Energize Weekly, August 29, 2018
The increased drilling of longer horizontal wells in shale oil and gas formations is fueling an escalating demand for the sand used to keep open fissures in rock after it has been fracked, leading to a $6 billion market by 2023, according to energy consultant IHS Markit.
The market for the sand, called a proppant, has grown from $1.3 billion in 2016 to $4 billion in 2018, spurred by increased budgets by operators for exploration and production, as well as greater intensity in the use of sand in wells, IHS said in a market report.
“Sand proppant demand is at record highs—the growth rate is extreme by any measure,” said Brandon Savisky, an IHS senior market research analyst, said. “We expect it will continue to expand at an estimated current annual growth rate of approximately 16 percent by 2023, with the Permian Basin leading the pack in terms of North American frack-sand demand.”
The West Texas basin accounts for nearly 40 percent of the market. By 2023, the Permian Basin will have almost 50 percent of proppant sand demand, Savisky said. The Permian accounts for some of the heaviest use of sand per foot in wells.
IHS projects total 2018 North American demand for proppant, which also includes a resin-coated sand and ceramic, to be 168 billion pounds, a 27 percent year-over-year increase.
Most of the demand is for sand, which accounts for 162 billion pounds of total North American proppant demand in 2018.
Drilling and well completion operations in tight rock formations, such as shale, pump a mix of water, chemicals and sand under high pressure into the wells to fracture the rock and release the oil and gas. As the water is pumped out of the well, the sand is left to “prop open” the cracks created by the fracking.
More than 70 percent of the entire North American proppant demand comes from three plays—the Permian, Appalachia and Eagle Ford. By 2020, the three plays will account for 75 percent.
There are two types of sand that are commonly used in oil and gas fracking operations, northern white sand and brown or regional sand.
Northern white, mined primarily in Minnesota, Wisconsin and Illinois, is considered a premium product. Brown sand is of lesser quality, but also less expensive. It is mined in Texas, closer to most oil and gas operations.
Brown sand is being increasingly mined within the Permian Basin itself, reducing significantly the transportation costs, delivery times and competition for supply, IHS said.
By 2023, North American frack-sand demand will reach an estimated 231 billion pounds, representing an increase of 113 percent above peak demand levels for 2014, IHS said. The frack-sand market for U.S. onshore oil and gas operations in 2011 was slightly more than 51 billion pounds.
