Oilfield minerals: Extracting what lies beneath

By Emma Hughes
Published: Friday, 20 December 2013

Oilfield minerals aid the process of extracting natural oil and gas from beneath Earth’s surface. For many years, lubricants such as bentonite and weighting agents like barytes (barite) have been used in conventional drilling while others, such as frac sand and sintered bauxite and kaolin, have seen demand increase as a boom in hydraulic fracturing (fracking) took off in the US and further afield. Ahead of IM’s Oilfield Minerals Outlook: Middle East, Emma Hughes, Deputy Editor, takes a look at some of the key minerals used in this end-market.

Bentonite

Bentonite is an abundant, versatile mineral found in many regions of the world. Its availability and unique properties have led to this mineral becoming the second most-commonly used industrial mineral in drilling fluids - called muds - after barite. Water-based drilling mud also commonly consists of additives such as calcium carbonate and graphite.

Drilling fluids can be divided into three primary types: water-based, oil-based and synthetic. Bentonite is among the most popular of the water-based fluids, and accounts for around 70-80% of the drilling grade bentonite produced, and around 20% of overall bentonite demand.

Sodium bentonite has gained a strong foothold in the oilfield market owing to its viscosifying characteristics and effective sealing and filtration properties. These properties come from bentonite’s structure as colloidal clay, comprising mainly of montmorillonite, meaning the mineral expands when added to water.

Along with gel formation, bentonite’s role in the oilfield is principally to seal borehole walls and lubricate the cutting head. This is a small, yet vital, part of the oil drilling process.

Bentonite’s popularity in the oilfield sector is also supported by the fact that there are no clear substitutes for this mineral in the drilling process. Indeed, S&B Group, which dedicates 50% of its business to bentonite, told IM that, bentonite might be used as a substitute for other materials that have less flexibility than that of bentonite.



Bentonite reserves

Bentonite deposits can be found in abundance around the world, yet not all deposits are suitable for use in the oilfield. Industry bodies such as the American Petroleum Institute (API) and Oil Company Materials Association (OCMA) specify stringent requirements for bentonite and other oilfield minerals determining whether they exhibit the necessary characteristics for this end-use.

Global bentonite reserves of more than 10bn tonnes are mainly distributed between the US, China, the CIS, Germany, Italy, Japan, Greece, Brazil, India and Turkey. Most of this bentonite is of the calcium variety; global sodium bentonite reserves are thought to be less than 500m tonnes.

Bentonite news

Bentonite Performance Minerals LLC, part of the Halliburton group, announced that it is awaiting approval for two new mines from the South Dakota Department of Natural Resources (DENR), in late October.

The permits request development of two sites located northwest of Belle Fourche in Butte County, South Dakota, each with an estimated tonnage of 5-15,000 tpa bentonite.

Application documents submitted to the DENR indicate that both the Killinger Mine and Purple Mine will cover an area of 2-10 acres (0.008-0.04km2) at any one time during a seven-year lifespan.

Bentonite mined at both sites is expected to be transported from South Dakota to Bentonite Performance Minerals’ processing plants in Wyoming, US.

Once operations have concluded, both mine sites will be reclaimed for use as livestock grazing rangeland.

Leaking concerns

Bentonite has also been causing a stir this year in the US as several spills of the oilfield mineral occurred as a result of other exploration work.

One instance at the site of Canadian mining company Mineral Mountain Resources Ltd, saw bentonite seep into a creek in Keystone, South Dakota.

Work on site was suspended until the leak was contained. The DENR confirmed it was relatively small and non-hazardous.

Barite

The industrial mineral barite is known by many names the most common being barite and barytes all derived from the Greek word βαρύς, meaning heavy.

The high atomic weight of barite (molecular weight = 233.39 gm) is attributed to the presence of barium in the compound. This gives barite an extremely high specific gravity and it is this that makes it a popular choice for use in oilfields.

Barite powder containing a minimum 90% barium sulphate with 4.15 specific gravity is recommended for drilling. For offshore drilling, the specific gravity should be 4.2. At least 97% of ground barite should pass through a 75-micron IS sieve and 95% through a 53-micron IS sieve.

