Produced water is redefining the economics of unconventionals. In this edition of Accelerate, Carlos Granado, Regional Director (USA) at CMG, and Panuswee Dwivedi , Project Manager at ADI Analytics share what’s at stake for production, economics, and regulation, and how operators can get ahead.
Water has always been part of oil production. But in today’s unconventional basins, water is no longer background noise. It is the defining constraint on production, economics, and even regulatory standing.
In the Permian alone, operators produced more than 8 billion barrels of water in 2024, compared to just 2.5 billion barrels of oil. That translates to a water cut of more than 75%—and rising. “We’re not talking about a steady, linear increase,” explained Panuswee. “As we move into older wells and Tier 2 acreage, water volumes climb exponentially. Once water reaches the wellbore, it flows more easily than oil, leaving hydrocarbons stranded behind. That accelerates the problem.”
Carlos has seen those ratios firsthand. “In some cases, I’ve seen ten barrels of water for every barrel of oil,” he said. “At that point, trucking and disposal are not economic. Companies hit a wall where water handling dictates how much oil they can actually produce.”
When water becomes the bottleneck
Produced water creates challenges on every front. The most obvious is cost. Hauling water from New Mexico leases into Texas for disposal can quickly erase margins, and building new pipelines or disposal wells takes time and capital.
But economics is only part of the story. “We’ve already seen lawsuits where one company accused another of injecting water that migrated into their lease,” Carlos pointed out. “That adds legal exposure to an already complex problem.”
Regulators are increasingly involved as well. Injection depth, seismicity, and shallow formation impacts are under scrutiny. “Too deep, and you risk induced seismicity. Too shallow, and you risk freshwater contamination,” Panuswee explained. “Producers can’t treat water management as a purely surface problem. It’s subsurface, surface, legal, and regulatory all at once.”
And looming behind all of it is the risk of lost production. As Carlos put it, if you reach your injection or handling capacity, your only option may be to choke back wells or shut them in. That means lost revenue. And by then, it’s too late to redesign your system. You have to prepare in advance.
Preparation versus reaction
The core issue is not whether operators will face water constraints—it’s whether they’re prepared when those constraints arrive.
Every operator forecasts oil production across the life of the well. Why wouldn’t you forecast water production in the same way? If you know what volumes are coming, you can plan separation capacity, secure disposal contracts, and build the right gathering lines. It’s prevention versus cure.”
This is where simulation becomes indispensable. You need to de-risk before you act. Digital models let you design facilities virtually, run sensitivities, and understand the impact of different choices—before you spend capital or commit to a plan. Once you inject water into the ground, you can’t undo it.
Integration is essential
A recurring theme from both experts is the danger of treating water in isolation. In many organizations, reservoir, production, and facilities engineers still operate in silos. Yet produced water cuts across all of these domains. An injection plan that alters stresses in shallow formations can introduce drilling risks in future wells. Differences in salinity between injected and formation water can trigger scaling and reduce injectivity. These are not independent challenges—they are deeply interconnected. Effective planning requires a coupled view that links subsurface behavior, surface facilities, and long-term production strategy.
From a strategic perspective, consolidation is amplifying the scale of the challenge. As larger producers and midstream players assume control of water infrastructure, management of produced water is evolving into a competitive differentiator. Those who think beyond short-term risk avoidance and treat water as a strategic asset are positioning themselves for long-term advantage.
A common language with regulators
The regulatory environment is also reshaping how operators approach water. Disposal projects are now scrutinized not only for seismicity risks but also for their potential impact on shallow formations and freshwater zones. Proving safety and environmental stewardship requires more than assurances—it requires evidence. Integrated simulation provides the common language regulators and operators need. By modeling how water will migrate, interact, and affect the reservoir and overburden, companies can demonstrate that risks are understood and managed.
Legal rulings are reinforcing this responsibility. In Texas, produced water has been formally defined as a byproduct of oil and gas, placing liability squarely on the producer. Outsourcing logistics does not outsource accountability. With clear, physics-based models, operators can strengthen their case and protect themselves against both regulatory and legal exposure.
Turning constraint into advantage
The sheer scale of produced water may feel like an overwhelming constraint, but it is also an area of opportunity. By forecasting water production with the same rigor as oil, operators can design infrastructure, secure contracts, and test “what if” scenarios before capital is spent. This foresight reduces exposure and creates new avenues to optimize or even monetize water.
At some point, every operator will face the limits of their water-handling capacity. When that threshold is reached, production decisions will be dictated not by oil potential but by water management. The companies that thrive will be those that plan early, simulate comprehensively, and design their systems with resilience in mind. In the future, the industry’s leaders will not only be the most efficient oil producers—they will be the most strategic water managers.
With integrated modelling, you can turn water from a constraint into a controllable variable, and ensure that production, not water, defines your future.
