Sand's Surge | Russell T. Rudy Energy LLC
Amid the sea of economic devastation wrought by the crude oil price collapse, there is one small island of prosperity. Fittingly, it is sand. “Rigzone” reports that apparently you can’t pour too much of the stuff down hole when fracking shale reservoirs.
Operators keep trying to define the limit as to how much is too much sand when used with water in a mixture known as “slick water”. As yet, no one has found the answer. As Sean Meakin, an oil services analyst at JPMorgan Chase, observes, “The message from drillers is more, more, more sand. All of the numbers are going up and they’re going up dramatically.”
Since 2011 sand usage on a per well basis has doubled. Admittedly, this is still far below the 2014 peak, but some analysts predict that if the price of oil gets to $60 a barrel, sand usage will surpass the 2014 level of 64 million tons per year.
In fracking, slick water blasts shale reservoir rock at high pressure, creating tens of thousands of tiny cracks. The sand component elongates these, makes them more jagged, and keeps them open. Operators have found that the more sand used in the mixture, the more fractures stay open.
The shale oil industry has responded to the price collapse with creativity and resilience. This is true not only with regard to the amount of sand used, but also in the type of sand. Initially, only white sand from Wisconsin and Minnesota was considered suitable for fracking. Accordingly, it demanded a 25% premium. However, as harsh economic reality forced operators to experiment with brown sand which is found in the Southwestern U. S., it was found to be just as effective at keeping fractures open. Given the savings in the cost of the sand itself, and transportation to Southern oil fields, brown sand now comprises more than 40% of the fracking market, up from 26% in 2014.
The upside potential of sand is not lost on investors. The shares of some of the largest sand producers, U. S. Silica, Fairmont Santrol Holdings, Hi-Crush Partners LP, and Emerge Energy LP have, on average, doubled. To put this in perspective, share prices for exploration and productions companies are up about 14 % this year and the broad oil service industry index is essentially flat.
To read the article in its entirety, as well as some very insightful comments from readers, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=146013&utm .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
