SPE-179445-MS

What is the 2030 Vision for Water Management in the Oil and Gas Sector?
Alistair Wyness, BP International plc; Ruth Romer, IPIECA

Copyright 2016, Society of Petroleum Engineers

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Abstract
Water constraints are predicted to increase as a result of population growth and increased living standards,
pollution impacts and climate change impacts. IPIECA, the global oil and gas industry association for
environmental and social issues, has implemented a structured, scenario based process to build a
long-term vision to 2030 to help inform water management for the industry. This process was informed
by published science, IPIECA member knowledge and external experts. The process involved the
characterisation of numerous and complex uncertainties that may potentially arise by 2030, the depen-
dencies between those uncertainties and the regional variation of those uncertainties. Through this
characterization four independent and plausible future-state scenarios have been created, describing
potential water management regimes in 15 years that could exist. These scenarios will allow, IPEICA to
develop a vision for water management in the oil and gas sector, forming the basis of a roadmap for
IPIECA and the industry to proactively plan for the future.

The context and why a water vision is needed

There is growing pressure on our global water resources, the 10th edition of the World Economic Forum
Global Risk Report (WEF, 2015) confirms this by citing ⬙water crises⬙ as one of the top global risk in
terms of impact and likelihood to our society. The report also highlights the increasing interconnectivity
between ‘global risks’, for example the interconnection between water crises with food crises, failure of
climate-change adaptation and large scale involuntary migration. The growing complexity and intercon-
nection of global risks provides important context for the development of scenarios and this paper. In the
current context of these interconnected global risks such as climate change, population and economic
growth along with other factors, water scarcity is projected to increase in many regions of the world. The
UN (2015) has estimated that by 2025 1.8 billion people will be living in areas of water scarcity and
two-thirds of the world’s population may be in water stress conditions. As a result, societal awareness of
water resources and management is gaining traction and increasing scrutiny on water– consumptive
industries is driving greater transparency and disclosure across all sectors, and possibly tightening
regulatory regimes.
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In 2010, annual global freshwater withdrawals were approximately 4,000km3, approximately

two-thirds of which was used in agriculture and one-ninth was used for the entire energy industry
(Williams and Simmons, 2013). It is acknowledged that both fresh and non-fresh water is withdrawn
for use throughout the project lifecycle of oil and gas operations; however, the volume of water
consumed in those operations and not returned to the environment is much lower. Although the
volume of fresh water consumption in the oil and gas sector is extremely low relative to the
agricultural sector, the potential risk of ‘local’ impacts can be significant and should be managed
appropriately and proactively by the sector.
If the current predictions of increased water scarcity, tightening regulations and changing societal
expectations arise, the constraints for oil and gas industry operations will be substantially greater than they
are now. It is vital that the sector anticipates future challenges so that it can consistently and proactively
manage water resources and be stewards of this valuable resource. If the sector does not manage and
mitigate these potential risks, access to hydrocarbon resources might become threatened and operational
and social license to operate might be lost.
In response, IPIECA, the global oil and gas industry association for environmental and social issues,
is proactively working to help the industry to anticipate the future water management challenges for the
sector, by developing a vision for 2030, to coincide with the recently adopted UN Sustainable Develop-
ment Goals (SDGs).
Initiated in 2015, this exercise aims ⬙to implement a structured, scenario based process to build a
long-term vision (to 2030) for water management for the sector⬙. IPIECA has now developed scenarios
that describe the possible water constraints and circumstances around water resource management that
may exist in 2030. The developed scenarios could plausibly exist in different regions of the world at the
same time. These scenarios will be used to equip the oil and gas sector, in general, and IPIECA, in
particular, to respond to the growing global water management challenges for the sector. The development
of scenarios will ultimately lead to the development of long-term vision (to 2030) for water management
for the oil and gas sector.
This paper has been developed as an initial thought piece for the industry to begin preparing to manage
and mitigate for a more constrained water regime in many areas of the world.

