Private-equity firm Blackstone Energy Partners LP said Feb. 5 it has set up a midstream unit in the Permian Basin to build facilities that treat water in one of the world's largest oil fields.
Huge levels of dirty water produced by U.S. shale firms are driving up investment in water-handling facilities, as cash-conscious oil and gas companies try to cut costs.
Blackstone said it has made an equity commitment of $500 million in Waterfield Midstream.
The Permian Basin of West Texas and New Mexico is at the center of the U.S. shale boom, where Waterfield will focus.
Waterfield is led by Co-CEOs Scott Mitchell and Mark Cahill, who previously built and led Anadarko Petroleum Corp.’s (NYSE: APC) and Western Gas’s Permian Basin commercial water infrastructure platform.
Recently, Waterfield signed a 15-year contract with Guidon Energy to construct a new system to handle Guidon’s water gathering and disposal needs across its about 40,000 acre position in Martin County, Texas. In Martin County, Waterfield is targeting deeper disposal zones, as opposed to shallow disposal zones, to provide long-term flow assurance and to support optimal drilling conditions for its upstream customers.
Additionally, Waterfield has entered into an agreement with EagleClaw Midstream to operate the company’s water assets in Reeves County, Texas. These assets consist of 58 miles of gathering lines and 390,000 barrels per day of permitted water disposal capacity.
The parties must now renegotiate a deal that would transfer Breitburn's Permian reserves to investors including Elliott and WL Ross through their participation in a $775 million rights offering.
Sustained lower oil prices may lead to Permian consolidation, the return of tough times to other shale plays and U.S. E&Ps helping rebalance global inventories.
A big crowd turned out for an afternoon honoring industry leaders representing all facets of the energy sector.