Shale’s Big Sand Switch Is Delivering Dollars, But Not Eroding All Concerns
- Trent Jacobs (JPT Digital Editor)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- February 2019
- Document Type
- Journal Paper
- 28 - 33
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Where shale producers in Texas are getting their proppant has turned out to be one of the sector’s most significant market transformations since the onset of the oil industry’s downturn.
The 4-year movement toward using regional sands from within the state has been a major
economic win for the operators leading it. The production results are encouraging. Supply chains are more efficient. Yet, there remain long-term concerns.
Distinguished by their roundness and high-crush strengths, northern white sands from the US Midwest had served as the ubiquitous proppant of choice for much of the unconventional revolution—supplying 75% of the sector’s frac sand in 2014. Then crude prices collapsed.
Northern white sand accounts for just over 40% of today’s market. Nearly a quarter of the supply now comes from within the Permian Basin thanks to more than a dozen new in-basin sand mines that opened within the past year.
The additional supplies have forced the premium northern white sand suppliers in the US Midwest into price parity with the regional sands in Texas. However, without the need for cross-country rail shipments from Wisconsin or other northern states, the all-in cost of the Texas alternatives is actually about 60% less—amounting to a reduction of $40–$50 per ton.
Previously, operators avoided the use of these regionals sands due to their lower quality. The fear was that their more brittle grains tend to compact quicker, cutting off hydrocarbon flow from within the fractured reservoir. But for the most intense horizontal well designs that use 40 to 50 million lbs of sand, the arbitrage can amount to more than $1 million of freed up capital per well.
“The way I look at it is, if you can save that much money, then it doesn’t take very long until you’ve already funded a new well,” said Scott Forbes, a proppant expert with the consultancy Wood Mackenzie.
Forbes has been visiting the in-basin mines in Texas and speaking with buyers for the past year. In terms of production issues, he has heard of isolated cases where improper sand cleaning operations at some of the new mines may have contributed to poor well completions.
Overall though, the sentiment Forbes has picked up on from the shale patch is that the gains outweigh any losses seen so far. Companies that were the first to switch to regional sands “are pretty well sold on it,” he shared, adding that their gains are creating pressure on the hold-outs to follow suit.
The big sand shift started early on in the downturn as producers in Texas sought economic refuge by “debundling” their reliance on service companies and sourced brown sands (i.e., Brady or Hickory Sands) directly from mines in the central part of the state. The second act—the arrival of the in-basin operations—is solidifying the transition sooner than many anticipated.
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