How to Save Money When Buying sourcing oil fracturing proppant

In the oil and gas industry, the saying "there's more than one way to skin a cat" holds particularly true when it comes to selecting proppants for reservoir fracturing.

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While there are various options, some are significantly more cost-effective than others. Specifically, there are three main proppant types used in hydraulic fracturing: ceramics, resin-coated proppants, and natural sands.

According to Zigurds Vitols, president and CEO of Select Sands, "Ceramics may be effective, but they are approximately ten times more expensive than natural sand." The performance versus cost ratio indicates that natural sands could provide a more economical solution.

Zigurds Vitols, president and CEO of Select Sands (Source: Select Sands)

Headquartered in Texas, Select Sands harvests high-quality northern white sand from the St. Peter formation. This massive sandstone structure stretches from Minnesota to Arkansas and Illinois to Nebraska. Vitols asserts that this sand not only meets API standards, but it also boasts the highest crush strength in natural sands. The sand boasts a hard, spherical shape with minimal turbidity, making it ideal for maximizing recovery rates in wells.

Turbidity indicates the level of suspended particles in the sand; thus, reducing turbidity enhances the cleanliness of the sand, ensuring fewer dirt and silt particles attached to each grain.

St. Peter formation sand is preferable for fracking operations in states like Colorado, Texas, and Louisiana due to its superior strength and low turbidity compared to in-basin sands, which struggle with higher turbidity levels, causing oil flow to be more challenging. Advances in chemicals and friction reducers have made it possible for producers to utilize in-basin sands effectively, according to Vitols.

However, in-basin sands tend to deteriorate more swiftly than white sands, necessitating innovation on engineers' parts.

As Vitols explains, "If in-basin sands are not performing well, a completion engineer may design a fracking operation that utilizes white sand for critical stages while using in-basin sands for less critical stages." This results in a combination of both sands in some wells, while others may rely solely on white sand.

"To effectively extract petroleum from the fracture, white sand is the go-to choice," he concludes.

The Apex of Proppant

Choosing the right proppant is a critical decision for producers involved in fracking operations.

Although ceramic proppants generally display greater strength and conductivity, various natural sands are also advantageous (Source: CARBO)

Josh Leasure, CARBO's director of sales, emphasizes that, "Your choice of proppant will ultimately influence the long-term performance of the well. For resilient wells, ceramic proppant is the preferred solution."

CARBO is a tech-forward company offering a range of advanced ceramic and resin-coated proppants. The KRYPTOSPHERE product, which Leasure claims to be "the pinnacle of proppant technology," is emblematic of their innovation.

"Our manufacturing process is key to the quality of our products," he notes. "We excel in eliminating weak points found in proppant grains."

All proppants in the CARBO KRYPTOSPHERE family—like KRYPTOSPHERE and KRYPTOAIR—are ultra-conductive and designed for high closure stress environments. The uniformity in shape and size of each grain ensures optimal production flow through the fracs. CARBO's offerings cater to unique producer needs, addressing various challenges operators may face.

While ceramic proppants, like those produced by CARBO, are primarily used for offshore fracturing due to their high cost, they are exceptionally effective. With limited capacity on ships, producers must maximize extraction from offshore wells, as noted by CARBO's R&D manager, Brett Wilson.

Natural frac sand, albeit slightly less effective, remains a popular choice for onshore operations thanks to its broader availability and cost advantages, allowing producers to utilize greater quantities during the fracking process.

Editorial Focus: February

The Merriam-Webster dictionary describes cyclicity as the tendency to occur in cycles; it could've simply written "refer to oil and gas" to illustrate this.

A mere year after a significant demand collapse left an oversupply crisis across the energy sector, the term "shortage" has reentered industry discussions as global inventories deplete and operators resume drilling operations. Few sectors have felt this sentiment shift more acutely than the U.S. fracking sand market.

Despite a staggering increase in onshore frac sand consumption—from 42 million tons to 116 million tons—supply surged so rapidly that industry analysts began warning two years prior that new in-basin mines were overwhelming the supply chain. Reports indicate that approximately two dozen frac sand mines launched in the Permian, with additional openings in the Eagle Ford, Haynesville, and Mid-Continent regions, resulting in total U.S. supply nearing 225 million tons.