By adding barite to drilling muds, oilfield companies are able to prevent blowouts of oil and the collapse of the drilling-well wall. Barite is also used to carry drill cuttings from the well bottom to the surface.

The oilfield market accounts for 84% of global barite production a figure that is expected to increase with the growing amount of fracking taking place in the US, Europe, China and other areas of the world.

Some fracking wells are a lot deeper than those used in conventional drilling, meaning more barite is needed (see fracking box below).

In the drilling mud market, alternatives to barite include celestite, ilmenite, iron ore, and synthetic hematite that is manufactured in Germany. None of these substitutes, however, has had a major impact on the barite drilling mud industry, according to the USGS.



Barite reserves

Barite manufacturers and processors are located all over the world in countries such as Algeria, Brazil, China, France, Gabon, Germany, India, Morocco, Netherlands, Spain, Tunisia, Turkey, UAE, the UK and the US. In fact, many of these countries have formed associations in connection with the barite industry.

As is the case with many industrial minerals markets, China leads the way in terms of barite reserves, hosting approximately 100m tonnes and producing more than 4m tonnes in 2012, according to USGS figures (see table 1).

“For many years China has been the dominant producer and exporter of drilling-grade barite really dwarfing everybody else,” John Newcaster, VP distribution and logistics at Baker Hughes, told IM.

“China is still huge and still very significant, but what’s great to see is [that] some of the other markets in the world are now coming on stream. Notably, Morocco has really stepped up its production and exports; India has stepped up to some extent and now our industry is looking at other sources around the world,” he explained.

Algeria holds 29m tonnes, producing only 60m tonnes in 2012 while India is the world’s third largest country in terms of reserves, with 32m tonnes, producing 1.4m tonnes in 2012.

The US is home to the fourth-largest barite reserves with around 15m tonnes and produced 654,000 tonnes barite last year. Of this total 95% was used in the drilling mud market, the USGS states.

Newcaster told IM that many producers are now looking at US-based barite reserves in Nevada, for example, to overcome the potential supply issues faced elsewhere in the world.

Barite developments

The barite market has been more active than that of bentonite in terms of news over the past 12 months, with several companies announcing new developments.

One that has been in the pipeline for some time is Mabwe Minerals’ Dodge Mine, located in Zimbabwe, Africa.

In late November 2013, the company received its first purchase order from Steinbock Minerals amounting to 2,000 tonnes barite.

Mabwe estimates Dodge Mine barite production as being up to 165,000 tpa, and anticipates shipments of 140,000 tpa bulk barite in 2014.

By integrating a crushing processing facility in Q2 2014, the company aims to raise revenues to between $14m and $16m.

Later, in December, a new barite company was formed in Algeria, named National Company for Barium Barytal.

The company will undertake evaluation, development, and production of the Draissa barite deposit in Bechar province, in western Algeria.

With a capitalisation of 200m Algerian Dinar ($2.5m*), the company was formed on 2 December as a joint venture between Sonatrach (60% split equally between its subsidiaries NPHS, ENTP, and ENAFOR) and Manadjim El Djazair (Manal), through its subsidiary Entreprise Nationale des Produits Miniers Non-Ferreux et des Substances Utiles (ENOF 40%).

The Draissa resource amounts to 10.4m tonnes in total, with an average BaSO4 content of 74.7% and at 4.2 SG.



Drilling fluid pricing

Speaking with IM in June this year, Newcaster said that the price volatility of both barite and bentonite has been dramatic.

“The two key industrial minerals that go into drilling fluids are bentonite and barite and price volatility in the last few years has been dramatic. Starting in about 2011, the shortages that we’ve seen in China in particular the main supplier globally really caused significant pain,” Newcaster explained.

The reason behind this pain, Newcaster said, was not the fact that the price of these minerals going up, but the rate in which it increased.

“It really makes it difficult for companies in our business who are in long-term contracts, with very large exploration and production oil companies, to go in and get recovery from that,” he added.

According to US-based sources, bentonite prices are not expected to move before the end of 2013, but may alter in the first two months of 2014.

After fluctuating over the past 12 months, sources told IM that for now “prices are stable”.

As we enter the first two months of 2014, prices could increase 3-4%, one source said, while others suggested pricing will remain flat into this year.

