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FRAC SAND: A MARKET SURGING FORWARD THE HIGH-PROFILE FRAC SAND MARKET IS EXPERIENCING GROWING PAINS, BUT AGGREGATES PRODUCERS SHOULD TAKE NOTE: THE LONG-TERM OPPORTUNITY IS TOO GOOD TO PASS UP. By Mark S. Kuhar any aggregates producers have heard about the explosive growth of the frac sand market in the United States, and the potential for international growth as well. Frac sand plants are currently being oper‐ ated by everyone from giant corpora‐ tions with extensive resources and high‐tech equipment, all the way down to wildcat producers with a small de‐ posit and mobile equipment. M Make no mistake, the frac sand market is here to stay. And while historic price‐per‐ton levels are a thing of the past, the product is in demand and the payback is still lucrative. The U.S. market for frac sand is in the midst of a major economic boom with significant growth continuing for the foreseeable future. The International Energy Agency predicts that more than a half‐million new wells will be drilled in the United States by 2035, creating the need for a steady stream of high‐quality frac sand. According to PropTester Inc. and KELRIK, LLC from its 2011 Proppant Market Report, as reported in the Wall Street Journal, production jumped to 28.7 million metric tons in 2011. U.S. demand for well stimulation mate‐ rials such as frac sand is forecast to rise 10.2 percent annually to nearly $12 bil‐ lion in 2016, according to a study of‐ fered by Cleveland‐based The Freedonia Group. Growth will be 14 ROCKproducts • OCTOBER 2012 driven by continued advances in hy‐ draulic fracturing technology designed to increase the productivity of both new and existing wells. Proppants (an‐ other name for frac sand), gases, and base fluid materials will be among the fastest growing products. Ongoing growth in horizontal drilling activity and development of shale re‐ sources will boost demand for prop‐ pants and the fluids used to deliver them into formation fractures. In the early portion of the forecast period, use in oil well drilling will provide most of the impetus for growth, as oil prices are high by historical standards and natural gas prices are not. How‐ ever, shale gas development activity was strong in 2009, 2010 and 2011, despite low prices. Growth in shale plays has been sup‐ ported by companies looking to estab‐ lish a shale gas presence and the desire of existing producers to de‐ velop already acquired leases, as well as by hedges on production made when prices were high. Through the forecast period, shale gas producers will continue to embrace innovations such as multiple‐well drilling pad sys‐ tems and advanced hydraulic fractur‐ ing materials in order to improve drilling efficiencies and increase per‐ well output, all of which will benefit well stimulation material demand. Well stimulation technologies have had a commercial presence for more than 60 years, but for much of that time these techniques were used fairly selectively. A number of factors have combined to transform well stimula‐ tion in the U.S. from a niche technol‐ ogy to one of the most common oilfield activities. Technological advances have improved well stimulation techniques to the point that their use – and cost – is nearly always justified by increased well productivity. Going forward, gains for well stimulation materials will re‐ main strong, despite some deceleration in growth. A decade or two ago, most wells drilled in the U.S. were not frac‐ tured. That is no longer the case. Moreover, much of the recent growth in demand for well stimulation mate‐ rials has been attributable to the emergence of horizontal drilling and multistage fracturing. Horizontal drilling allows for greater reservoir contact, and therefore faster and fuller well productivity. Multistage fractur‐ www.rockproducts.com