Oilfield minerals, the clays and proppants used in drilling
and extracting oil, are a crucial part of the petrochemical
industry. Barite and bentonite are used in drilling fluids,
while silica sand is crucial in the fast-growing fracking
The key proxy for oilfield minerals demand is the number of
active drilling rigs worldwide. More active drilling rigs means
more mud going down-well, and greater demand for minerals. But
as far oilfield mineral markets are concerned, not all wells
are created equal. There are far fewer offshore drilling rigs
active world-wide, but they are the key driver of demand for
Onshore oilrig activity in the United States has been highly
volatile in recent years. Drilling in the US fell sharply in
2015 after oil prices slumped and the fracking industry ground
to a halt. But that changed in 2016, when the oil price
|Baker Hughes Rig Count
|Bentonite, rail hopper cars, crude, bulk (all
grades), ex-works Wyoming,
Since then the number of onshore drilling rigs in the US has
trended upward. This trend was supported by the falling cost of
drilling and fracking wells in the Permian Basin, in
southwestern US. Only in 2019 did the rate of drilling in the
US fall, as costs for frackers rose and the local oil price
But away from the US onshore market, the picture has been
one of decline, and then stabilization, with very little
movement in drilling rates around the world. This stagnation,
particularly in the offshore market, has limited demand for
The primary driver in drilling rates is the oil price.
Higher prices push more potential projects into profitability,
encouraging more drilling activity. Oil prices have stabilized
compared with the lows of 2015 and 2016.
Brent crude front-month oil futures rose steadily from
around $68 a barrel at the start of 2018, to nearly $85 a
barrel at the start of October, their highest in nine
Prices were driven by cooling relations between Iran and US,
with the return of sanctions expected to restrict the flow of
oil out of Iran, and a strengthening world economy.
But the bubble burst in October 2018, with the trajectory of
prices moving downward. Pressure came from efforts by the
European Union to circumvent sanctions on Tehran, as well as a
softening of the US resistance to foreign purchases of Iranian
At the same time, US oil production continued to grow,
driven by the fracking boom in the state of Texas and
All of this came as global growth fears and falling stock
markets threatened the bullish consensus on
Brent crude futures tumbled some 38% over the last three
months of 2018, to just over $50 a barrel in late
But in the Permian Basin in West Texas, the fastest growing
oil region and the center of the US hydraulic fracturing
industry, the decline was even sharper.
Oil prices were not just being hit by weak demand at the end
of pipelines, but squeezed capacity at the wellhead.
The rapid growth in Permian production had filled up
pipelines out of West Texas, meaning that producers were forced
to ship out excess crude oil by road and rail. This regional
glut pushed prices there below $40 a barrel by the end of
Oil prices recovered over 2019, but are still trading just
over $60 a barrel. This makes a stark contrast to the period
between 2010 and 2015, when the oil price repeatedly pushed
over $100 a barrel, with Brent crude peaking above $120 a
barrel in 2012.
Oilfield minerals are used in drilling mud, which is poured
into wells as they are being drilled. This mud serves a
number of purposes. It lubricates and cools the drill bit,
which is crucial to prevent the mechanism overheating. It
also carries away cuttings. As the rock is broken away by the
drill bit, the mud sinks down into the gap created, carrying
away the fragments of rock.
And crucially, drilling mud maintains formation pressure. If
this pressure is not managed then hydrocarbons can be pushed
back up the well. This type of accident, called a blowout, is
enormously costly and environmentally destructive.
There are two widely used minerals in drilling mud.
Bentonite, which is a lubricant, and barite, which is a
|China is the largest producer of barite,
mining 3.2 million
tonnes out of 9.5 million tonnes globally.
Bentonite is a so called "swelling clay". It has a number of
unique properties which make it suitable for drilling. It is a
shear-thinning material, which means that a suspension of
bentonite in water is fluid when being agitated by a drill bit,
but it thickens when it is not moving. This means that
bentonite lubricates when the drill is active, but it does not
flow deep into the hydrocarbon formation, and instead forms a
"mudcake" between the well and formation.
Bentonite has a number of other uses, mostly based on its
swelling and absorbent qualities. In particular it is valued in
cat litter for these reasons. It is also used to clarify
beverages, as a bulker in animal feed, and in civil engineering
as a groundwater barrier.
Production of bentonite in the US was down in 2019.
