Demand for fracturing sand and
other industrial mineral proppants is booming, and it is all
down to the US shale gas revolution.
Extracting natural gas from shale
formation involves hydraulic fracturing (fracking) - a drilling
technique which requires large amounts of water and sand to be
blasted down wells to release small pockets of trapped gas
(see panel: Fracking basics).
Due to the massive increase in
fracking, the US frac sand market has quadrupled in the last
decade to around 22m tpa, with producers estimating supply is
yet to catch up with demand.
But will the US shale gas output
continue to grow? And what is the outlook for frac sand and
ceramic proppant producers looking to tap into the global
Start of a revolution
Although fracking was developed in the mid 1970s,
cost-effective technology was not brought to market until the
1990s and was then very quickly taken up the by the industry to
produce vast quantities of gas.
From producing nearly nothing at
the start of 2000, output from shale gas plays rose to 1
trillion cubic feet a year by 2006 and 4.8 trillion cubic feet
by 2010, according to the US Energy Information Administration
(EIA), and accounting for 23% of total US dry gas production
(opposed to associated gas which is produced with liquids such
The US was expected to start
importing gas from the mid-2000s due to lower output from
maturing conventional fields, but the shale gas revolution has
turned the market on its head, making the country more than
self-sufficient. The resource base for technically recoverable
US shale gas is estimated at 482 trillion cubic feet, nearly
double the conventional gas reserve.
The abundance of gas has also
resulted in a slump in US gas prices, which was over $12 per
million British thermal units (mBtu) in mid 2008, to remaining
flat at less than $5/mBtu since the beginning of 2010.
The EIA also forecast shale gas
output to climb to 13.6 trillion cubic feet in 2035, accounting
for nearly half of all US dry gas production.
In President Barack Obamas
State of the Union speech in early January, he urged the US to
exploit domestic shale gas resources, while also acknowledging
environmental controversies around fracking.
We have a supply of natural
gas that can last America nearly 100 years, and my
administration will take every possible action to safely
develop this energy, Obama said.
Experts believe this will
support more than 600,000 jobs by the end of the decade.
America will develop this resource without putting the health
and safety of our citizens at risk.
Fracking environmental concerns
While shale gas has supporters in the highest office of
government, it also has given birth to an anti-fracking
movement which is concerned about water contamination and
earthquakes resulting from unconventional drilling.
New York and New Jersey are the two
US states that have imposed a temporary ban on fracking over
concerns that the chemicals and minerals used in drilling fluid
may contaminate into drinking water reservoirs, while protests
have broken out in Pennsylvania over the same issue.
Ohio also suspended operations of
some shale wells after the city of Youngstown experienced small
earthquakes at the end of last year.
All four states lie partly on top
of the huge Marcellus shale formation, which has an estimated
recoverable reserve of 141 trillion cubic feet according to the
EIA, enough to satisfy US gas demand for a decade.
Other issues include methane
leakage, with the 2010 Oscar-nominated film Gasland showing
residents setting fire to tap water, although this has been
disputed because methane naturally occurs in some underground
But due to the availability of cheap energy, fracking has the
backing of the US manufacturing base, with the industrial
sector accounting for a third of the countrys gas
consumption. With the US manufacturing sector shedding jobs to
countries with cheaper labour in Asia, industrials argue that
low-cost gas is a necessary to keep competitive in a global
(PwC) estimated shale gas could employ a million more workers
by 2025 from industries directly involved with supply in the
shale gas industry and also companies that consume large
amounts of gas.
For example in 2011, 17 chemical
and metal companies commented that growth in demand for
products was directly attributed to the emergence of the shale
gas sector, compared with no mention of shale gas in 2008.
PwC also said that cheap natural
gas was likely to result in significant investment in new
chemical factories, giving them an advantage against overseas
competitors which use more expensive oil-based naphtha,
according to its report: Shale Gas: A renaissance in US
We estimate a cost saving for
US manufacturers of approximately $11bn annually, by combining
recent natural gas consumption levels with potential natural
gas prices under high and low shale recovery scenarios,
Given the historical
relationship between domestic energy prices and manufacturing
employment, we believe that a high-level of shale gas recovery
could lead to approximately one million more manufacturing jobs
by 2025, and by 2035, when compared to the low shale gas
Shale gas could also be exported to
other countries via liquefied natural gas (LNG), which is a
natural form that is super-cooled to a liquid, loaded onto
tankers and warmed up back to gas at the destination port.
