After an extremely bearish two years in the oilfield minerals
markets – defined here as the group of minerals that
find their main use in the oilfield services industry, chiefly
in drilling oil wells or in extracting shale gas through
hydraulic fracturing (fracking) – things started to
look up in 2017.
The recovering oil price meant that the US was interested in
fracking once again and US frac sand demand was forecast to
rise to at least 70 million short tons in 2017, compared to 34
million tons in 2016.
However, as the oil price did not recover by a significant
amount, it was indisputably a race to the bottom for frac sand
producers this year, as demand grew for cheap, basin frac
It has been a take of quantity over quality, as frackers strive
to get as much sand as possible into wells.
Looking ahead, US Silica chief executive officer Bryan Shin
forecast a continued rise in US frac sand demand, to as much
as 90 million short tons in 2018 thanks to "continuing
improvement in North American well economics, partially
driven by greater proppant usage."
Basin sand rush
Investments were made by several leading sand producers in new
frac sand mines. The most notable examples were those in the
Permian basin, where Hi Crush Partners LP, US Silica and Unimin
Corp pushed for new capacity in the Texas play, after oilfield
activity in the state boomed.
The Permian basin is attractive because of its proximity to the
massive oil and gas fields in Texas. More than two thirds of
the cost of delivered frac sand from Wisconsin, the traditional
heartland of sand production, to a Texas wellhead consists in
In-basin production has the potential to reduce freight costs,
delivering a more competitive product at a time when margins
are shaved paper thin due to low oil prices.
In February, Hi-Crush paid $275 million for Permian Basin Sand
Co, and its 3 million short tons per year capacity.
This was followed in June by US Silica announcing a $225
million investment, to establish 4 million short tpy of
capacity in the basin. In September, the company added another
acquisition to the list, when it announced it would build a
second frac sand mine in the Permian basin.
The mine is expected to have capacity of some 2.6 million
short tpy, with production commencing in March 2018.
Frac Sand 17
At this year’s IM Frac Sand 2017 Conference, in
Denver, US, delegates heard how ceramic proppants were "dead in
the water" as raw sand wins out.
"It’s clear, the data is in: today raw sand is the
choice," Joel Schneyer, managing director at banking services
provider Headwater MB, told attendees.
One attendee told Industrial Minerals that ceramics were still
being used in fracking, but only as a way of clearing stocks
accumulated by the industry when demand was expected to be
Elsewhere, new US regulations on dust exposure for workers
are opening up opportunities for equipment and sand producers
servicing the fracking industry, delegates heard. Regulation
on silica dust exposure for workers came into force in
September for construction companies.
Elsewhere in the world
While frac sand opportunities were clear in the US, elsewhere
the picture was more muted.
This was true not just of frac sand markets but of the overall
gas and oil market. The Baker Hughes Rig Count, released every
month, showed that while activity was creeping up in the US, it
was stagnating in other parts of the world.
In January, a new study published by trade body UK Onshore Oil
and Gas (UKOOG) showed that the development of 400 well pads in
the UK could reduce its dependency on gas imports by 50% with a
limited impact on countryside areas.
However, this did not translate into public support or more
wells being taken on. In fact, sentiment around fracking was
cool in 2017 – a survey* undertaken by the Business
and Energy Department revealed that public support in the UK
for fracking had fallen to 16%, from 21% in the previous
Also, at the beginning of the year, the Scottish government
launched a public consultation on the extraction of
unconventional oil and gas in the country.
Scotland placed a moratorium on hydraulic fracturing (fracking)
in January 2015, while the government investigated the
potential impacts of the practice.
Over the year, the Scottish government carried out a
comprehensive period of evidence gathering, public engagement,
and dialogue on the issue. This culminated with a
four-month public consultation, "Talking
'Fracking’", which closed on 31 May and received
over 60,000 responses.
On October 3, 2017, in response to the publication of the
consultation responses, the Minister for Business Innovation
and Energy made a statement to the Scottish Parliament on the
future of unconventional oil and gas.
The statement set out that the Scottish government does not
support the development of unconventional oil and gas in
Indeed, in August, BHP warned that fracking opportunities "do
not exist" outside the US.
The comments were made as the Anglo-Australian mining giant put
its shale oil business up for sale just six years after it made
a surprise entrance to the sector.
Speaking to investors, BHP boss Andrew Mackenzie suggested that
the $20 billion investments made back in 2011 had been
"The shale acquisitions were poorly timed," Mackenzie said.
"We paid too much and the rapid pace of early development was
*2,000 people polled