This mod is a module of the OBGE Project, and REQUIRES the OBGE v3 Core to already be installed. If you are unaware of what that is, look at either the current OBGE Forum Thread on the official Bethesda Forums, Navigate to the OBGEv3 TESNexus Page, or explore the OBGE Wiki found here:

http://obge.paradice-insight.us/wiki/Main_Page

WARNING: Because of the dependencies of OBGE on the specifics of graphics drivers, there is a possibility you will encounter odd graphical errors. I can no longer provide support for such issues. If you are extremely intent on getting this to work and encounter such graphical oddities my only suggestion is to try the OBGE 3.1 release candidate, which is even more likely to have graphical errors. I also no longer have a link to it, so you will have to search for it.

The only known major graphical oddity I can provide a fix for is circles of light randomly appearing and disappearing on walls:
http://www.mediafire.com/?y9m2q1zf3m8pnx2

Put the file in your shaders/override directory. Make sure you have bCompileSources set to 1 in your OBGE ini.

Description

The story of this project begins with the precursor to the OBGEv2 project, the long-gone OVEP project. One of OVEP's main goals was to eventually replace Oblivion's water shader. Even with mods and INI tweaks, Oblivion's water is blocky, unnatural, and unaesthetic. Unfortunately, OVEP ended up dying and the water didn't get replaced. A long while later, a series of rapid advancements in what the OBGE team realized they could do with just full-screen shaders finally led to this replacement for Oblivion's water shader, albeit with a few bugs.

About two months were initially spent on the creation of the water shader itself, with another two months spent on reintegrating the Liquid Water fork into the main OBGE project and on working out the kinks in OBGE Liquid Water v1.X.X. The results of such a long development time for a shader do show however, with the final water replacement featuring the following:

Reflections and Refractions
Realistic Speculars
Water Surface Refraction
High Quality Normal Maps
Physically Based Light Scattering System
Underwater Volume Fogging
Smooth Shoreline Transitions
Water Caustics
Accounts For Weather
Looks Natural In All Conditions
Works In Exteriors And Interiors
Fully Customizable
Supports Cell-Based Unique Settings

Full Changelog:

2.0.0:
- Updated to use OBGEv3
- Much simpler to install, no INI changes needed
- Reorganizing of release format to normal and performance versions
- Removed the previously included shader loading method
- Removed incompatibilities with other shader loading methods
- Optional shoreline movement was removed
- Water height issues fixed
- 99% of water transparency issues fixed
- Fixed the night eye issues
- Water interacts with rain
- Water ripples and displacements now functional
- HDR applies over water
- Added specular occlusion
- Better distance fog handling
- Added more green to the default water settings
- Added the shorefactor variable
- Added more location-specific custom settings by Palidoo
- Added more sections to the ReadMe
- Other misc bug fixes and improvements

1.2.0:
- Integrated DoF compatibility for all OBGEv2 DoF shaders
- Added 4x4 ordered dithering to prevent underwater banding
- Added a toggleable fix to water seams and animation choppiness
- Added the ability to create unique settings for specific cells or worldspaces
- Replaced the default water settings with Palidoo's hand-tweaked settings
- Included unique water settings for blood, Bravil, Leyawiin, Cheydinhall, and the Shivering Isles
- Created a Nehrim compatible version

1.1.2:
- Improved Lava Rendering
- Added customizable LOD settings to the water.
- Added a customizable Reflectivity setting to the water.
- Changed the default settings to remove the "blue paint syndrome" and to make the water a more realistic hue.

1.1.1:
- Made the lava look hotter
- Added Lojack's Bain Conversion File to simplify installation
- Fixed water tearing with HDR off
- Provided an OBGE Liquid Water Basic OMOD that only includes the water replacement

1.1.0:
- Provides Ethatron's for the memory leaks: this mod is now stable
- Added lava rendering using textures from CptJoker's Real Lava mod
- Fixed water aliasing when running HDR (HDR still does not apply to the water)
- Reduced specular highlights in bad weather
- Fixed water height issues in Anvil, Cheydinhall and the Imperial Arboretum
- Added a section to the ReadMe about customizing the water
- Added a section to the ReadMe about editing shader variables
- Added a section to the ReadMe about changing the reflection resolution
- Renamed the mod to OBGE: Liquid Water

1.0.1:
- Added another step to installation, fixed a bug with AMD cards

1.0.0:
- Initial Release