Rock Products

MAY 2015

Rock Products is the aggregates industry's leading source for market analysis and technology solutions, delivering critical content focusing on aggregates-processing equipment; operational efficiencies; management best practices; comprehensive market

Issue link: https://rock.epubxp.com/i/511782

Contents of this Issue

Navigation

Page 69 of 111

68 | Frac Sand Insider May 2015 www.rockproducts.com Domestic Frac Sand of approximately 36-90 Mt at their operations in Minnesota and Wisconsin and about 36 Mt in Texas (Sierra Frac Sand, LLC, 2014). A cursory review of published reserve data coupled with (1) the high number of permit applications for development of new frac sand mines in Wisconsin and other states; (2) mine life estimates and expansion plans for established operations; and (3) thickness and areal distribution of geologic formations in the Great Lakes Re- gion, Texas, and other areas that contain favorable geology to host sand deposits that meet the frac sand specifcation requirements, suggests that the United States' reserves and resources at current prices are suffcient to meet demand for fracking requirements for the foreseeable future. Some of these deposits may not be devel- oped because of factors that include thick overburden and other geologic and engineering challenges, absence of infrastructure, such as power and nearby rail transportation; and lack of available water, environmental concerns, preexisting development, societal pressure, and issues related to permitting. Frac Sand Pricing As a result of high demand and tight supply, the price of frac sand in 2013 increased to a national average of about $63 (avg. 2013) per ton FOB plant from about $50 (avg. 2013) per ton FOB plant in 1990 (U.S. Geological Survey,1991-2014). As discussed previously, the major factors that determine the cost and application for frac sand include: (1) grain strength, which is based on its SiO 2 content and internal structure; (2) grain sphericity; (3) grain size; (4) grain size distribution; (5) and overall purity. In general, the relatively clean, coarse and high-silica high-strength "white" sands mined in Arkansas, Illinois, Minnesota, and Wisconsin bring the highest pric- es, averaging about $55 per ton FOB plant. The coarser-cleaner fractions bring premium prices of approximately $70 per ton FOB plant, because of higher conductivity which is especially desirable for the recovery of oil. In most cases, rail is the primary form of transportation to get sand from the mine to a transfer point and then, from there, trucked to the well site, and represents the high- est post-mine cost. Adding to the cost burden of transportation some suppliers and consumers of frac sand are affected with lo- gistical "bottlenecks" that result from the: lack of available hopper cars, limitations of branch lines to accommodate rail traffc, weight, and speed; complications associated with moving sand through the network of rail freight carriers that traverse the Midwest United States; shortages of truck drivers and truck availability; and con- strained capacity at trans loading terminals (Gopinath and Praman- ick, 2014; Minnesota Department of Transportation, 2012; Vecto- ra Transportation, 2013). Depending on the modes of transport, distances traveled, and number of transfer points, the cost of white frac sand may reach $170 per ton by the time it arrives at the well site (PacWest, 2014b). In 2013, brown sand represented about 35 percent by weight of the untreated sand used for fracking (PacWest, 2014b). In general, the brown sands mined in Louisiana and Texas are fner grain-sized, less spherical and lower purity quartz than Northern sand. They are generally considered lesser quality because of lower silica content with commensurate lower-strength and lower conductivity. Their relatively low resistance to pressure generally limits their use to a fracking depth of about 2,400 m. The sands are priced at about $65 per ton FOB plant (Ashwill, 2012; Carbo Ceramics, 2012; Lyle, 2011; PacWest, 2014b; U.S. Geological Survey, 1991-2014). On average, they are burdened with higher mining costs than mines in the Great Lakes Region, but experience signifcantly lower transpor- tation costs because of the shorter distance and fewer transit points necessary to reach the well site. Conclusion Natural gas and oil recovered from fracking unconventional depos- its has captured a signifcant share of current U.S. production. More than 80 percent of the natural gas wells developed in the United States over the next ten years are expected to require fracking and it is projected that by 2035 natural gas from fracked wells will rep- resent more than a 75 percent share of the domestic supply. The EIA details how surging domestic oil production has narrowed net petroleum imports – from 60 percent of U.S. requirements in 2004 to 38 percent in 2013 (API, 2014a; 2014b) . The United States is the largest producer and consumer of frac sand in the world. Of the approximately 54 Mt of frac sand produced in 2014, the greatest percentage share required for tap- ping into unconventional deposits originated from the Great Lakes Region and Texas. These areas will likely continue to represent the largest production shares through the end of the decade as expan- sions at existing mines occur and new mines are developed. Fur- ther mine development in other states, such as Arkansas, and new mine development in Canada will also contribute additional supplies of frac sand. It has been estimated that frac sand consumption in the United States could approach 70 Mt by 2016 (PacWest, 2014a; Progressive Railroading, 2014). This amount of frac sand would have a value exceeding 4 billion dollars FOB plant as estab- lished plays are refreshed and further developed, and new plays are exploited (Hoerth, 2014). This consumption estimate is well with- in the limits of anticipated effective U.S. frac sand capacity. U.S. growth in consumption of frac sand was dramatic during the 4-year period of 2009 through 2012 with an estimated 49 percent CAGR as development of unconventional deposits was aggressively pur- sued. Barring factors that could negatively affect frac sand demand, such as major technological breakthroughs and/or a drop in oil and gas prices that are considered to be long term by the petroleum industry , f rac sand will continue to represent the largest tonnage used among proppants and the highest total value for fracking until at least the year 2020, based primarily on: (1) its satisfactory perfor- mance in most applications; (2) its availability; and (3) its lower price compared to alternative materials. The average amount of proppant used per unit distance for horizontal holes is expected to contin- ue to climb with improved fracturing technologies, closer-spaced stages and increased number of stages per drill hole. Demand for proppant will also increase as more previously drilled wells are re- freshed, established ones further exploited, and new oil and gas felds are developed.

Articles in this issue

Links on this page

Archives of this issue

view archives of Rock Products - MAY 2015