Shale gas is poised to expand outside the U.S., offering 28% annual growth in water treatment, but risks overexposure for start-ups chasing the market, says Lux Research.
Boston, MA – May 1, 2012 – With hydraulic fracturing, or “fracking” – the use of high pressure water to help extract previously inaccessible shale gas – eager to replicate its success outside the U.S., the market for water treatment will grow nine-fold to $9 billion in 2020. This expansion will spur technology innovation and novel thinking about water disposal and reuse, but the field is rapidly growing overcrowded, creating significant risk for new entrants, Lux Research said in a report.
Fracking requires between 4,000 m3 and over 22,000 m3 (25,000 bbl to 140,000 bbl) of water per well and produces toxin-laced brine that can be more than six times as salty as the sea. Its growth has energized the water industry, inspiring a bumper crop of new water treatment startups vying to treat the highly challenging flowback water.
“Fracking represents a significant water treatment challenge – hydrocarbons, heavy metals, scalants, microbes, and salts in produced and flowback water from shale gas wells represent a water treatment challenge on par with the most difficult industrial wastewaters,” said Brent Giles, Lux Research Analyst and the lead author of the report titled, “Risk and Reward in the Frack Water Market.”
“While the opportunity is large, only a few companies are really positioned to profit. Meanwhile, nearly every start-up we talk to is going after frack water, regardless of their technology, and many of them are going to come to grief.” he added.
Lux Research positioned key companies on the Lux Innovation Grid based on their Technical Value and Business Execution – companies that are strong on both axes reach the “Dominant” quadrant – and also assessed each company’s maturity, and provided an overall Lux Take. Among its findings:
- WaterTectonics has technology and alliances. WaterTectonics’ high-energy electrocoagulation technology addresses heavy metals, biological matter, and hydrocarbons, but leaves salt in place, meaning its use is restricted to areas where salt levels are moderate. Still, with its long-term alliance with Halliburton, WaterTectonics reaches the “Dominant” quadrant.
- EcoSphere, Aquamost lead in oxidation technologies. Ecosphere combines ozone, cavitation, and electrochemistry, and the $9 million company leads in the “Dominant” quadrant. AquaMost, an early-stage startup, uses catalyzed UV to achieve many of the same results, but also removes metals. It ranks as “High potential” with strong technical value.
- GasFrac is poised to disrupt the industry. GasFrac, with technology licensed from Chevron, uses high-pressure propane, rather than high-pressure water, to fracture gas wells. Its technology is being tested by Shell, Blackbrush, Husky, and Chevron, among others. With 300 employees, revenues of $300 million, and $50 million on hand, the profitable company outstrips every water start-up in our lineup, positioned in the “Dominant” quadrant and earning a “Strong Positive” Lux Take.
The report, titled “Risk and Reward in the Frack Water Market,” is part of the Lux Research Water Intelligence service.