The approach to developing IPIECA’s water vision

Given the large number of interlinked complexities related to water, the vision is based on the develop-
ment of globally/regionally-based scenarios drawing from research, the knowledge of external thought
leaders and, most importantly, the combined knowledge of the subject matter experts from 15 oil and gas
companies. Central to the development of scenarios is their plausibility in that they could arise in different
regions of the world over the next 15 years. Given the regional nature of water and large number of
interlinked complexities a systematic approach was developed and applied to first understand the trends
and drivers and to assess the key uncertainties before developing the scenarios. The studies were,
therefore, split into four distinct phases (Figure 1).
SPE-179445-MS 3

Figure 1—Visioning Process with four phases

This paper focuses on the outcomes of Phases 1 and 2 with some preliminary thinking on Phases 3 and 4.
Phase 1 - Research
To provide context for current trends and future predictions in water resource management, some research
was conducted to provide the evidence-base for identifying the attributes and uncertainties required for
Phase 2 and scenario development. IPIECA was supported in this research by a number of consultants and
subject matter experts (refer to the acknowledgements).
This research identified a significant body of existing research that defines the long-term trends on
water resource availability coupled with a number of approaches to managing future constraints, from
policy changes to voluntary collective actions. The most important findings from this review are described
below and summarised in Table 1.

Table 1—Summary of current water and policy trends

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● Limited water data There are major gaps in regional scale hydrological data (Braga, 2014),
including the developed world. There is a global lack of reliable long-term records of precipitation,
runoff and in particular, groundwater data. In many global water resource models groundwater
resources are often not included in the estimates of water availability. The uncertainty in the
existing levels of water availability, supply and demand results in a high degree of uncertainty in
future predictions.
● Future physical water constraints, including increasing demand and changing supplies:
There is predicted to be regional constraints in both water quantity and quality. Most global models
are aligned in the fact that there are increasing water demands, particularly in developing and
emerging economies where the greatest increases in population and per capita demand are likely
to occur, posing the largest threat to water security worldwide. The OECD (2015) predicts an
increase in global water demand of 55% between 2000 and 2050, primarily in non-OECD
countries.
Changes in water resources are predicted using IPCC (International Panel on Climate Change,
2014) models (e.g. WRI Aqueduct, 2015). Areas where water supply is projected to decrease are
already subject to some degree of water stress. The models also indicate that increased frequency
of drought and changes in seasonal availability of water will lead to more water supply interrup-
tions.
Within OECD countries, the continued investment and improvement in wastewater treatment is
expected to stabilise and restore surface and ground water quality by 2050, though there is rising
concern that micro-pollutants (e.g. medicines, cosmetics, biocide residues) will enter water
sources. In non-OECD countries, there is expected to be a continued deterioration in water quality
over the next 15 years.
● Future water demand management: Increasing water demands pose the largest threat to water
security, particularly in the developing world (MIT, 2014). A lack of government funding and
capacity is the main obstacle to the development of coordinated water policies necessary to
manage this demand. Some policy analysts believe appropriate water pricing is required to manage
demand and to raise capital to improve supply and sewage infrastructure. Although historically
water has been inconsistently and poorly priced, there is clear evidence of an upward trend in water
tariffs and rates in many areas of the world. However, there is insufficient clarity on how fast and
in what nations/geographies cost changes will occur.
● Water valuation methods: New valuation methodologies are evolving that assess water’s
⬙worth.⬙ This value can be environmentally, socially or economically driven. Approaches to water
valuation are beginning to emerge, particularly within industry, to support investment decisions in
water-related infrastructure that may improve quality and supply.
● Water stewardship: The concept of water stewardship is promoted by a number of non-
government organisations (Alliance for Water Stewardship, CEO Water Mandate), based on the
need for collective action between companies, communities and local authorities to manage water
constraints, while protecting the health of local ecosystems.
● Water technology innovation to reduce demand: Various studies (e.g. Ajami, 2014) demon-
strate that new technologies can greatly reduce fresh water use, including the use of reclaimed
water or desalination, rainwater and storm water capture, and recycling approaches. In addition,
⬙smart water⬙ technologies in municipal water supply systems are emerging that integrate infor-
mation technology into water accounting and management to curb demand and enhance supply
simultaneously. Technological innovation does represent significant opportunities, which coupled
with coordinated collective action leveraging technological innovation between sectors can result
in win-wins and the oil and gas sector being seen as part of the ‘solution’.
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● Water and development: The human right to water and access to sanitation is gaining traction and
importance across all sectors. This aspect is incorporated in many of the UN Sustainable
Development Goals (SDGs) although the uptake and implications of these Goals are still not clear.
The linkages between energy, water, health and food security will increasingly be required to
ensure sustainable development and business continuity.
● Water use rights & permitting: Water law and water rights vary from region to region as well
as country to country; complexities grow in contexts where demand increases and supply
decreases. In some areas (e.g. the Murray Darling Basin in Australia), historical water rights have
been changed to accommodate changes in demand and supply and to facilitate economic growth
within the river basis.
● Reformulating approaches to water quality and water management policy: There are some
policy tools related to water quality which are gaining traction, such as the ⬙polluter pays principle⬙
and ⬙green infrastructure⬙ investments in watershed services.
● Investing in wetlands and coastal zone protection: Integrated approaches to considering water,
wetlands and coastal zones are gaining momentum and the concept of Biodiversity and Ecosystem
Services supports this approach resulting in win-wins for business and the natural environment.