Exporting natural gas means
wealth comes into the United States, US government Energy
Secretary Steven Chu said. US gas prices dipped under $3/mBtu
early in 2012, compared with European gas prices being over
double and Asian countries are paying over three times as
The US is projected to become
a net exporter of LNG in 2016, a net pipeline exporter in 2025,
and an overall net exporter of natural gas in 2021, the
EIA said in its latest Energy Outlook.
The outlook reflects
increased use of LNG in markets outside of North America,
strong domestic natural gas production, reduced pipeline
imports and increased pipeline exports, and relatively low
natural gas prices in the US compared to other global
But the huge success of shale gas could also be its downfall.
Since the shale gas boom, US gas prices have fallen so much
that it may be unprofitable for companies to keep fracking.
As a result, Chesapeake, the second
largest producer of natural gas, is planning to cut shale gas
output by 9% this year in response to a bloated market.
The curtailed volumes are
located primarily in the Haynesville and Barnett shale plays.
In addition, wherever possible, the company is deferring
completions of dry gas wells that have been drilled, but not
yet completed, and is also deferring pipeline connections of
dry gas wells that have already been completed,
Meanwhile, other companies such as
UK-headquartered BG Group has said it would halve previous 2015
gas output forecasts and US oil company ConocoPhillips said it
would also slash this years gas output by up to 9%.
However, cheaper gas prices also
means more demand, with US power companies looking to
capitalise on cheap gas instead of burning coal.
The US is also looking to convert
vehicles to run on compressed natural gas, ensuring healthy
long-term demand ahead.
European frac sand market
The fracking revolution that started in the US is spreading
around the world, with many European countries investigating
shale gas potential, including Austria, Germany, Hungary,
Ireland, Poland, Sweden and the UK.
Within this group, Poland is
leading the way and is targeting first shale gas production in
2014. According to the EIA, Poland has 187 trillion cubic feet
of recoverable shale gas, enough to meet domestic demand for
over 300 years.
Warsaw has welcomed US oil majors
such as Chevron, Exxon Mobil, Conoco and Marathon to help
kick-start the Polish shale gas industry, with the country
desperate to reduce dependence on Russian gas imports. Poland
imports 64% of consumption, mostly from Russia, giving Moscow
powerful sway over its smaller neighbour.
Fracking has also started in
Ukraine, which also has similar political motives for
extracting unconventional gas. It sits on 42 trillion feet of
shale gas, enough for over 25 years of demand, and also imports
54% of its gas demand, again from Russia.
But the same environmental concerns
that plague the US shale gas industry also concern Europe.
France and Bulgaria have already banned fracking for
The UK has temporarily banned
fracking after earthquakes occurred in the north-west of
England. Cuadrilla, the company drilling for shale gas in
England, admitted the earthquakes were due to fracking, but
also said the tremors were so small that they could only be
recorded with specialist seismic devices.
Fracking might also be more
difficult in Europe as it has more urban areas compared with
large areas of arid land in the US. And land rights also
differ, meaning land owners may not benefit from fracking like
they do in the US.
Compared with the US, there
is a higher population density in Europe and more stringent
environmental regulations, consultancy Ernst and Young
said. Issues like noise pollution, which has so far been
less of a concern in the US than some of the other issues,
might be more of a problem in densely populated regions of
Europe also lacks the oil and gas
drilling industry that the US has, hampering an uptake in
Although the number of active
land rigs in Europe has increased over the course of 2011 to
more than 70, a higher number than operating offshore, there is
still a shortage of suitable rigs for shale gas exploration and
development in Europe, Ernst and Young added. This
compares to around 2,000 rigs in the US.
China also has huge shale gas potential, with a recoverable
1,275 trillion cubic feet which is more than the US and Europe
combined. Energy firms China National Offshore Oil Corp.
(Cnooc) and China Petroleum & Chemical Corp. (Sinopec) have
started drilling for shale gas, but it could be years before
commercial production starts, according to the EIA.
Argentina also has large quantities
of shale gas (774 trillion cubic feet) as does Mexico (681
trillion cubic feet) and South Africa (485 trillion cubic
And fracking activity is likely to
increase over the coming decades in line with the increase in
gas usage. Oil major BP forecast gas to be the fastest growing
fossil fuel through to 2030. This is partly because of
environmental reasons - burning gas releases half the carbon
dioxide of coal - and due to cost.
Energy prices have steadily risen over the last few years,
with oil staying above $100/barrel for most of 2011 compared
with around $80/barrel in 2010. Shale gas represents a cleaner
and cheaper alternative, which is attractive to a world which
cannot afford to go completely green.