According to the United States Geological Survey (USGS), US
production totaled 3.7 million tonnes in 2018, compared with
4.3 million tonnes in 2017.
But prices in the historically stable US bentonite market
ticked up slightly in early 2019, as a couple of big
producers increased their prices for sodium bentonite mined
in the Western US.
Barite, also spelled barytes, is made up primarily of barium
sulphite. Barite is used as drilling mud because it is soft,
non-magnetic, and crucially it is very heavy. The name barite
is from the Greek word barus, meaning heavy. Pure barite has a
specific gravity (SG) of around 5.0, meaning it is five times
heavier than water. Most barite used in drilling has an SG of
between 3.8 and 4.5, with the lower-grade material blended with
the higher grade to achieve a sufficient density.
There are few suitable replacements for barite in drilling
muds. Some materials, such as ilmenite and calcium carbonate,
have been tried but never proved commercial viable. Haematite,
a form of iron ore, is the only alternative to have achieved
any commercial traction.
Venezuela’s beleaguered national oil company in
2018 suggested switching to locally mined haematite as an
alternative to barite, in order to avoid making
dollar-denominated purchases of foreign mined barite. The
tumbling Venezuelan currency and a shortage of dollar
investments has stalled oilfield activity in the country,
despite the fact that it boasts the world’s
But barite is rarely used in other markets, due to technical
issues. Haematite is magnetic, which interferes with the
technology used to align the drill bit deep underground. This
can result in the drill wandering in the wrong
Barite has other applications, including as a filler in
plastic, as a pigment and in medicine. But use in drilling
fluids dwarfs all other applications.
The International Petroleum Association sets the
specifications for drilling-grade barite. The original
specifications included an SG of 4.2. This remains the most
commonly used grade of barite for offshore drilling. But
onshore drillers are more flexible about their requirements,
and can use barite of SG 4.1. The USGS launched an SG 4.1 spec
in 2010 this market. Oilfield service companies also buy
lower grades of barite, and blend them to achieve the desired
China is the world’s largest barite producer,
mining about 3.2 million tonnes in 2018, according to figures
from the USGS, out of a total global production of 9.5 million
tonnes. The key role of Chinese barite exports is reflected in
the fact that the mineral was excluded from the 25% tariff
currently paid on most mineral imports to the US from China.
This decision to exclude barite was made after a number of
major importers complained that they would be unable to supply
the US oil and gas industry without Chinese supplies.
|Barite, unground lump, API, bulk, SG 4.2, fob
|Barite, unground lump, API, bulk, SG 4.2, fob
The other major barite exporting countries are India,
Morocco, Mexico, and Turkey. The US, Kazakhstan, Russia, and
Iran all mine significant volumes for domestic production.
Chinese material is the most commonly traded, but many
drillers in the Middle East prefer Indian material,
particularly for offshore applications. The reason is one of
consistency and quality. China has hundreds of active barite
mines, some with very low capacity. This diversity of origin
means that Chinese material is variable in quality.
Indian barite, on the other hand, is mostly sourced from a
single massive mine, the Mangampet project in Andhra Pradesh.
This material is of a very predictable quality, a boon for
traders, grinders, and end users, who can predict exactly
what kind of mineral they will use.
"If we get some material from China, and it is too hard,
it’s difficult to grind," one Middle Eastern buyer
told Fastmarkets. "Once we bought Chinese material and it was
the wrong weight… It’s just easier to buy
Indian exports up until 2017 were stymied by an inflexible
price system. The resource at Mangampet belongs to the Andhra
Pradesh Mineral Development Corp (APMDC), itself owned by the
state government of Andhra Pradesh. This material was made
available to exporters on a tender system, which made Indian
material expensive relative to China or Morocco.
Buyers in Saudi Arabia and other Middle Eastern destinations
continued to pay a premium for Indian material, helped by the
relatively cheap freight rates between those places, but
exports of high-SG barite from India to the US stopped almost
A reform to the existing tender system was announced in late
2017, empowering the APMDC to review prices more regularly,
with input from market participants.
Indian exporters report that this change in process has come
alongside a greater willingness to empower exports, at more
"India is interested in getting rid of its barite," one
market source told Fastmarkets. "They won’t sell
it too cheaply, but they want to keep exports high."
The source went on to speculate that the change in policy
was based on a shift in expectations of long-term barite
prices. "The APMDC is much more realistic about what is a good
price for barite."