Frac sand

Unlike barite and bentonite, which are both used in the conventional and non-conventional drilling process, frac sand, as the name suggests, is only used in fracking. The sand is a proppant material, which is used to ‘prop’ open fractures made in shale rock during the fracking process. These allow natural oil or gas trapped in the rock to flow to the well surface.

There are three main types of proppant used in the fracking process: raw silica sand, ceramic beads (see below) and resin-coated versions of each of these.

Like other oilfield minerals, silica sand suitable for use as frac sand is specified by the API. Some of these qualities include that the percentage of quartz (SiO2) must be 99% or more and crush resistance must be high so that the sand can withstand compressive stresses of 4,000-6,000 psi max. fines wt.%: 14% for 20-40, 14% 16-30 mesh, 10% 30-50 mesh, 6% 40-70 mesh, 20% 6-12 mesh.

Acid solubility must be low and roundness and sphericity must meet API >0.6. Turbidity tests also measure the amount of light that can pass through a wetting fluid. The higher the measurement, the more suspended particles are present. Turbidity is measured in Formazin Turbidity Units (FTU) and the minimum threshold limit is <250 FTU. Producers will look for a lower turbidity rating as high turbidity readings can be an indication of poor proppant manufacturing, transportation, or handling practices, which can lead to interference with the fluid chemistry.

Frac sand deposits

Frac sand has been the proppant material of choice for many years as it remains in abundant supply around the world and is a cheaper alternative to ceramic proppant material.

The world’s largest producer of frac sand is the US, where a fracking boom has been driving demand for this mineral. Since fracking really took off in the US 60 years ago, over 1m wells have been drilled using this method.

High-purity quartz sands are common in the US, and many of these deposits are currently being exploited. The most notable deposits of API-grade frac sand can be found in sandstone formations such as the St. Peter (or Ottawa) sandstone (primarily mined in Illinois, Wisconsin, Minnesota, and Missouri), the Jordan sandstone (Minnesota and Wisconsin), and the Hickory sandstone (Brady, Texas).

Within the US, Wisconsin has become the US’s top hub of frac sand activity, showing a 100% increase in frac sand activity between 2011 and 2012, growing from just a handful of facilities to more than 100 frac sand sites.

Data from the USGS highlights that Wisconsin ranked third in total US industrial silica sand production in 2010 at 3.39m tonnes, accounting for 11.3%, after Illinois (4.37m tonnes, 15%) and Texas (3.61m tonnes, 12.5%). However, in terms of frac sand production, the state is leading the way.

“The [new DNR] staff position will speed up the process for frac sand oversight and regulation of frac sand mining,” Walker explained.

The state’s largest frac sand mining and processing facility, located in Trempealeau County, was approved in April after a nine-hour public hearing and meeting.

Other states in the US that are abundant in API-grade frac sand include Illinois and Minnesota, however these areas have experienced more limited success due to government moratoria that have been put in place due to health and environmental concerns surrounding silica sand.

The US Occupational Safety and Health Administration (OSHA) is working to produce new safety standards for industries that utilise silica sand, such as fracking, in a bid to overcome these concerns.

In late August 2013, the OSHA published proposals for two new crystalline silica safety standards, suggesting, among other measures, a new permitted exposure level (PEL) for respirable crystalline silica, together with new provisions for measuring how much silica workers are exposed to.

“Exposure to silica can be deadly, and limiting that exposure is essential,” Dr David Michaels, assistant secretary for labour at the OSHA, said.

“This proposal is expected to prevent thousands of deaths from silicosis - an incurable and progressive disease - as well as lung cancer, other respiratory diseases and kidney disease. We’re looking forward to public comment on the proposal,” he added.

At present, the OSHA enforces PELs for crystalline silica that were originally adopted in 1971.

For industrial minerals markets, such as construction and general sand industries, the current PEL is 100 micrograms respirable crystalline silica per cubic metre of air during an eight-hour period (0.1mg/m3).

OSHA recommends that the PEL should be reduced to 50 micrograms respirable crystalline silica per cubic metre of air (0.05mg/m3 air) during an eight-hour period and should apply to all industries - general, maritime and construction.

