A number of producers in the Permian and other shale plays are rethinking their strategies for using, procuring and delivering frac sand — all with the aim of minimizing sand costs, which account for a sizable and increasing share of total drilling and completion expenses. The focus on frac sand stems from evolving completion strategies that are pumping ever-larger volumes of sand into horizontal wells resulting in sharply higher hydrocarbon production. That has caused sand demand — and prices — to soar, and prompted the rapid development of new sand mines close to shale-production hot spots like West Texas, in part to reduce sand transportation costs. Today, we continue our blog series on recent developments on the frac sand front.
Like turkey at Thanksgiving, frac sand is a Shale-Era essential. As we said in Part 1 of this series, shale-play production is founded on a combination of horizontal drilling and the use of proppant (primarily natural sand, but also a bit of ceramics and resin-coated sand) that, when forced out of the horizontal portion of wells at high pressure (using water and other fluids), fractures openings in the surrounding shale. When the pressure is released, the fractures attempt to close but the proppant contained in the fluids keeps them propped open, providing a ready path for crude oil, gas and natural gas liquids (NGLs) to flow into the well bore. (See Tales of the Tight Sand Laterals for more on the basics of hydraulic fracturing.)
Figure 1 shows U.S. proppant consumption in billions of pounds per quarter from 2013 through the first half of this year (natural sand — the focal point of this blog series — typically accounts for well over 90% of total proppant use); the colored bar segments indicate how much is consumed in each of the major shale basins. As you can see, sand consumption rose in 2013-14 as the number of wells being drilled soared and producers found that more volume of sand could increase production. Demand then dropped off with crude oil prices and drilling activity, but started rebounding in the second half of 2016, due in part to a gradual uptick in the active-rig count, but also for two other reasons: the trend toward much longer horizontal wells (also known as laterals) and the use of much more frac sand per linear foot of lateral. (See Faster Horses and Part 1, Part 2 and Part 3 of our “Wipe Out!” series on frac sand and produced water.)