Economic and environmental strategic water management in the shale gas industry: Application of cooperative game theory

Abstract

In this work, a mixed‐integer linear programming (MILP) model is developed to address optimal shale gas‐water management strategies among shale gas companies that operate relatively close. The objective is to compute a distribution of water‐related costs and profit among shale companies to achieve a stable agreement on cooperation among them that allows increasing total benefits and reducing total costs and environmental impacts. We apply different solution methods based on cooperative game theory: The Core, the Dual Core, the Shapley value, and the minmax Core. We solved different case studies including a large problem involving four companies and 207 wells. In this example, individual cost distribution (storage cost, freshwater withdrawal cost, transportation cost, and treatment cost) assigned to each player is included. The results show that companies that adopt cooperation strategies improve their profits and enhance the sustainability of their operations through the increase in recycled water.