While this move may be welcomed by silica sand mining detractors, those working in the industry have come out in opposition, stating that the PEL is sufficient.

The National Industrial Sand Association (NISA) said that it opposes the suggestion to lower the PEL “because [the current PEL] has been proven protective”.

“NISA companies have demonstrated that silicosis can be prevented when exposures are maintained consistently below the 0.1mg/m3 PEL. Lowering the PEL is not justified,” the association said.

Industrial Minerals Association - North America (IMA-NA) told IM that its position on the PEL is consistent with NISA’s standpoint.

“A lower PEL will not contribute to safer workplaces, and will have catastrophic economic impacts across a broad spectrum of industries,” a statement from IMA-NA said.

“In fact, an analysis by the American Chemistry Council Crystalline Silica Panel indicates that the total economic impact of halving the current PEL would amount to $5.45bn/year,” it added.

Ceramic proppants

While frac sand is by far the market leader in terms of proppant consumption, ceramic proppants have become the material of choice for those working with deeper wells. The main reason for this is that ceramic proppants, which most often contain sintered bauxite or kaolin, are proven to be stronger, denser and more uniformly round than frac sand, making the ceramic proppant pack more conductive (meaning more hydrocarbons flow to the surface of the well).

However, while these alternatives may be more effective when used in high-pressure, deeper wells, they are far more expensive and are less available at present.

It is this large market value that is driving development in the ceramic proppant market and several companies are working in this space to increase the overall volume of ceramic options used.

In late October 2013, halloysite and iron oxide producer, Applied Minerals Inc., entered into an agreement with OPF Enterprises LLC to develop a new range of ceramic proppants.

The companies plan to utilise the high-grade clay resource at Applied’s Dragon mine, located in Utah, US, to manufacture proppants for use in the North American fracking industry.

Preliminary development work indicates that the alumina-rich clay at the Dragon Mine’s Western Area meets the crush resistance, permeability and specific gravity characteristics required for proppant use in high pressure wells.

The mine’s location will also aid the delivery of ceramic proppants to the Bakken Shale formation, which utilises approximately $1bn ceramic proppants a year, and the Niobrara shale basin in North America.

Another developer, Carbo Ceramics Inc., introduced a new proppant grade in early October, designed to maximise and sustain hydrocarbon flow at high closure stresses for the life of a fracking well.

Named Kryptosphere, the proppant solution has been developed in response to a request from a major drilling operator working in the Gulf of Mexico.

According to Carbo, Kryptosphere is able to deliver more than twice the baseline conductivity of the more widely used bauxite-based, high strength ceramic proppants available on the market and is able to work at 20,000 psi closure stresses, making it an ideal solution for deeper wells.

Although Carbo was unavailable for comment when approached by IM, the company’s published technical specifications for Kryptosphere indicate that this new proppant has “high alumina” content, and is not bauxite-based.

Future oilfield mineral potential

Unlike many industrial minerals markets, the oilfield space is a safe one for many mineral producers. While others have experienced a rough ride over the past couple of years as the economic downturn significantly impacted business, those working in the oilfield minerals market have enjoyed fairly steady demand.

Despite some concerns over the oilfield mineral supply situation especially for muds minerals from China the supply and demand situation has not only remained constant of late, it has actually risen.

This demand is expected to continue over the coming years as developments, in unconventional drilling especially, take off.



Fracking

The fracking process consists of both horizontal and vertical drilling. First, a vertical hole will be drilled down to around 10,000ft (3,048 metres), which is where the shale bed can be found. The second drilling stage is horizontal and takes place at a ‘kick-off point’, which is where the shale formation begins. This stage takes place at around 10,000ft and can stretch from around 1,000-10,000ft (304-3,048 metres) depending on the company’s requirements.

Once the hole has been drilled, a perforating gun is lowered down to break the barrier between the shale rock and the drill casing to create tiny fractures in the rock. Fracking fluid is then pumped at high pressure into the well in order to increase the size of the fractures in the shale. This fluid is approximately 95-99% water, 2% proppants and 0.5% different chemicals. Proppant consumption varies from well to well but is usually in the range of 800-3,000 tonnes per well.

The proppant material now props open the fractures in the shale rock, allowing natural oil and gas to flow freely up to the surface of the well.