Big trouble is brewing in the mighty North Dakota Bakken oil field. While oil production in the Bakken has reversed since it bottomed in 2016 and increased over the past few years, so has the amount of by-product wastewater. Now, it’s not an issue if water production increases along with oil. However, it’s a serious red flag if by-product wastewater rises a great deal more than oil.

And… unfortunately, that is exactly what has taken place in the Bakken over the past two years. In the oil industry, they call it, the rising “Water Cut.” Furthermore, the rapid increase in the amount of water to oil from a well or field suggests that peak production is at hand. So, now the shale companies will have an uphill battle to try to increase or hold production flat as the water cut rises.

According to the North Dakota Department of Mineral Resources, the Bakken produced 201 million barrels of oil in the first six months of 2018. However, it also produced a stunning 268 million barrels of wastewater:

Thus, the companies producing shale oil in the Bakken had to dispose of 268 million barrels of by-product wastewater in just the first half of the year. I have spoken to a few people in the industry, and the estimate is that it costs approximately $4 a barrel to gather, transport and dispose of this wastewater. Which means, the shale companies will have to pay an estimated $2.2 billion just to get rid of their wastewater this year.

Now, some companies may be recycling their wastewater, but this isn’t free. Actually, I have seen estimates that it cost more money to recycle wastewater than it does to simply dispose of it. So, as the volume of wastewater increases while the percentage of oil production declines, then the shale companies are hit with a double-whammy… less oil revenue and rising wastewater disposal costs.

To give you an idea just how much more water is being produced versus oil in the Bakken, I went back to the North Dakota Department of Mineral Resources and looked at their data back to 2015. Unfortunately, the data published in excel only goes back to 2015, even though they have figures published in PDF form starting in 2003.