A new report surveying water risks among the world’s top energy-producing regions has found that three energy sectors face particularly high water risks: shale gas in the United States, coal production and coal-fired power in China and crude oil in the Middle East.

The report from energy and consulting firm Wood Mackenzie, supported by data and analysis from WRI’s Aqueduct Water Risk Atlas, found that in the United States, more than 50 percent of reserves of shale and tight gas—gas trapped in especially hard, non-permeable rock—are located in areas of medium to extremely high baseline water stress. Water users in these areas, are already facing high levels of competition for the same supplies. While shale and tight gas drillers use a small percentage of water compared to other industrial users in the United States, individual wells need large volumes of water during short periods of time for hydraulic fracturing. These short but intense demands add up and can threaten to displace other water users. Over time, freshwater availability in shale development areas could decline as demand from homes and farms starts competing with hydraulic fracturing operations.

The concerns extend beyond the United States -in the 10 countries with the largest shale and tight gas reserves, 60 percent of the reserves are located in areas facing medium to extremely high baseline water stress. The report concludes that in coming years energy companies operating in these high-demand and limited-supply areas are likely see pollution and competition-related stress increase.

Some energy firms have already started planning risk-mitigation strategies to account for potential scarcity, even though they are costly. Antero Resources Inc. plans to spend more than $500 million dollars on an 80-mile pipeline, just to secure water supply for its shale development.

Limited water for vast coal reserves in China

The Report says that Chinese coal mining and coal-fired power plants already operate under significant water stress and could face increasing water risks as energy production moves into the water-stressed northern and western provinces. In 2012, nearly 70 percent of China’s coal-fired power generation capacity and the vast majority of the country’s coal mines are already located in areas facing medium to extremely high baseline water stress. In addition, more than 60 percent of China’s planned coal-fired power plants are slated for development in the six northern provinces that only account for only 5 percent of China’s total water resources.

93% of Middle East oil reserves at medium/extremely high water quantity risk

As one of the world’s most aridregions, oil production in the Middle East faces a variety of water risks - nearly 93 % of the Middle East’s onshore oil reserves are exposed to medium to extremely high overall water quantity risk. Overall water quantity risk helps differentiate physical water risks across the region - the weighted average of seven individual Aqueduct water quantity risk indicators, including :

• variations in climate over time
• upstream storage
• floods
• droughts
• groundwater stress
• baseline water stress.

In addition to supply concerns, energy companies in the Middle East face two primary water risks. First, inadequate desalination or other water infrastructure can disrupt ongoing projects, delaying oil drilling, production, and processing extraction and production. Second, domestic desalination consumes oil resources that would have been exported to customers around the world. In Saudi Arabia, for example, oil is sold to power and desalination plants at around $4 a barrel, but can be exported at around $100 a barrel.

Time to reverse the trend

Three-quarters of energy respondents to a 2012 CDP Global Water Survey confirmed that they experienced water-related operational risks, while half experienced water-related detrimental business impacts in the past five years.

The report is now calling on the global energy sector - as the world’s largest water user- to reverse the trend and successfully mitigate their water risks by better understanding their own water needs, identifying their specific water-driven business risks and developing clear water management strategies. The report points out that the future of energy production depends on all stakeholders working together to ensure a water-secure future.

Click here for an abridged version of the full report