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Dramatic Changes to the Supply of Frac Sand could lead to Efficiency Gains in the Permian basin

Published in Oil Industry News on Monday, 12 March 2018

Graphic for News Item: Dramatic Changes to the Supply of Frac Sand could lead to Efficiency Gains in the Permian basin

A major report from Energent, part of Westwood Global Energy Group, the energy market research consultancy, predicts dramatic changes to the frac sand supply chain to the Permian basin, the world’s most important oil growth region.

The Permian basin produces 2.9 MMbopd, approximately 45% of light-tight oil production in the U.S. More than 800 E&P operators, 25 pressure pumpers, and 30 frac sand producers are engaged in activities there. With 2,430 drilled uncompleted wells and increasing capital expenditures for E&Ps in the basin, the Permian is poised to continue growing.

Frac sand is vital to the industry as it is pumped into the ground at high pressure to help extract oil and gas. Until now, the industry has relied upon Northern White premium frac sand hauled over 1,200 mi from Wisconsin at a cost of $110/ton.

The Energent report shows that all this is about to change. Mines based within the Permian basin itself are now producing sand of the required technical standard and volume to meet the expected demand growth of 2.5 million tons per quarter over 2018-19.

By the end of 2018, Energent anticipates over seven million tons per quarter of available premium sand capacity inside the Permian basin. This will remove almost 800,000 tons of sand requiring long-haul rail logistics in fourth-quarter 2018 compared with first-quarter 2018.

Todd Bush, Founder of Energent, comments: “The cost and availability of frac sand has been a major challenge for operators in the region. So much so, that new entrants and existing frac sand companies have dedicated over $850 million to opening their own miles near Winkler county, Texas.

“The potential savings of in-basin sand are huge – as long as operators are satisfied that it meets their technical requirements, they could save up to 50% on frac sand hauled from Wisconsin.

“Assuming a 50% adoption rate of locally mined sand, incumbent suppliers will see a material decline in non-contracted volumes by the third quarter. It will also focus attention on logistics within the basin itself, the truck fleet, retaining drivers and transport technology, which will also drive well economics.”

The full report -- Frac Sand in the Permian – Near-Term Outlook - - has been put together using Energent and Westwood’s proprietary data detailing frac sand demand and consumption patterns across the U.S. shale plays.

Source: www.worldoil.com

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