Permitting Delays Halt Construction of Carbo Ceramics Proppants Plant in Georgia

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Researched by Industrial Info Resources (Sugar Land, Texas)--Construction of the CARBO Ceramics Incorporated (NYSE:CRR) (Houston, Texas) $70 million, 250 million-pound-per-year proppant manufacturing plant addition in Toomsboro, Georgia, supposed to be well under way by now, has been temporarily suspended due to permitting delays.

While some equipment has been purchased and some structures were already in fabrication, selected engineer and construction manager KBR Incorporated (NYSE:KBR) (Houston) had barely broken ground before the project was placed on hold. Initially slated for completion by the second or third quarter of 2010, the project's setback will push the anticipated new plant start-up date to late 2010 or early 2011. Civil and site work contracts have been awarded, but not yet announced. All other divisions of work, including mechanical, electrical and equipment installation packages are still up for grabs. The new construction schedule, as well as the fate of the project, is expected to be announced in the next couple weeks. KBR expects the project to take at least 12-18 months from the date construction resumes.

Adding a third production line of 20/40 and 30/50 mesh product to the 500 million-pound-per-day Toomsboro plant will bring overall capacity up to 750 million pounds per year, which will give the company the ability to meet a higher demand for proppant if the economy turns around in 2010 as expected. During the downtime, the company plans to build an inventory to allow it to meet current demand before the new plant comes online.

With six manufacturing plants in the U.S., China and Russia, CARBO is the world's leading supplier of ceramic proppants. Ceramic proppants, also known as ceramic sand, are spherical high-strength alloy pellets used during the hydraulic fracturing process to stimulate and increase production in oil and gas wells.

The concept of fracturing was developed in the mid-20th century. A hydraulic fracture is formed by pumping a fluid into a well bore quickly enough to make enough pressure to cause a crack in the rock formation located in oil and gas wells. In order to keep these cracks open after the injection stops, a sand-like material proppant is added to the fluid, providing a path connecting the larger area of the reservoir to the well. As a result, the area from which fluids can be produced is increased.

The specifications of ceramic proppants can be divided in various types such as 20/40 mesh, 30/50 mesh, 40/60 mesh, 16/30 mesh and 12/18 mesh.

Industrial Info has been tracking the Toomsboro project since June 2006, and also covered the design and construction of the second production line, following the project from December 2005 to August 2007, when the second 250 million-pound-per-year proppant plant was commissioned.

During the second-quarter 2009 conference call, CARBO President and CEO Gary Kolstad hinted there may be more expansions for Toomsboro on the horizon: "If our business can be this good under these conditions," said Kolstad, "it's very exciting about what's going to happen. And of course, that's why we're going to continue to build the Toomsboro Line Three and add another 250 million pounds. And we're doing engineering on Toomsboro Line Four. So we're pleased where we're at in our client base."

Company officials say plans for a fourth production line are very preliminary and depend highly on market conditions. While the company plans to review the idea next year, it should be noted that the Toomsboro facility is designed to run production lines in pairs. Lines 1 and 2 are operated by the same employees, so running lines 3 and 4 together would be a sensible way of expanding operations at the plant.

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