Oilfield minerals News in Brief

By Laura Syrett, Kasia Patel
Published: Wednesday, 31 December 2014

Andhra Pradesh issues global tender for barite mining; Coretrack begins construction of fly ash ceramic proppant plant

Andhra Pradesh issues global tender for barite mining

The government of Andhra Pradesh in India has cancelled 32 barite (barytes) mining leases issued in Mangampeta, Kadapa, district in 2004 and launched an anti-corruption enquiry into their allocation, according to local media sources.

The state government took the decision to cancel the decade-old leases on 19 November, reports by The Hindu and The New Indian Express state, and has said that fresh licences will be issued by global tenders.

In a briefing with reporters following a cabinet meeting, Andhra Pradesh Information Technology Minister, Palle Raghunataha Reddy, said the government had decided to cancel the order GO MS 296, which allotted the leases in 2004, after it was suspected that irregularities in the awarding process had cost the government around Indian rupee (INR) 2bn ($323m*) in unpaid taxes by December 2014.

Andhra Pradesh’s cabinet sub-committee on corruption is now investigating the alleged irregularities, which saw a handful of miners given exclusive rights to mine barite in a 250 ha (2.5km2) area of Mangampeta, where deposits are estimated to total 50m tonnes, or 20% of global reserves.

The Andhra Pradesh Mineral Development Corp. (APMDC), the government body presently tasked with issuing the tenders, has refrained from making a statement on the matter.

Changing mineral policy in India

The delay to the Indian barite tender has caused widespread consternation in the global barite market, as oilfield buyers of drilling-grade material become anxious about the constriction of supply from one of the world’s most significant suppliers.

India’s new Prime Minister, Narendra Modi, whose Bharatiya Janata Party (BJP) swept to power with a large majority in April 2014, has pledged to reform the country’s mining sector and stamp out corruption. The period of transition is leading to some gaps in national mineral output, however.

A new mining act, the Mines and Minerals Development and Regulations (Amendment) Bill 2014, is being drafted. This will make illegal mining a criminal offence and initiate transparent auctioning of mining blocks in the hope of attracting foreign investment and skills into the sector.

The amended bill also seeks to introduce a single window clearance process for land acquisition and mining licences and stimulate growth in the sectors that consume domestically-produced minerals.

A preliminary version of the bill is still being debated between India’s mining ministry and mining companies. It is unclear when a final version will be drawn up and implemented.

IM Data analyst, Shruti Salwan, said that barite mining is one of the focal points of planned government reforms.

"Because Andhra Pradesh is the barite hub of India, the state’s Chief Minister has declared a war against illegal mining of the mineral," she explained.

"State officials have been instructed to install cameras at strategic points near mines, set up proper weighing machines at the mines and track the trucks carrying barite using GPS. Over 94% of the barite reserves of this state are in Kadappa district and the government wants to consume the mineral wealth for state development," she said.

Coretrack begins construction of fly ash ceramic proppant plant

Oil and gas technology company Coretrack has begun construction at its Ecopropp Pty Ltd pilot fly ash proppant manufacturing plant in Queensland, Australia.

The plant is expected to be completed by the end of Q1 2015 and will test the scalability of Ecopropp’s proppant product based on fly ash, a residue from coal power plants.

Planning and development of the project began in May 2014, when Coretrack purchased Australian proppant company Ecopropp, and production is expected to begin in the second quarter of 2015.

"Production at the plant will validate the scalability of our proppant product and provide a clear runway for the commercialisation of the product in the massive global fracking and proppant market," Siegfried Konig, Coretrack’s executive director, said.

Potential to "lead the industry"

Proppants are used in hydraulic fracturing (fracking) in the oil and gas industry, where they are pumped into wells under pressure to prop open fractures in shale rock, allowing the extraction of tight oil and gas. An increase in fracking has driven up demand for frac sand, sintered bauxite and kaolin, the main components of oilfield proppants.

As a result of its 'shale gale’, the US’ requirement for frac sand, ceramic proppants, and resin-coated versions of each, has grown from around 5m tonnes in 2007 to 34.7m tonnes in 2013, according to IM’s China’s Proppants market report.

The IM Research report estimates that frac sand takes up approximately 80-85% of the fracking mineral market share by volume, with ceramic proppants and resin-coated versions taking 10-15%. By value, however, ceramic proppants take a 50% share of the market.

Coretrack’s proppants have been certified to meet or exceed both the American Petroleum Institute (API) and ISO standards.

US frac market strong in face of lower oilWhile oil prices have been falling to five-year lows, dropping under $60/barrel in mid-December, the US frac sand market has gathered speed.

According to an index released monthly by the country’s Bureau of Labour Statistics, which measures the producer price for frac sand, prices are around 9% up year-on-year at an indexation of 98.7 at the end of November.

This is down month-on-month, but October, at an indexation of 99.1 for the month, was the highest the Producer Price Index (PPI) had been since December 2012.

Oil prices tumble

The latest fall in the crude oil price, which was well over $100/barrel as recently as June 2014, was triggered by a report from the Organization of the Petroleum Exporting Countries (OPEC), which lowered its demand forecast for OPEC-produced crude to the lowest level in a decade.

The cartel said that a looming supply glut for oil had been created by a combination of surging shale oil production in the US and weakening global demand as economic growth in key oil-consuming nations is slowing or has stagnated.

Low oil prices would normally be welcomed by manufacturers and logistics companies which benefit from cheaper energy, but the sagging oil price has been received as a sign of the wider malaise in worldwide raw material consumption and points to further bad news for minerals and metals prices.