Phase 2 – Development of 2030 Water Scenarios

In order to develop the scenarios, different attributes of and trends in water management needed to be
defined. The attributes and trends in water management included water availability, supply and demand
trends, technology change, societal expectations and regulatory changes. An understanding of how these
attributes and trends will develop over the next 15 years and beyond helped define the range of future
scenarios. However, the trends will depend on many different and competing factors, therefore, there is
a significant degree of uncertainty. Understanding and characterizing these uncertainties, the dependen-
cies between them and the regional variation of uncertainties were, therefore, essential elements of
developing the scenarios. Regional variations are the most important characteristic in water resources
management: the local hydrological, regulatory, socio-economic and political regime largely defines
availability, quality and access. It is also possible for the different constraints to arise within the same
watershed and aquifer basin. With this broad range of uncertainties and unknowns, it was, therefore, a
challenge to develop and implement an approach that resulted in a small number of plausible scenarios
that would cover the range of uncertainties, and could apply to different regions of the world.
Developing uncertainties To help rationalize the research, IPIECA designed a workshop with industry
SMEs to focus on key uncertainties.. It quickly became apparent that all of the water elements highlighted
in the previous section are evolving at different rates in different areas, depending upon local hydrology,
socio-economic factors and regulatory constructs. As a consequence, there is a significant degree of
uncertainty in predicting the future across the different regions of the world, even over a relatively short
timescale of 15 years. This was an added complexity of developing scenarios for a very locally specific
yet global issue such as water.
To frame the discussion, a question was posed to the workshop participants: ⬙How will water risks and
opportunities affect the oil and gas industry by 2030?⬙ Over 30 different uncertainties were highlighted,
as summarised in Figure 2, these were categorised into four areas: water availability, regulations,
environmental and societal concerns and technology. How each uncertainty will play out will depend on
many global, regional and local factors.
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Figure 2—Uncertainties in the Evolution of the Future Water Environment

Through voting and discussion amongst the attendees at the workshop, six key uncertainties emerged
as the most potentially impactful on the future for the oil and gas industry whilst also defining the water
environment in 2030:
● Global and local regulations (global/local) on water that impact the number of water management
options available.
● The changing demand due to population and economic growth and demographic change.
● The overlap between oil and gas developments and areas of water stress.
● Societal pressures impacting our licence to operation.
● Technical development in the oil and gas industry.
● The evolution of water price and value.
Many of these uncertainties are interdependent. For example, increasing levels of water stress are
caused by increased demands and will result in increased societal pressures, which could lead to
regulatory change.
The Scenarios There are various methods that can be deployed in the development of scenarios; the
method used in this situation is drawn from and a simplified version of Shell’s model-based methodology
that relies on deduction for generating scenarios via a 2x2 matrix with independent axes.
The creation of IPIECA’s four scenarios consequently required two independent uncertainties to form
two perpendicular axes, with each quadrant representing a single scenario. Although not fully indepen-
dent, the workshop attendees settled on 1) regulations and 2) the overlap between oil and gas develop-
ments and areas of water stress. The two perpendicular axis results in four quadrants each representing a
unique scenario as defined in Figure 3.
SPE-179445-MS 7

