Not unlike other boom and bust industries, the frac sand industry has been a turbulent one in recent years, with oil prices crashing and recovering, but industry experts are anticipating the continuation of a positive trend for the upcoming years. A new study by the Freedonia Group estimates demand for frac sand to grow 4% each year through 2021.
While demand for frac sand continues to surge, production is struggling to keep up, but new plants coming online are anticipated to ease the pressure.
Frac Sand Demand
The US currently holds the title for both largest producer and consumer of frac sand. Demand for the proppant sand pumped down wells in an effort to hold open fissures in shale formations, allowing hydrocarbons to flow out has seen increasing demand in recent years as oil prices bounce back and natural gas gains a greater share of the energy market.
According to an expert at OilPrice.com, 2012 demand for frac sand sat at 34 million tons. This jumped to 61.5 million tons in 2014 and dropped off after oil prices crashed. Upon recovery, however, Rystad Energy is quoted as anticipating 100 million tons in demand for 2018 – almost double pre-crash levels.
Why Frac Sand Demand is Going Up
In addition to the frac sand industry’s relationship with oil prices, two major trends have caused frac sand demand to swell: advances in horizontal drilling and the growing amount of sand employed per foot of well.
Advances in Horizontal Drilling
While hydraulic fracturing has been a progressive technology in its own right, its merger with advancements in horizontal drilling has brought oil and gas production to a new level.
Where drillers once drilled a number of vertical wells to access the resources in a shale formation, they can now drill a single horizontal well off of a vertical one that allows them to access a much greater portion of the targeted shale formation.
Advancements in horizontal drilling in recent years have promoted longer lateral lengths, further increasing the efficiency of a single well and upping requirements for the volume of sand per well. A 1990 write-up in Oil & Gas Journal on horizontal drilling states wells to be between 500 – 3,000 feet long. In November of 2017, ExxonMobil announced they were getting close to reaching 4 miles in lateral length with their wells – an astounding feat.
Many in the industry are referring to these progressive lateral length wells as “super laterals.”
Increases in the Amount of Sand Per Well (Proppant Intensity)
The amount of sand per well has also been on an upward trend in recent years; drillers experimenting with more sand per foot discovered that the more sand they pumped down a well, the greater their recovery. This has led to exponential rises in the amount of sand employed per well.
According to a report by International Oilfield Research group Kimberlite, the amount of sand employed per foot of well was between 300 – 800 lbs. three to five years ago. More recently, this number has reached around 1,755 pounds per foot, with some reports claiming even higher volumes.
Although some wells have seen slight declines in the amount of sand employed per well as a result of optimizing other factors, the general increase in the more-sand-per-well trend remains strong.
Frac Sand Production
According to Credit Suisse, US frac sand production had a record-setting year in 2017, garnering almost 70 million tons of the sand. The group anticipates 2018 to be another one for the books with an additional 30 million tons mined.
Despite booming production, however, frac sand supply has had a hard time keeping up with the torrent of demand. This has been aggravated by delays in rail deliveries and the lack of infrastructure near oil basins for mining and processing the quartz sand.
At present, a large portion of the sand comes from the Midwest, particularly Wisconsin, which is home to the best frac sand money can buy, but this frac sand comes at a high price when transportation by rail to oil basins is taken into account. A growing trend looks to provide relief.
In-Basin Sand Supplies
A shift in production to “in-basin sand” – sand sources closer to oil rigs that can be trucked in – is bolstering development of mines and processing plants around oil basins. Despite being a lower quality, the local proppants provide sufficient recovery at a significantly decreased cost by eliminating the need for rail transport. This is especially being seen around the Permian basin – the current hotbed for oil and natural gas production, where the majority of frac sand is destined for.
Frac sand dryer expert, Shane Le Capitaine, commented on his experience on a recent trip to the basin: “They can’t get sand fast enough. When a well is under production, they are literally trucking in sand every 6-10 minutes, 24 hours a day to keep things moving. It’s really something to see.”
Although frac sand is a natural material, it still requires processing upon mining to optimize its characteristics for use as a proppant. Mined sand is washed and dried at a processing plant. It is then screened to segregate the various grades required by drillers and transported to rig sites.
Outside of sand production from Wisconsin and around the Permian Basin, according to the USGS, activity around frac sand production is also growing in Oklahoma, Minnesota, Iowa, Illinois, Ohio, Michigan, Missouri, South Dakota, Arkansas, Nebraska, Utah, and Arizona.
Conclusion
The frac sand industry is slated for record-setting times in both supply and demand in the coming years, thanks to recovering oil prices, advancements in horizontal drilling, and the increasing amount of sand employed per well.
Around the country, but particularly surrounding the Permian Basin, frac sand mines and processing plants are being constructed to support the skyrocketing demand with an in-basin source of sand while Wisconsin picks up the slack in the meantime.
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