Indian prices started to gain market share from China
throughout 2018. According the USGS, Indian barite production
rose from 1.5 million tonnes in 2017, to 2.0 million tonnes in
But Chinese exports took a dip over the same period. Chinese
barite exports were just 1.2 million tonnes in 2018, compared
with 2.0 million tonnes in 2017, a reflection that Indian
exports were winning market share against Chinese in the
global marketplace. But Chinese exports picked up a little in
2019. Exports in the first four months of 2019 were around
526,000 tonnes, compared with 374,000 tonnes in the first
four months of 2018.
Oilfield minerals 101
Barite and barium compounds
Barite is a clean, soft, inert - but quite heavy - mineral,
with a specific gravity of more than 4. It is a weighting
agent in the fluid/mud used in drilling deep wells by the
Barite makes up around 40% of the mud and can increase the
density of oil-based and water-based drilling fluid to 21lb. It
can also offset pressure, lower liquid flow into the hole from
the formation and keep the hole open.
Barite’s use in drilling accounts for around
95% of barite consumption worldwide.
The basic functions of the drilling fluid include to:
- Carry cuttings from beneath the bit, transport them up
the annulus and permit their separation at the surface
- Cool and clean the bit
- Reduce friction between the drilling string and the
sides of the hole
- Maintain the stability of uncased sections of the
- Prevent the inflow of fluids, oil, gas or water from
the permeable rocks penetrated
- Form a thin, low-permeability filtercake to seal any
pores or other openings in formations penetrated by the
As well as the above, the fluid needs to be safe and
environmentally benign and should not corrode or create
excessive wear to the drilling equipment. It should not require
unusual or expensive methods of completion of the drilled hole,
nor interfere with the normal productivity of the fluid-bearing
Bentonite (smecite clays)
Smecites are a family of clays that swell when immersed in
water or liquids having polar molecules and have a very high
cation exchange capacity. Within the group montmorillonite is
the most important commercially, in particular bentonite, a
rock that is mainly comprised of montmorillonite. That said, in
recent year hectorite is also increasingly being used in
When immersed in water, relatively large flakes of sodium
bentonite disperse into colloidal particles activating dormant
electrochemical energy carried in the crystal lattice and
imparting dilatancy (swelling up to 15-30x its original bulk
volume), viscosity (resistance to flow) and thixotropy (gelling
strength). These properties are used in drilling muds to
provide a suspension for weighting agents and drill cuttings,
as well as forming an impervious coating on the drill-hole
walls and thus prevent liquid or gas migration.
Specifications are covered by the API, based in the US, and
OCMA, in Europe. Particularly important criteria includes mud
yield – barrels of mud with an apparent viscosity of
15 centipoise produced from a tonne of clay.
Silica (Frac) sand**
Silica, or silicon dioxide (SiO2), makes up 61% of the
earth’s continental crust. Quartz is the main form
and there are the polymorphs cristobalite and tridymite and the
cryptocrystalline varieties chert, flint, chalcedony and
Silica sand or 'frac sand’ is a durable,
round-grain, crush-resistant material produced for use in the
hydraulic fracturing process (otherwise known as
'fracking’). This process is used to gather energy
sources, such as oil, natural gas and natural gas liquids, from
underground rock formations that lack adequate pore space for
these fluids to flow into a well.
Sand used in fracking has to have very specific components.
The grade of sand used has to have a round grain and be very
hard. The sand is pumped into wells, either horizontally or
vertically, along with drilling fluid, to prop open fissures
and voids in bedrock and improve the permeability and flow
rates of the substance being recovered.
Fracking fluid is made up of 95-99% water, around 2%
proppants - either ceramic (see below) or sand - and 0.5%
other chemicals and minerals. These include phosphate,
diatomite, calcium carbonate, borates and magnesium
*Information taken from the Industrial Minerals Handbook,
by Peter Harben
**Information taken from Fastmarkets IM and the British
What happens after the shale gale?
Barite and bentonite are traditionally the main oilfield
minerals but frac sand is the most volatile and fastest-growing
The US onshore drilling market is the largest single site of
drilling activity in the world. And most of these new wells
will be fracked.