Figure 3—The 2030 Scenarios

Although the aim is to develop unique and plausible scenarios, they may arise simultaneously in different
regions. For example, the water stress conditions described by ⬙Sandstorm⬙ and ⬙Oasis⬙ could arise in two
countries in the same region. Further, the regulatory regimes could be the same in areas of water abundance
and water stress. It is likely that all four scenarios, or attributes of each scenario will arise in different locations
as a result of the local changes in water availability, the regulatory regime and the socio-economic conditions.
There are likely to be some elements of each scenario that are already in existence. However, each scenario is
describing a trend that is more prevalent or has greater consequences, either positive or negative, in 2030.
Phase 3 & 4 – Characterising the scenarios and the IPIECA road-map
Although Phases 3 and 4 of the visioning process are not yet complete at the time of writing this paper, there
are a number of important conclusions that can be drawn from this research, the thought processes adopted and
the developed scenarios. The studies have resulted in an improved understanding by the industry of the
uncertainties that lie behind some of the published predictions of the future extent of water stress and scarcity,
how the different aspects of water management are interlinked and dependent upon each other and the need to
take a holistic view of water in an area in order to understand both the risks and the potential solutions. The
regional complexities in the development of 2030 scenarios for water are very apparent.
The next steps are to characterise the scenarios in more detail and define an action plan in response to
the four scenarios. Based upon the action plan IPIECA will be able to develop a clear pathway and vision
for suitably equipping itself, as the global industry association, and its members to be resilient to manage
and mitigate potential future water risks.
Discussion and conclusions
In 2000, although water constraints did exist, water was not considered a key issue for the oil and gas
industry, or for other industrial sectors. Now, in 2015, water management has emerged as a key strategic
8 SPE-179445-MS

risk for all water-consumptive industries including the oil and gas sector, both as a sustainability issue and
a business continuity challenge. In the next 15 years, there are likely to be more constraints and pressures
on water resources, to both reduce demands and improve the quality of discharges to water. In some
regions the constraints could be very severe. Planning for the rising pressures is, therefore, a growing
necessity for the industry. IPIECA has taken a leadership position in understanding and planning for the
future through the development of plausible future scenarios, as presented in this paper.
Water constraints will remain largely a local issue, depending upon physical, social and regulatory
context. However as the constraints deepen in many areas, a global view will help develop the local
solutions. In particular, innovation will be essential for the oil and gas industry in many regions and within
all the scenarios identified. This means technological innovation as well as innovative approaches to
collective action within constrained watersheds.
These scenarios have provided IPIECA and its members with a common understanding of possible
futures. More importantly, it has provided a basis for IPIECA to develop a more proactive framework in
which to operate, one that scans for the leading indicators (⬙signposts⬙). It also includes a series of actions
that IPIECA and its members will implement to help the industry operate within the different environ-
ments described by each scenario.
The approach outlined in this paper could also benefit other issues that the oil and gas industry may
face in the future. The systematic approach to understanding the key components and uncertainties using
the collective understanding of the industry is a powerful means of developing a robust understanding of
an issue and related action plan.

Acknowledgments
The process and scenarios presented in this paper were developed by many individuals. Externally,
research and presentations have been provided by Paul Reig, World Resource Institute and Sissel Waage,
BSR. Managing the brainstorming that developed the basis of the scenarios was undertaken by Geoff
Styles, of GSW Strategy Group LLC. Internally, a large number of oil and gas SME’s contributed.
Without this collective knowledge base, this paper would not have been possible.

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