Water is undoubtedly one of the most precious natural resources for life on earth. Without access to good quality freshwater, human, animal and plant survival is impossible, while many industries are also highly dependent on reliable sources of water for their day-to-day operations and long-term viability.
However, factors such as climate variability, droughts, growing populations and economic expansion are all placing greater demand on the available water sources.
The extent of the water problem is starkly illustrated by the data: only 2.5% of the world’s water is fresh1, yet the US depends on it for nearly 90% of withdrawals for public and industrial use2. At the same time, groundwater, which makes up 30% off all freshwater, is under widespread stress, with NASA reporting that a third of major water basins globally are being rapidly depleted by human consumption.3
To counter these stresses, the challenge for individuals, governments and industry is to embrace sustainable practices, technologies and policies to ensure the preservation of this global resource.
1Source: Food and Agriculture Organization of the United Nations
2Source: US Geological Survey
3Source: NASA http://www.nasa.gov/jpl/grace/study-third-of-big-groundwater-basins-in-distress
Source: FAO, 2016
Water scarcity has a direct effect on public health, availability of food and, ultimately, public safety. In an increasingly interlinked world, with ever-expanding trade routes, water stress in one geographic region not only affects local populations, it can also have a reverberating impact in other regions.
In agriculture, for example, a shock such as a drought or blight (a fungal disease that spreads rapidly in wet weather) can have a high human cost through famine, but also global implications for food supplies. Countries that import water are especially vulnerable to such shocks.
Water stress indicator (WSI) in major basins
Source: Philippe Rekacewicz, GRID-Arendal
Energy companies – in particular, the oil and gas industry, and electric and water utilities - use substantial amounts of water and have an important role to play in protecting resources.
In the U.S. oil and gas industry, for example, fracking operators have increased their use of freshwater from 5,600 barrels per oil well in 2008 to more than 128,000 barrels in 2014, and over 300,000 barrels in some areas today. Although the industry is improving the way it deals with wastewater, it has been responsible for spillages and other problems.
Source: US Geological Survey
Electric utility companies withdraw a lot of water for cooling purposes, although much of this is returned to the water cycle. However, in water-stressed regions, these withdrawals may contribute to supply and demand imbalances. The problem lies not so much in contributing to water scarcity as protecting against it.
Water companies have different water constraints from oil and gas operators. The sector is typically publicly owned, with less access to capital to invest in ageing infrastructure and innovative solutions to counter water loss and leakages. Its main challenges include a decline in supply and an increased demand for freshwater.
Despite differences between the oil and gas sector, electricity providers and water utilities, there are opportunities for them to collaborate through shared learning and innovation. For example, larger, well-capitalised companies in the oil and gas industry, as well as some utilities, can help finance upgrades for capital-constrained small public wastewater utilities in exchange for use of wastewater.
Through a combination of reusing and recycling wastewater and applying innovative technologies, it has been predicted that oil and gas operators could substantially increase reused water for operating oil and gas wells. These companies could also look to use treated brackish water (a naturally occurring mix of fresh and salty water) instead of freshwater.
Reuse: Defined as wastewater that is used within an oil or gas well, requiring very little additional treatment, reuse could lower water-related costs by about 45% and save over 300,000 barrels of freshwater per well.
Recycling: Recycling is treating wastewater to acceptable standards through robust treatment technologies that range from simple filtration, which removes large organic particles, and oil and gas bubbles, to complex procedures that treat water to near freshwater standards. There are many possible uses for recycled wastewater, especially for livestock watering and crop irrigation.
Many factors dictate whether reuse and recycling are viable options for oil and gas companies. Cost, water availability, water quality logistics, and disposal options all have a bearing on whether an operator reuses or recycles.
Power companies can reduce the amount of freshwater they use by turning to saline and recycled municipal water instead. They can also deploy demand-side management and energy efficiency. Like the oil and gas sector, alternative water sources used with additional treatment can be an opportunity, but they also require additional infrastructure, and are costly and energy intensive.
Source: Argonne, National Lab, Department of Energy
As water scarcity continues to limit existing freshwater supplies, water utilities are looking at alternatives to freshwater sources, including treated brackish, saline and wastewater. Other solutions include managing existing supplies through conservation, smart water management and leak detection technologies.
