Welcome to approximately 60 seconds of reading Mike ODriscolls take on the weeks news highlights in the industrial minerals world.
You can mine a frac sand deposit, but can you get it to market?
Thats the $64,000 question or more like the $64 million question these days for anyone involved in shipping frac sand to drill sites across North America.
Industrial Minerals June 2013 issue features an oilfield special which includes a review of frac sand logistics and projects, but also exclusively profiles Halliburtons recently opened state-of-the-art 40m lb frac sand transfer terminal at Windsor, Colorado.
Serving the Niobrara Basin, this is worlds largest frac sand facility of its type and signifies the importance oilfield service companies attach to securing adequate logistics infrastructure.
Likewise, in May, US Silica opened its 15,000 tonne silica sand storage and distribution facility in San Antonio, Texas, in partnership with BNSF Railway Co.
And yesterday, Canadian National Railway announced increased investment to the tune of $33m to upgrade its Whitehall subdivision, in Wisconsin, to meet increased demand for car-loading capacity and train velocity for frac sand producers Badger Mining, Preferred Sands, Atlas Resin Proppants, and Taylor Frac.
With frac sand freights costs accounting for as much as 61% of its delivered cost, 2012 saw Baker-Hughes target $100-120m savings with a range of raw material supply initiatives.
Such oilfield mineral logistics challenges, solutions, and trends are up for discussion at Oilfield Minerals Outlook 2013, 19-21 June 2013, Houston (register online) with presentations from Accenture, Cadre Proppants, Preferred Sands, RDC Logistics, and TBS Shipping.
US market bottomed out
The 2013 Q1 results and associated comments from the major US oilfield service companies were united in admitting that they have endured a tough domestic market while overseas there is much promise for continued growth.
In the US, the drilling market is considered to have bottomed-out, and modest growth is expected for the rest of 2013.
Although this has been reflected in the decline of drilling grade barite demand recently, it has not dampened enthusiasm among consumers and developers to seek out alternative sources of supply.
Mexico is fast becoming a hot-bed of barite development. Prodexa de Mexico SA de CV has recently begun several barite mining and processing operations in Sonora state under the name Anaconda Barite and will be presenting its views on the market at Oilfield Minerals Outlook 2013 (register online).
Last month, Nevada-based Double Crown Resources signed a master purchase agreement for 140,000 tpm barite with Mexicos Grupo Estella SA de CV which it will then resell to oilfield customers.
Downhole Trader recently reported a Mexican barite producers leap of faith when it shipped 20,000 tonnes in 1.5 tonne Super Sacks to a US port without a contract. In short time a buyer tested and then purchased the entire first shipment. The market price on the product was reported at $173/tonne, and it is believed that it was contracted in the low $170s.
Baker Hughes reported that the Gulf of Mexico is seeing a positive shift as customers begin to transition from exploration to development, although the limited capacity for stimulation vessels is creating tightness in the market (logistics again!).
Halliburton reported that with the exception of the Marcellus, natural gas drilling will not be a major activity driver in 2013 in the US.
In the groups 2013 Q1 results discussion, David Lesar, CEO Halliburton said: If we see improvement in the gas basins, it will be late in the year, although we are becoming increasingly optimistic about gas activity in 2014.
Oilfield potential outside North America
However, the really interesting developments seem further afield.
The Middle East is really hotting up. Baker Hughes has dramatically expanded business in Iraq and increased work in Saudi Arabia to support growth in the unconventional gas market.
Halliburton is also making strides in Iraq, but in Saudi Arabia enjoyed over 30% revenue growth relative to the first quarter of 2012, and is expected to be one of Halliburtons top growth areas in 2013. To support further unconventional development in the region, the company is opening an unconventional gas technology centre in the country later this year.
If you look at the opportunities in the Red Sea, where we recently won some work with Saudi Aramco, were very excited about that market in particular, said Lesar.
Schlumberger also recorded its strongest Middle East growth in Saudi Arabia, where activity is expected to expand further with the rig count expected to touch 170 from current levels of around 140 (watch this space for news of IM Roundtable Oilfield Minerals Outlook Middle East 2014, Abu Dhabi).
Schlumberger recognised the potential of China as a significant opportunity in the unconventionals space as the country has auctioned several shale gas blocks, many of which have been won by non-oil companies which will require expertise to unlock the reserves.
Paal Kibsgaard, CEO Schlumberger stated: Overall, China is way up there with the highest growth regions that we expect in the next couple of years.
The status and outlook of Chinas hydraulic fracturing market and its associated ceramic proppants industry will be examined in the upcoming IM Roundtable Chinas Industrial Minerals & Markets: New Horizons, New Mindsets, 23-25 September 2013, Shanghai (details here).
In Australia, Queensland unconventional gas activity together with deepwater drilling activity in the north-west is also expected to lead growth for Schlumberger in the coming year.
For Latin America, most of the companies reported increased activity levels and good potential, although there was a whiff of caution that the pace of development might not match that of Asia or the Middle East.
Trouble brewing in Germany
The market in Europe, Africa, and CIS region was described as solid. Halliburton reported an uptick in the adoption of unconventional technology including increased use of multistage fracturing, and concluded: These are markets with terrific potential for unconventional development.
As has been reported in IM and will be discussed in Houston, Europes development of shale gas resources is likely to be of a mixed nature, with some countries more enthusiastic than others.
One story that caught the eye last week was concern expressed by German brewers over the potential contamination risk to the purity of the water used to brew some 5,000 different varieties of beer.
Apparently, many German brewers still adhere to a beer purity law that dates back hundreds of years and permits only the use of hops, barley, yeast and pure water.
The German Brewers Federation has written to ministers warning that until the risk of contamination of water used for brewing can be ruled out, the German government should not pass any fracking legislation.
Last orders for fracking in Germany?
All the latest trends and developments in oilfield mineral supply and demand will be discussed at Oilfield Minerals Outlook, 19-21 June 2013, Houston register now.