Wood Mackenzie: The Energy Industry's Rising Water Challenge

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Water poses a variety of business risks for the energy industry, and could play an influential role in shaping the future energy supply mix, according to Wood Mackenzie's latest research report "Troubled waters ahead? Rising water risks on the global energy industry", which utilizes data and maps from the World Resources Institute (WRI).

Working with WRI’s Aqueduct Water Risk Atlas, Wood Mackenzie identified that water risks could have the greatest impact on (1) shale gas in the US and with global expansion, (2) the upside for Middle East oil, and (3) China’s future coal mining and coal-fired power plants. Aqueduct mapped key energy production centers over baseline water stress levels (measuring the ratio of total water withdrawals to available supply). The analysis identified areas more likely to see high competition amongst local water users, increased depletion of the resource over time, and growing concerns over contamination of dwindling water supplies.

"The key water-driven business risks to the global energy industry include limited accessibility to new sources of supply, delays on project developments, increasing costs and asset downtime," said Tara Schmidt, Manager of Wood Mackenzie's Global Trends Service.

Almost all forms of energy production and power generation are dependent on water, and risks vary greatly by fuel type and asset location.

"Water is a risk to the energy industry. By progressing with innovative technologies, advanced water management practices and public policy engagement, the industry can rise to the challenge of reducing shared water risks," explained Paul Reig, Associate with WRI’s Aqueduct project.

Overall, the energy sector is the world’s largest industrial water user, at more than 15 percent of global supply and growing. The industry is under increasing scrutiny from the government and public on how it uses freshwater supplies.

"Some of the solutions to reduce water-driven risks include new technology implementation to improve operational environmental performance, and most importantly, early stakeholder engagement in the river basins, particularly with governments, to identify opportunities to collectively reduce water risks," added Reig.


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