reducing the water needs in oil and gas extraction. Gasfrac, a Canadian business quoted on the Toronto Stock Exchange, provides waterless fracking thanks to LPG gel technology.
Huston-based Oxane Materials has raised $100m over the last decade from a group of investors that includes the venture units of Conoco Phillips, BP and Chevron. Its nanotech-enabled ceramic Proppants hold fracs open so that oil and gas can flow more easily, thereby reducing water needs.
Calgary-based N-Solv Corp received $10m in funding in 2011 from Sustainable Development Technology Canada, a Canadian government-backed entity, for the development of its bespoke solvents, which are used as an alternative to water in the extraction of oil from Canada’s oil sands. Typically, the oil sands are ‘mined’ using a highly water-intensive process call steam-assisted gravity drainage. N-Solv’s proprietary solvents release the oil from the sands without the need for steam. N-Solv is being trialled by Canadian energy giant Suncor.
TouGas Oilfield Solutions has raised an undisclosed sum from Conduit Ventures and Enertech Holding (which is backed by the Kuwait Investment Authority) to commercialise its polymerisation technology which reduceds the consumption of fresh water in fracking.
And there’s not a large chemicals company in the world for which oil and gas is not a vast and top priority market. BASF Venture Capital (which invested in NanoH2O) is just one of the many chemicals corporate venture capitalists watching the water-chemicals-energy nexus very closely.
*GWI report: Water for Onshore Oil & Gas – Opportunities in produced water management, hydraulic fracturing & enhanced oil recovery