Fracking, or hydraulic fracturing, is the injection of fluid
into a well under high pressure. This breaks open the
hydrocarbon formation, allowing oil or gas to flow out of
through myriad tiny cracks. Frac sand is added to this fracking
fluid to prevent the cracks closing back up again. This sand is
called a "proppant" because it literally props the cracks
Frac sand markets had a slow first half of 2019 while
recovering from a rollercoaster 2018. They started last year
impressively - demand for frac sand was soaring thanks to a
buoyant fracking industry, particularly in West Texas. Not only
was the number of wells being drilled up strongly from the lows
of 2016 but demand for sand per well was also increasing. Wells
grew longer and sand intensity - the volume of sand used per
foot of well - rose.
This trend toward higher sand intensities boosted demand
even faster than the increase in drilling would suggest. Demand
for frac sand soared to more than 100 million short tons in
2018 from just 24 million short tons in 2016. Indeed, in the
summer of 2018 many market observers predicted that demand
would exceed 120 million short tons.
But as 2018 wore on, the picture for sand miners worsened.
The upward trend in sand intensity coincided with a shift away
from the coarse-grained sands favoured before 2016. Frackers
are increasing using finer sands, with 40/70 mesh the favoured
grade. Sand of 100 mesh is commonly used; some frackers are
experimenting with "ultrafines" of 200 mesh or
|Barite, unground lump, API, bulk, SG 4.2, fob
This very fine sand is less prone to crushing than the
coarse 20/40 mesh that was once preferred. And that means the
strength of the sand is less crucial. Buyers are therefore more
willing to forgo top-quality white sand mined in Wisconsin or
Minnesota in favour of lower-grade sand mined closer to the
Construction began in 2017 on a slew of new sand mines in
the Permian basin. And as 2018 wore on, huge volumes of
capacity started to come online while local prices in the
Permian started to fall, succumbing to pressure from squeezed
The effect was to roil frac sand prices in August 2018 -
they fell from more than $50 per short ton to barely above $20
in a matter of months, market sources reported. The effect on
the frac sand industry was devastating.
"Capacity had to close so it closed," one frac sand
distributor told Fastmarkets.
Frac sand miner Hi-Crush Partners announced in September
2018 that it had suspended dry plant operations at its
Whitehall in Wisconsin, citing "recent, temporary softness in
[fracking activity] and frac sand demand."
And Covia, the country’s largest frac sand
miner, idled some 4.9 million short tons per year of capacity
in response to an oversupplied market.
Sellers weren’t the only ones to regret plans
made when prices were higher. Some buyers started to regret the
long-term take-or-pay deals they had signed.
Oilfield service company Liberty in October 2018 scrapped
its offtake agreement with Select Sands, which operates frac
sand mines in Arkansas.
And at the start of 2019 Smart Sand initiated legal
proceedings against Schlumberger for allegedly falling behind
on the pace of its contracted sand purchases.
Fastmarkets began to price frac sand markets late in 2018.
The first price reported was northern white frac sand, 20/40
mesh, API, exw Wisconsin, $/short ton, launched in September
2018. This was followed by 100 mesh, 40/70 mesh, and 20/50 mesh
prices launched in November 2018.
Prices have held steady so far in 2019. The trend has been
one of increased interest in 40/70 mesh, while all other market
But some frac sand sellers see a brighter picture emerging
for 2019. Although one seller said that "there is still too
much sand around," rising demand will eat up a large portion of
this excess, he added.
Activity in West Texas may have slowed since late 2018 but
there is consensus that the US fracking industry will continue
to thrive. The all-important "breakeven" point at which it is
profitable to drill and frac wells is estimated at $40 or even
$30 per barrel. This means that activity can keep going even if
oil prices fail to approach their pre-2015 highs.
And the picture in the Permian basin is improving. Several
new pipeline projects are scheduled to come online this year,
with larger-capacity projects to follow. The high transport
costs faced by frackers will ease, allowing production to
Sand sellers also report increased interest in quality
material after years when the philosophy of frackers was to put
as much cheaply priced sand down the well.
"[Frackers] who aren’t in the Permian
don’t want to take risks… so they buy
tried-and-tested sand," a seller said. "And some of the guys
who are in the Permian are saying that the second year
isn’t looking as good as the first."
Output at frackers who reported strong results with low-grade
sand in the first year of operation is reportedly declining
faster than they had hoped. If this is true, it would be a
boon to producers of northern white sand, who might again be
able to differentiate themselves by the strength and shape of
their product rather than having to compete with regional
sand producers on price.