Zachary Sadow is an energy equity research analyst at Barclays. He is also a PhD candidate at the University of Nottingham’s School of Politics and International Relations, and a Visiting Scholar at Columbia University’s School of International and Public Affairs (Harriman Institute).
Daniel F. Ford, CFA, is Managing Director and Head of North America Utilities Equity Research at Barclays. In this position, he and his team are responsible for research coverage on a group of 61 energy stocks. Prior to joining Barclays in September 2008, Mr. Ford served as managing director at Lehman Brothers covering the US electric utility and power industries. Previously, he covered electric utility stocks at ABN AMRO, HSBC Securities, Dean Witter, Merrill Lynch, and Morgan Stanley.
With more than 20 years experience in the industry, Mr. Ford has received a number of awards. Most recently, he was ranked third in the 2016 Institutional Investor All-Star Analyst Survey. He has been ranked in the top three in both the Institutional Investor All-Star Analyst Survey and Greenwich Survey since 2001. Mr. Ford is a Chartered Financial Analyst and holds a bachelor’s degree in economics from Dartmouth College.
Mark Lewis is a Managing Director and Head of European Utilities research at Barclays. Mark has 18 years’ experience as a financial analyst covering global energy markets, and since May 2016 he has been a member of the Financial Stability Board’s Task Force on Climate-related Financial Disclosure, which was established by FSB Chairman Mark Carney in January 2016 under the chairmanship of the Honourable Michael J. Bloomberg. Mark is a UK Citizen
and holds a BA (First-Class Hons) from Sheffield University, an MPhil from Cambridge University, and an MA from London University.
Rose-Lynn Armstrong is an electric utilities research analyst at Barclays. She has covered the electric utility sector for twelve years on the sell side and buy side. She received an MBA from New York University and a B.S. from the State University of New York at Geneseo.
The Columbia Water Center’s mission is to creatively tackle water challenges of a rapidly changing world where water and climate interact with food, energy, ecosystems and urbanization. Combining the rigor of scientific research with the impact of effective policy, we aim to design reliable, sustainable models of water management and development that can be implemented on local, regional and global levels. The Columbia Water Center, in collaboration with other Earth Institute units and external partners, is leading intellectual inquiry into the assessment, understanding and resolution of the global crisis of freshwater scarcity.
Professor Upmanu Lall is the Alan and Carol Silberstein Professor of Earth and Environmental Engineering and the director of the Columbia Water Center, a unit of the Columbia University’s Earth Institute. Lall has over 35 years of experience in statistical and numerical modeling of hydrologic and climatic systems and water resource planning and management. Lall has pioneered an approach to applied research that emphasizes the importance of viewing water issues through several different traditional academic disciplines in order to understand the global dimension and interconnected nature of water challenges. He received his B.S. from the Indian Institute of Technology and both his M.S. and Ph.D. in Civil Engineering from the University of Texas.
Michelle Ho is a Post-Doctoral Research Scientist at the Columbia Water Center. Her research focuses on hydroclimatic variability and water resource risk analysis using paleoclimate information in the US.
Angela LaSalle is an environmental and sustainability analyst. She holds a Masters of International Affairs from Columbia University’s School of International and Public Affairs focused on Energy and Natural Resource Management, and a Masters of Fine Arts from Hunter College in Integrated Media with a focus on documentary film. She participated in the 2016 Barclays-Columbia Workstudy Program (Capstone) focused on water in the U.S. oil and gas industry, and subsequently worked as a consultant at Barclays in the Research Department as part of the Barclays-Columbia Water Center water-energy project.
Barclays thanks Professor Natasha Udensiva at Columbia’s School of International and Public Affairs for her leadership in the Barclays-Columbia workstudy program (Capstone).
Download the full report, ‘The water challenge: preserving a global resource’ for in depth analysis from Barclays’ Impact Series
Barclays’ Equity Research analyst Zachary Sadow and Dr. Upmanu Lall of the Columbia Water Center discuss opportunities to lessen water stresses