An increase in hydraulic fracturing (fracking)
over the past few years means that demand for oilfield minerals
has never been stronger. Continued drilling and exploration
kept demand high for minerals such as frac sand, bauxite,
kaolin, bentonite and barite over the course of 2014.
North America remained the largest market for
oilfield minerals. However, while frac sand continued to be the
proppant of choice for most fracking operators in this region
and further afield, concerns surrounding its possible
environmental and health impacts were raised.
As awareness surrounding health risk exposure
grew, so did the opposition to fracking in several areas of the
US, most notably Wisconsin and Minnesota, as well as opposition
to frac sand mining and hauling over the course of last year,
leading to difficulties in starting up new mines.
A report by the World Resources Institute (WRI)
also warned that water availability could limit shale resource
development on every continent except Antarctica, finding that
out of the 20 countries with the largest shale gas and tight
oil resources, 40% face high water stress or arid
Concern arose around supply bottlenecks and US
suppliers of oilfield minerals, including US Silica Holdings
and Hi-Crush Partners, announced they were developing
in-house rail systems to move product from mine to well
In 2014, the fracking boom also created a renewed
interest in ceramic proppants and new producers entered, or
announced plans to enter, the ceramic proppant
Barite (barytes) supply remained relatively
stable over the course of the year, meanwhile, although output
from India, the world’s second largest barite
producer (1.5m tonnes in 2013), was reported to have ceased by
Q4 as mining contracts in Andhra Pradesh are renegotiated.
China’s barite exports have decreased in recent
years as a result of falling mine output and increased domestic
consumption, as the country looks to diversify its energy
supply from coal to less-polluting shale gas. Having become
dependent on China’s supply, the US barite
industry has begun to look for alternative sources of
For bentonite, another mineral associated with
conventional and unconventional exploration, supply remained
relatively stable over the course of 2014. The biggest news in
the industry was the takeover of bentonite producer AMCOL,
which was the target of a bidding war between speciality
minerals and refractories company Minerals Technologies Inc.
(MTI) and French industrial minerals multinational, Imerys.
After several months of counter bid after counter bid, US-based
MTI finally won the battle and concluded the $1.7bn merger in
Towards the end of 2014 Halliburton announced it
would buy Baker Hughes Inc. for $34.6bn to create a combined
Houston-based global oilfield services provider. Both companies
are leading producers and providers of oilfield minerals
including bentonite and barite.
Driving demand in 2014 was an increased focus on
unconventional hydrocarbon recovery through fracking and
Bentonite and barite have been used as part of
the conventional drilling processes for years, but in 2014 the
minerals saw increased use in fracking. Demand for proppant
minerals – frac sand and those used in ceramic
proppants, kaolin and bauxite – also saw an increase
in demand last year.
To date, the majority of large-scale shale oil
and gas development has occurred in North America. Other
countries with the potential to tap unconventional oil and gas
resources include China, Australia, Mexico, the Middle East,
South America, Europe and Russia. However, technical political,
logistical and environmental challenges in these regions have
hampered their development, compared to the rapid escalation of
the industry in the US.
Elsewhere, the UK government expressed its
support for fracking in 2014, which is expected to lead to
additional local frac sand demand.
Throughout 2014, oilfield services providers
reported consistently high demand and highlighted continued
growth in the oilfield sector.
The US’ requirement for frac sand,
ceramic proppants and resin-coated versions of each, grew from
around 5m tonnes in 2007 to 34.7m tonnes in 2013, a growth
trend which continued to be seen throughout 2014. In terms of
market split, frac sand remained the most popular choice of
proppant, owing to its low cost in comparison to ceramic
proppants, as well as its widespread availability.
In 2014, frac sand accounted for around 80-85% of
the market share by volume, with ceramic proppants and
resin-coated versions taking 10-15%. By value, however, ceramic
proppants accounted for around 50% of the market share.
While barite demand continued to be strong, some
companies, such as Halliburton, noted that the industry was
moving away from bentonite as there are similar performing
substitutes on the market.
The prices of ceramic proppants in North America
remained flat over 2014, in contrast to frac sand values which
grew steadily over the last year, in part due to demand,
although much of this was owing to logistics constraints.
The strengthening of frac sand prices throughout
2014 led to more medium to long term contracts being agreed in
what was traditionally a spot price market. Prices are also set
to continue rising throughout 2015 as more sand is
As oilfield mineral consumption picked up in
Europe in particular, prices for barite saw increases from
Turkey and price rises were also expected from India, although
in October US importers said that it was impossible to obtain
drilling grade material from India as State-run Andhra Pradesh
Mineral Development Corp. (APMDC) missed its 1 July deadline to
complete a tender process for mining rights and production in
the country was believed to have ceased temporarily. Barite
prices from other regions, including China and Morocco, were
believed to be broadly stable.
As the global energy landscape changes, demand
for traditional oilfield minerals such as barite and bentonite,
as well as the minerals used in unconventional exploration, is
expected to increase as in the majority of cases, there are no
reasonable substitutes for these minerals.
World natural gas production, according to the US
Energy Information Administration (EIA), is likely to increase
by 1.7% every year until 2040. Unconventional gas on the other
hand is expected to go up by almost 5% a year between 2010 and
2040, with the majority expected to come out of the US and
Canada. Another major growth market for unconventional oil and
gas is China, as the country holds the world’s
largest reserves of shale gas and has set a national output
target of 6.5bn cubic metres by 2015 and as much as 100bn cubic
meters by 2020.
However, with oil prices plunging to below
$60/barrel in December, the future of higher cost tight oil
extraction operations could be in jeopardy in 2015.