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.
Posts from Taylor Robinson
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.