Water handling emissions: An emerging dimension of shale maturity

Since the rise of shale in the onshore arena, the volume of produced water has expanded dramatically. This trend is primarily driven by the continuous development of shale, while water production from conventional fields has remained steady, contributing to the overall increase. From 2010 to 2024, water volumes from shale have grown by more than 900%.

Today, North American oil and gas producers bring to the surface, process, move and find a new home for 75 million barrels of water each day – almost five times the level of oil production.

The problem is only intensifying. As the shale assets base ages, their water-to-oil ratios rise, turning water management into an increasingly complex- and costly-burden for operators.

Operators have also focused on reducing the carbon footprint of their overall operations as regulators and investors evaluate their performance. In particular, they are searching for solutions that would simultaneously reduce operating costs and emissions.

Water handling is an area in which we, at S&P Commodity Insights upstream emissions research, believe offers that opportunity, even as the growth in volumes creates a real challenge.

Breakdown of water handling emissions

Produced water -- extracted alongside oil and gas -- requires careful management and can generate significant emissions at different stages. According to the S&P Global Commodity Insights' Water Handling Emissions Model, water-related emissions in Permian Basin can be at least 4kg CO2e per barrel for unconventional plays, while conventional plays can see emissions as high as 20kg CO2e per barrel. The model analyzes emissions across three categories: production, transportation, and reinjection. Each stage presents distinct challenges and opportunities, particularly for operators balancing profitability with sustainability goals.

1. Water Production Emissions

Produced water flows to the surface mixed with hydrocarbons during extraction, contributing emissions from energy-intensive lifting processes. Water volumes vary by basin, with mature regions like the Permian Basin seeing large amounts of produced water. Efficient water management in these basins is crucial, as both the operating cost burden and environmental impact are high

2. Water Transportation Emissions

Transporting produced water to disposal or recycling sites is a key contributor to emissions. Trucking dominates in regions lacking pipeline infrastructure, such as the Williston Basin, adding to the GHG footprint. In contrast, the Permian Basin benefits from more pipelines available, allowing for emissions reductions through infrastructure investments. Investors are closely monitoring these developments as companies strive to phase out trucking in favor of pipelines to meet emissions targets.

3. Water Reinjection Emissions

Reinjection for disposal generates additional emissions, requiring energy to pump water into underground injection wells. This is particularly prominent in the Permian Basin, where deep wells are used for this purpose. Companies that improve reinjection efficiency through technological upgrades -- such as more efficient pumps -- can not only reduce emissions but also reduce variable operating costs.

Emerging trends in water handling and sustainability

Operators are shifting toward sustainable and efficient water management, driven by internal decarbonization pledges, cost goals, regulatory pressure and investor demand for low-carbon solutions. Key trends include:

• Increased Pipeline Infrastructure: Investments in water pipelines, particularly in the Permian Basin, are helping companies cut transportation emissions. Pipelines also offer cost savings, making them attractive to investors seeking operational efficiency alongside decarbonization.
• Produced Water Recycling: Recycling produced water for reuse in hydraulic fracturing reduces the need for freshwater resources. Although recycling requires energy and adds emissions, net environmental benefits make it an appealing option for sustainability-conscious operators and investors.
• Monitoring and Measurement Improvements: Companies are adopting digital tools such as IoT-based monitoring and advanced data analytics to track water handling emissions. These technologies are essential for carbon reporting and compliance, which will increasingly influence access to financing and partnerships.
• Risk Mitigation: Most recently the Railroad Commission of Texas has imposed tighter restrictions on injection disposal wells due to the increased events of earthquakes related to produced water injection wells. The situation has pushed some companies to reduce water injection plans up to 75% in more seismic sensitive areas. These restrictions, which may increase as water disposal volumes rise, is a risk to cost discipline (longer hauling distances) but also can keep volumes in the ground if disposal is unavailable. Therefore, operators are looking for options, with some even evaluating discharge of treated produced water into waterways. This case requires special attention in terms of potential environmental risks. Federal and state agencies are called to take action and regulate this activity.

Insights from play-level emissions

The Permian conventional is mainly produced through vertical wells with lower production rates and the highest water volume produced historically. Despite oil volumes declining over the long-term, water production increased modestly. Interestingly, the key driver behind the step-down in 2020 and the decline of the past few years has been the shut-in of old, stripper wells. Meanwhile, the rapid rise in hydrocarbon production from the basin's three shale plays -- the Wolfcamp Delaware, Wolfcamp Midland and Bone Spring – has generated a tidal wave of associated water production from both fracking water and produced water.

Nationwide, this rise in water production has led to substantial water handling emissions.

The high level of production in the Permian has naturally resulted in higher emissions associated with water handling and reinjection there versus other basins. However, operators have successfully mitigated transportation emissions through strategic investments in pipeline infrastructure, leading to lower emissions intensity compared to other basins constrained by pipeline access. In contrast, Bakken operators encounter challenges due to their dependence on trucking, even as they continue to invest substantially in reinjection infrastructure. This data enables investors to evaluate basin-specific emissions performance and pinpoint operators with substantial potential for emissions reductions.

The Investment Case for Sustainable Water Management

As global energy markets transition toward sustainability, operators are looking for ways to reduce emissions, and financial institutions are paying closer attention to water-related emissions, though this remains one of many dimensions of corporate performance. Additionally, GHG-related initiatives such as national methane taxes, carbon border adjustment schemes, and carbon markets are taking shape over time. Taken together, they present a risk to higher-carbon barrels.

In the near-term, reductions in water-handling emissions are likely to come from the imperative to reduce the costs and logistical inefficiencies of dealing with the massive volumes of water in onshore operations. With costs per barrel ranging as high as $3.00 per barrel and the threat of restrictions related to increased earthquake activity, operators have begun to invest seriously in more efficient systems, particularly for transport of water. In short, operator economics and emissions reduction goals are aligned and working together to bring creative solutions to better water handling.