Everything Has Changed - The Frac Sand Revolution

The U.S. frac sand market has been turned on its head. Over the past three years, demand for the sand used in hydraulic fracturing has more than doubled, dozens of new “local” sand mines have been popping up within the Permian and other fast-growing plays, and frac sand prices have fallen sharply from their 2017 highs. The big changes don’t end there. Exploration and production companies (E&Ps), who traditionally left sand procurement to the pressure pumping companies that complete their wells, are taking a more hands-on approach. And everyone is super-focused on optimizing their “last-mile” frac sand logistics — the delivery of sand by truck, plus unloading and storage of sand at the well site — with an eye toward minimizing completion costs and maximizing productivity. Today, we begin a blog series on the major upheavals rocking the frac sand world in 2019.

We’ve said it time and again: the Shale Revolution would not have been possible without sand­­ — and lots of it. Way back in 2012, in Tales of the Tight Sand Laterals, we explained that freeing the vast amounts of oil, gas and natural gas liquids (NGLs) trapped in shale and tight sands requires horizontal drilling to access the long, pancaked layers where trapped hydrocarbons reside, as well as proppants (natural sand, ceramics and resin-coated sand) that, when forced out of the laterals at high pressure (using water and other fluids), fracture openings in the surrounding shale/tight sands. When the pressure is released, the fractures attempt to close but the proppant contained in the fluids keeps them open, making a ready path for oil, gas and NGLs to flow into the well bore. Then, in our Wipe Out! series, we discussed how the trend toward much longer laterals and high-intensity well completions caused demand — and prices — for Northern White Sand (NWS) from the Upper Midwest (long the preferred sand type) to soar. That helped spur the development of new, local sand mines in the Permian (and the Eagle Ford, SCOOP/STACK and the Haynesville) to help meet rising frac sand demand and to reduce sand transportation costs by eliminating the cost of long-distance rail shipments and rail-to-truck transloading. Most recently, in All My Frac Sand Comes From Texas, we looked at — among other things — the still-rising volumes of sand being used per well, the development of more local sand mines, and the steps that an increasing number of E&Ps were taking to become more involved in sand procurement.

Just about all the changes we’ve been discussing the past few years have come to fruition in recent months. The availability of local sand in the Permian has skyrocketed since early 2018, to the point that supply now exceeds demand by a considerable margin — the same will soon be the case in the Eagle Ford and SCOOP/STACK plays. The supply glut in the Permian and elsewhere has led some sand mines to close or ramp down their output and brought once-astronomical sand prices back down to earth — not only for local sand but for Northern White. By and large, E&Ps and their pressure pumpers have grown comfortable with the quality and characteristics of local sand that had once been suspect — it’s “good enough,” many say. And it’s now become commonplace for E&Ps to be very involved in sand procurement and logistics. As for last-mile sand logistics, they’re becoming more efficient and less costly every day. To put it simply, the Frac Sand Revolution has arrived.