Nowadays, the hydraulic fracturing of a typical Permian well with a 10,000-foot lateral requires about 12,500 tons of frac sand — enough sand to fill more than 500 large sand trucks. That sand needs to be at the ready — delivered, offloaded, stored, and set for blending and use. If it’s not, the well completion and the start of production would be delayed or the hydraulic fracturing process would be shut down after starting — a mortal sin in the shale world. With reliable, seamless access to frac sand at the well site being so critical, E&Ps and their pressure pumpers are understandably doing all they can to optimize their “last-mile” sand logistics. This involves everything from minimizing truck-delivery congestion to maximizing the speed at which sand is transferred from truck to storage, as well as the type of storage used. It’s all much more high-tech than you might think. Today, we conclude our series with a look at the latest in last-mile logistics, which can account for as much as one-third of the total delivered cost of sand.
Posts from Taylor Robinson
A primary focus of E&Ps during the Shale Era has been driving down the cost of drilling and completing wells — doing so lowers producers’ break-even costs and increases their profitability. With the volumes of frac sand being used in the Permian and many other plays having grown dramatically in the past five years, a big push is on not only to minimize the cost of the sand itself, but to maximize the efficiency of sand delivery and sand management at the well site. All this has been spurring E&Ps to assume responsibility from oilfield service companies for the frac sand supply chain — anything from directly sourcing the sand to managing “last-mile” logistics. Today, we continue our series on the rapidly changing frac-sand world, this time concentrating on producers’ growing involvement in sand procurement and management.
Over the past three years, the U.S. frac sand market has been transformed. Demand for the sand used in hydraulic fracturing is more than twice what it was in early 2016. Dozens of new “local” sand mines have come online, slashing the need for railed-in Northern White Sand in the Permian and a number of other fast-growing plays. Frac sand prices have fallen sharply from their 2017 highs. And exploration and production companies, which traditionally outsourced sand procurement and “last-mile” sand logistics to pressure pumpers and other specialists, are taking a more hands-on approach. It’s a whole new world. Today, we continue our series on the major upheavals rocking the frac sand world in 2019 with a look at the development of local sand sources in the Eagle Ford, SCOOP/STACK and the Haynesville.
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.
The push to develop local sources of frac sand — and significantly reduce well-completion costs in the process — started in the Permian Basin, but it didn’t end there. A number of new sand mines are being opened and developed in the Eagle Ford in South Texas, and there are early signs the same is happening in the SCOOP/STACK in Oklahoma. With local sand eliminating the need for rail deliveries and rail-to-truck transloading terminals, sand and logistics companies are streamlining the delivery and management of frac sand by providing integrated mine-to-well-site proppant services. Today, we discuss recent developments on the frac sand front and what they mean for exploration and production companies in key plays.
Crude oil pipelines out of the Permian are filled to capacity and the differentials between crude in Midland and in Cushing and Gulf Coast destination markets are wide and likely to widen. That has spurred Permian producers and shippers to consider every possible option for moving incremental barrels out of the play, including two old short-term standbys: tanker trucks and crude-by-rail. Cost isn’t a major issue — the price spread and the Permian’s low break-evens will probably justify the higher expenses associated with trucking and railing crude. But that doesn’t mean that badly needed truck and rail capacity can appear with a poof as if by magic. No, even wads of cash may not be enough to quickly round up the hundreds — thousands? — of trucks and drivers that would be required to make a significant dent in the Permian’s takeaway shortfall. And developing brand new crude-by-rail terminals can take a year or more — too much time to address the play’s more immediate needs. Today, we continue our look at the frenzied efforts under way to move more Permian crude to market.
With frac sand use — and costs — on the rise in the Permian, a number of exploration and production companies (E&Ps) are becoming more involved in managing sand acquisition and logistics. It’s not an easy job, because even though a greater share of the frac sand used in Permian wells is expected to come from local, West Texas sand mines in the coming year, those “last mile” logistics — the delivery of sand by truck from the mine, plus unloading and storage of sand at the well site — are especially complex. Today, conclude our series on frac sand with a look at the challenges E&Ps face when they assume supply chain responsibility for sand.
