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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The industrial sand market is dramatically expanding its capacity with new mines planned for Texas and Oklahoma, but speakers and attendees at a recent frac sand conference in Denver expressed little concern about a possible price collapse. The reason? The ever-rising amounts of frac sand used to hydraulically fracture Oil & Gas wells.
As new sand mines come online in Texas and Oklahoma in the coming months, some frac sand mines in the Midwest may have to take a haircut on prices, speakers said at the 5th Frac Sand Conference, organized by Industrial Minerals Events. And troubles at railroad operator CSX Corporation (NASDAQ:CSX) (Jacksonville, Florida) may cause that company to lose volumes to waterborne competitors, predicted a shipping representative.
The "X" factor overhanging predictions at the event is the global supply-demand balance for crude oil and natural gas.
Frac sand mines under development in Texas and Oklahoma will add more than 60 million tons of annual production capacity, an expansion of more than 50% of the overall industrial sand market, speakers said on September 13. The Permian Basin and Eagle Ford Shale consume about 45% of all frac sand produced in the U.S. So far, most of the frac sand used in Texas has been delivered by rail from the Midwest, mainly Wisconsin, Minnesota and Illinois. As the Texas sand facilities come online starting in early 2018, it is expected to displace sand from the Midwest, called Northern White. Operators in the Denver-Julesburg (D-J) Basin in Colorado and the Bakken Shale in North Dakota are looking for a price break on that commodity. For related information, see September 19, 2017, article - Economics of Fracking in Texas May Shift with Planned Frac Sand Projects.
But a price collapse in frac sand prices is not expected because "there's no end in sight to growth in proppant intensity per Oil & Gas well," Taylor Robinson, president of PLG Consulting (North Andover, Massachusetts), told about 130 conference attendees.
The "high intensity fracking trend will continue to expand sand volumes per well," he predicted. "There was a 20% to 25% year-over-year increase in sand volumes per well between 2015 and 2016, and this year will see another 15% to 20% year-over-year gain," he predicted. "Technology leaders have been advancing the next generation of this technique for the last 2-3 years in both gas and oil well fracks. Some leaders are using an average of 6,400 tons of proppant (or about 13 million pounds) to frac a well." As laterals get longer and drilling designs evolve, demand for frac sand will continue to rise. Some leaders are using up to 25,000 tons of proppant to "super frac" a well, Robinson told attendees.
"Followers are still experimenting with drilling design and optimization and are 1-3 years behind the leaders in implementing latest techniques," Robinson told conference attendees. Wells drilled in the Marcellus and Utica shales use the most proppant, on average -- about 7,500 tons per well as of the first quarter of 2017, he said. That's up nearly 40% from the amount of sand used to frac those wells in late 2015. Sand volumes per well also have risen in the Eagle Ford Shale and Permian Basin over the last six quarters, Robinson observed.
Click on the image at right to see average sand volumes per well in various U.S. unconventional formations.
Robinson shared a market forecast from IHS Markit Limited (NASDAQ:INFO) (London, England) that said North American demand for frac sand could nearly double, to about 90 million tons per year by 2022. Oil prices were the biggest factor regarding whether that demand will surge to those levels.
Click on the image at right to see a projection of frac sand demand through 2022.
Railroads transport about 90% of the frac sand used in the U.S., but at least one railroad could lose market share to barge transport. "I'm starting to get calls about delivering sand to the Utica and Marcellus," Tom Vorholt, senior vice president of business development for Florida Marine Transport Dry Cargo (Mandeville, Louisiana). "People are telling me, 'I've had enough of CSX's problems. I want to talk about barging sand'." Railway congestion and service problems plagued CSX Corporation (NYSE:CSX) (Jacksonville, Florida) this summer following the installation of a new chief executive, a cutback in workers and implementation of a new corporate strategy.
Vorholt said Florida Marine will transport between two million tons and three million tons of frac sand this year, a number he expects will rise to about three million tons per year in 2018. The company has a 45% share of the sand-by-barge market.