Unlike conventional drilling, hydraulic fracturing (fracking)
requires large volumes of water to extract the gas.
Usually, 2-4m gallons of fracking
fluids are pumped into each shale well, with the immense
pressure forming small fractures several hundred metres long
from the drilling area. From these cracks, natural gas which
was trapped in impermeable rock is released.
More than 99% of fracking fluid is
water and sand, but it also contains traces of clay and other
chemicals in the drilling mud to aid the process. Fracking
fluid also picks up other elements such as salts and heavy
metals as it is forced into the ground.
After fracking, the liquid is
pumped back out so the natural gas can flow back to the
surface. The left over fracking fluid is either treated and
recycled, or disposed of in deep disposal wells.
Frac sand is a form of silica sand
which conforms to a specific size, roundness, and sphericity;
and must be >99% quartz or silica.
It is divided into white sand and
brown sand, with standard white specifications derived from St
Peters sandstone in Illinois, US, and brown specification
from Hickory sandstone near Brady in Texas, US.
The American Petroleum Institute (API) has specifications
for proppants in fracking fluid including crush resistance,
roundness and sphericity, and the amount of fines allowed above
and below he specific mesh size (see IM February 2012: Frac
sand in the pipeline).
Major US shale plays
Barnett Shale, Texas
This Texas shale is the one that started it all in the
mid-1990s. The Barnett has estimated recoverable reserves of
43.4 trillion cubic feet and is the project that showed the
world fracking was economically viable.
The shale covers approximately
16,726 km2 and has had over 13,500 gas wells
completed since 1997. At the beginning of 2011, Barnett had
around 75 gas drilling rigs.
From zero shale gas production in
2002, the Barnett output for 2010 jumped to nearly 1.7 trillion
cubic feet of gas. Typical drilling depths are 2,500-3,000
Woodford Shale, Oklahoma
The Woodford shale in south-east Oklahoma has recoverable
reserves of around 22 trillion cubic feet, but due to the
complexity compared to the Barnett shale, the formations are
more difficult to drill and frack. Drilling depths are slightly
deeper than the Barnett, at over 3,000 feet.
Covering 7,510 km2 in
the Midwestern state of Oklahoma, Woodford produced under 0.5
trillion cubic feet of gas in 2010 and had around 55 drill
Haynesville Shale, East
Still in the early stages of
discovery, the Haynesville shale is estimated to hold a huge
74.7 trillion cubic feet of gas.
Covering 23,310 km2, the
shale is also at depths of 10,500 to 13,500 feet, which is
deeper than others, making it more difficult to extract gas.
Issues include requiring almost twice the amount of hydraulic
horsepower, higher treating pressures and more advanced
drilling fluid chemistry than the Barnett and Woodford
Haynesville has around 150 drill
rigs and produced 1.3 trillion cubic feet of shale gas in
Fayetteville Shale, Arkansas
The Fayetteville shale holds around 32 trillion cubic feet of
shale gas and is located in the Arkoma Basin.
With an area covering 23,310
km2, Fayetteville has around 25 drilling rigs and
produced around 0.5 trillion cubic feet of gas in 2010. The
drilling depths required range from a few hundred to around
7,000 feet, making this play shallower than the Barnett in
Marcellus Shale; New York State,
West Virginia and Pennsylvania
The Marcellus shale play is
potentially the big daddy of them all, although still in early
exploration stage. The shale is located in the Appalachian
Basin and holds a whopping 141 trillion cubic feet. The area
covers 246,048 km2 and stretches under New York
State, West Virginia and Pennsylvania.
The Marcellus formation is not a
new discovery and has been producing conventional gas for a
number of years, but the fracking had increased output
significantly. With a little over 100 rigs, shale gas output
has climbed to nearly 0.5 trillion cubic feet in 2010.
The Marcellus shale ranges in depth
from 4,000 to 8,500 feet.
Bakken Shale, North Dakota/Montana
The Bakken shale in the Williston Basin differs from the others
as it is an oil play rather than gas, with liquid trapped
between dolomite layered between two shales at depths ranging
from around 8,000 to 10,000 feet.
It could also hold up to 3.65bn
barrels of oil, which would make Bakken the largest find in US
history. The shale covers 16,890 km2 and has around
50 rigs working on it.
Bakken produced around 225,000 barrels a day in 2010,
helping push total North Dakota oil output to over half a
million barrels, which is more than Opec member Ecuador.