Exploration and production companies (E&Ps) in the Permian have made great strides in reducing key elements of their drilling and completion expenses. However, many E&Ps have struggled in their efforts to trim one key element: their frac sand costs, which can account for 20% or even 25% of the total bill per high-intensity well. Now, with new sand mines coming online in West Texas and with traditional Upper Midwest sand suppliers eager to protect their market share, many producers are looking for multiple ways to lower the total delivered cost of their sand while making the challenging tasks of sand delivery and handling much more efficient. Today, we continue our blog series on recent developments in the frac sand arena.
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.
In the past year, there have been major changes in the frac sand sector. Exploration and production companies in the Permian and other growing areas have significantly ramped up the volume of sand they use in well completions, catching high-quality sand suppliers in the Upper Midwest off-guard and spurring sharply higher frac sand prices due to the tight supply. At the same time, development of regional sand resources has taken off in the Permian — with close to 20 mines announced with upwards of 60 million tons/year of nameplate capacity possible — and, to a lesser extent, in the SCOOP/STACK, Haynesville and the Eagle Ford. That new capacity should begin easing sand-supply shortfalls next year, reducing sand delivered costs and potentially threatening the dominance of traditional Northern White sand. And more changes are ahead in 2018. Today, we begin a new blog series on fundamental shifts in the all-important frac sand market.
The accelerating trend toward high-intensity completions in the Permian, SCOOP/STACK, Marcellus/Utica, Haynesville and other key shale plays is sharply increasing demand for frac sand. As a result, there's upward pressure on sand prices and there are shortages of certain grades of sand that may continue into 2018. There is also increased interest in developing sand mines near production areas. It’s important to remember, though, that (1) there’s no evidence that sand-supply issues will seriously curtail drilling and completion activity, and (2) higher sand costs can be offset by the production gains that usually come from using a lot more sand. Today we continue our surfing-themed series on sand costs and water-disposal expenses with a look at the forecast for 2017-18 demand for frac sand, sand pricing trends, efforts to develop regional sand supply sources and the bottom-line upside of high-intensity completions.
The techniques used to wring increasing volumes of crude oil, natural gas and natural gas liquids (NGLs) out of shale continue to evolve, and as they do, producers are facing mounting costs for securing frac sand and for disposing of produced water from the wells. These costs are squeezing producer profits, and—in an era of sustained low hydrocarbon prices—sometimes even flip production economics from favorable to unfavorable. Today we continue our surfing-themed series on sand costs and water-disposal expenses with a look at how sand use in shale plays has evolved—and how these changes affect the bottom line.
Low natural gas prices are expected to fuel a revolution in US manufacturing industry over the coming years. This new industrial revolution affects not only gas and power intensive industries but downstream products produced from petrochemicals. Manufacturing industries that left the US decades ago are returning to take advantage of lower costs. Today Taylor Robinson from PLG Consulting details three phases to this industrial renaissance.
Consistent lower natural gas prices resulting from the boom in shale production are expected to fuel a major increase in industrial demand over the coming years. RBN expects that sector’s demand to increase by 5 Bcf/d from 19 Bcf/d in 2013 to 24 Bcf/d in 2025. There have been numerous announcements of new plant builds and expanded capacity projects in primary industries. Less well documented are the wider ramifications of abundant shale natural gas and natural gas liquids (NGL) supplies for US manufacturing industry as a whole. Today in the first of a two part series Taylor Robinson from PLG Consulting outlines the changes underpinning a new industrial renaissance.
RBN blog pages are replete with discussions of the Shale–Rail revolution. We’ve shown how rail has become a formidable competitor to pipeline transportation. Twice as much crude oil moves by rail out of the Bakken versus pipe. Almost 100 new rail terminals will be built during 2012-13. But that’s not the only impact that shale is having. Most of the vast quantities of materials that support shale drilling arrive by rail. Among these are proppants (sand, ceramics), pipe, lubricating chemicals, and water. Today we examine the other end of the shale-rail revolution – the inbound material supply chain.