Time will tell on Permian frac sand

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Published: Thursday, 22 February 2018

While demand for 100-mesh sand looks solid, questions are being asked about larger mesh sizes.

Sand miners have invested huge amounts in production in the Permian Basin formation in the United States, but 40/70 mesh frac sand from the southern state of Texas still has to prove itself in down-well applications.

The frac sand markets in the US are gearing up for what is expected to be a massive shift in supply this year, when a huge volume of sand capacity opens up in Texas.

More than 40 million tonnes per year of new sand production is planned to come online in Texas by the end of 2018. This volume is more than half of the estimated total demand in 2017, and will create stiff competition for miners in the US Midwest state of Wisconsin.

Rail companies are already warning of the potential effect of this shift in supply on their profit margins.
But although the nameplate capacity of these planned mines looks daunting for prices, it is not yet clear whether the supplies will prove competitive in the growing frac sand market. This is particularly so for larger mesh grades, with one observer saying it could be six months or more until the viability of 40/70 mesh material is proven.

Shift to the Permian

Texas sand is generally of lower crush strength, and lower roundness and sphericity, than the Northern White sand found in Wisconsin.

The ideal frac sand is considered to be very smooth and spherical, because this gives the greatest space between grains to allow hydrocarbons to escape. High strength ensures that the sand is not deformed by the high pressure in the shale formation.

But frackers in the Permian Basin in Texas are increasingly reporting that the best results come from using as great a volume of sand in wells as possible, with sand quality only a secondary concern.

And the number of wells is also booming. In the latest rig count data from information supplier Baker Hughes, released on Friday February 2, the number of active drilling rigs in the Permian was reported at 427, the highest number seen for more than three years, and this is driving up the demand for sand.

This drive to increased sand intensity, while keeping costs down, is fueling the shift toward sand produced near the wells, to reduce shipping costs.

And for Texas frackers, that means the use of sand mined inside the Permian Basin, from where it can be quickly and cheaply delivered to the well head.

This increase in Texan production threatens demand for Northern White sand, mined in Wisconsin and Minnesota, which has until now been the preferred grade.

"It suits everyone," a sand miner told Industrial Minerals in January. "We sell for more at the mine [and] they are paying less freight."

Time will tell

But this shift in supply will not come instantly, according to Taylor Robinson, president of logistics specialist PLG Consulting.

"Demand for Northern White will remain strong through the first half of the year," he said. "Local Permian mines [in Texas] are still in the early stages, either ramping up or not started yet."

Robinson added that the local mines being developed in other shale basins will not have any substantial effects until 2019.

And even when the Permian mines come online, it is currently unclear just how much Northern White demand can be replaced, particularly with larger mesh size sand, where crush strength is more critical.

"Most of the industry says that the Permian 100 mesh is going to replace the imported 100 mesh. 100 mesh supply will quickly move to the south [of the US]," Robinson said.

"The question is the Permian 40/70… will it work in the deeper wells, especially in the Delaware Basin?" he warned. "They’re testing that now. It’s going to take six to nine months before the initial trial results are known."