"If a waterway is located within 50 miles of a sand mine or a well site, there's a pretty good economic case to made for barge," he said. "Barge transportation can get sand anywhere except the Permian and Eagle Ford."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
As new sand mines come online in Texas and Oklahoma in the coming months, some frac sand mines in the Midwest may have to take a haircut on prices, speakers said at the 5th Frac Sand Conference, organized by Industrial Minerals Events. And troubles at railroad operator CSX Corporation (NASDAQ:CSX) (Jacksonville, Florida) may cause that company to lose volumes to waterborne competitors, predicted a shipping representative.
The "X" factor overhanging predictions at the event is the global supply-demand balance for crude oil and natural gas.
Frac sand mines under development in Texas and Oklahoma will add more than 60 million tons of annual production capacity, an expansion of more than 50% of the overall industrial sand market, speakers said on September 13. The Permian Basin and Eagle Ford Shale consume about 45% of all frac sand produced in the U.S. So far, most of the frac sand used in Texas has been delivered by rail from the Midwest, mainly Wisconsin, Minnesota and Illinois. As the Texas sand facilities come online starting in early 2018, it is expected to displace sand from the Midwest, called Northern White. Operators in the Denver-Julesburg (D-J) Basin in Colorado and the Bakken Shale in North Dakota are looking for a price break on that commodity. For related information, see September 19, 2017, article - Economics of Fracking in Texas May Shift with Planned Frac Sand Projects.
But a price collapse in frac sand prices is not expected because "there's no end in sight to growth in proppant intensity per Oil & Gas well," Taylor Robinson, president of PLG Consulting (North Andover, Massachusetts), told about 130 conference attendees.
The "high intensity fracking trend will continue to expand sand volumes per well," he predicted. "There was a 20% to 25% year-over-year increase in sand volumes per well between 2015 and 2016, and this year will see another 15% to 20% year-over-year gain," he predicted. "Technology leaders have been advancing the next generation of this technique for the last 2-3 years in both gas and oil well fracks. Some leaders are using an average of 6,400 tons of proppant (or about 13 million pounds) to frac a well." As laterals get longer and drilling designs evolve, demand for frac sand will continue to rise. Some leaders are using up to 25,000 tons of proppant to "super frac" a well, Robinson told attendees.
"Followers are still experimenting with drilling design and optimization and are 1-3 years behind the leaders in implementing latest techniques," Robinson told conference attendees. Wells drilled in the Marcellus and Utica shales use the most proppant, on average -- about 7,500 tons per well as of the first quarter of 2017, he said. That's up nearly 40% from the amount of sand used to frac those wells in late 2015. Sand volumes per well also have risen in the Eagle Ford Shale and Permian Basin over the last six quarters, Robinson observed.
Robinson shared a market forecast from IHS Markit Limited (NASDAQ:INFO) (London, England) that said North American demand for frac sand could nearly double, to about 90 million tons per year by 2022. Oil prices were the biggest factor regarding whether that demand will surge to those levels.
Railroads transport about 90% of the frac sand used in the U.S., but at least one railroad could lose market share to barge transport. "I'm starting to get calls about delivering sand to the Utica and Marcellus," Tom Vorholt, senior vice president of business development for Florida Marine Transport Dry Cargo (Mandeville, Louisiana). "People are telling me, 'I've had enough of CSX's problems. I want to talk about barging sand'." Railway congestion and service problems plagued CSX Corporation (NYSE:CSX) (Jacksonville, Florida) this summer following the installation of a new chief executive, a cutback in workers and implementation of a new corporate strategy.
Vorholt said Florida Marine will transport between two million tons and three million tons of frac sand this year, a number he expects will rise to about three million tons per year in 2018. The company has a 45% share of the sand-by-barge market.
"If a waterway is located within 50 miles of a sand mine or a well site, there's a pretty good economic case to made for barge," he said. "Barge transportation can get sand anywhere except the Permian and Eagle Ford."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