The narrative was clear: Even though sand consumption per well was on the rise, the oversupply led to eroding prices, placing pressure on sand suppliers' profit margins. However, the current state of the supply-and-demand balance suggests a significant shift is underway.

In January, Kpler issued surprising research revealing that U.S. shale plays could face constraints following a robust recovery in activity early in the year. Specifically, the report asserted that "Frac sand—a critical component in fracking—could become a bottleneck in the industry’s recovery during Q1."

But how did the industry swing so quickly from surplus to potential scarcity? Senior global energy analyst Alexandre Andlauer of Kpler elucidates that frac sand supplies mirror U.S. oil and gas production trends for the same reasons: a lack of investment. "Many sand mining companies have faced underinvestment due to low prices, resulting in numerous mines being shut or idled last year," he explains. "I’m hearing between a third and half of frac sand capacity from two years ago is no longer operational."

Many proppant suppliers faced reduced economic returns due to plummeting frac sand prices, followed by a complete halt in completion activities during the core lockdown phase of COVID-19, leading some suppliers to bankruptcy, restructuring, and mine closures, Andlauer continues. This includes both in-basin mines and Northern White mines in the Upper Midwest. Many of these companies carry debt from past expansions during periods of soaring demand and high prices.

Some mines may be irretrievably lost, but others may eventually reopen for production. "I believe the ramp-up in drilling and completion activities has happened far more quickly than anyone anticipated—from 250 rigs and 60 frac spreads in July to 380 rigs and 170 frac spreads in January—resulting in a sand market struggling to pace with demand," he says.

This discrepancy may soon present significant roadblocks for further activities as oil and gas prices strengthen. Andlauer warns, "Supply chain disruptions are likely unavoidable; while they extend beyond just frac sand, they will pose a primary challenge in the coming months as prices recover. U.S. shale oil production faced a 20% decline, making it improbable to reach previous heights in the next 18 months—even if oil prices soar past $70/bbl."

Strength in a Workforce

While capital and technology might drive the industry, human resources remain its lifeblood—raising concerns regarding workforce repopulation following the substantial downsizing of jobs last year. One essential but often overlooked job is the logistics of delivering millions of tons of sand and other resources to drilling sites. "I’m increasingly hearing that a shortage of truck drivers poses a greater challenge than the lack of frac sand itself in U.S. shale plays," Andlauer observes.

He highlights two compounding issues: "Many drivers who previously made a lucrative living in the Permian have exited the industry due to its volatility; they’ve endured numerous layoffs over the past several years. Moreover, with strong demand for drivers across many sectors, they have alternative options available to them."

Money often speaks volumes. The opportunity to earn competitive wages beyond the oil industry remains a significant allure. "The trucks are readily available, but companies must attract drivers back from other sectors. This usually entails offering salaries enticing enough to counter volatility and rebuild confidence," he remarks. "However, producers implementing stricter budgeting aren't keen on discussing increased costs related to trucking or anything else."

The Permian job market's intricacies are well understood by Willie Taylor, CEO of the Permian Basin Workforce Development Board, who has devoted nearly five decades to workforce initiatives in the region.

According to Taylor, the Permian Basin's future outlook is brighter than that of other basins. "While a cautious approach will be taken—especially under the new administration—the region will recover, albeit necessitating recruitment efforts both locally and from outside as oil field activities resume and unemployment rates bottom out," he predicts.

Last December, prior to the onset of the pandemic, Midland experienced one of the lowest unemployment rates in the country at just 2.0%, while Odessa followed closely at 2.9%. By December of the following year, however, the unemployment rates increased to 8.0% in Midland and 11.5% in Odessa, lagging behind state and national averages of 7.1% and 6.5%, respectively.

"Our area's reliance on oil and gas is both a blessing and a curse," he reflects. "Even high school dropouts can earn $80,000 or more annually. While our compensation has tended to outpace the state average, education levels have fallen short. The prosperity of the workforce is inherently tied to the industry's performance."

Nevertheless, that symbiotic relationship is reciprocal. "The past year has posed challenges, yet as activity ramps up and unemployment figures improve, the need to recruit outside workers will resurface," Taylor asserts. "We have significant work to tackle in the Permian, with a robust workforce and infrastructure positioned for future expansion."

Housing Availability

The recent surge in oil and gas development has driven one of the nation's fastest-growing populations, prompting extensive growth in local residential, commercial, and municipal infrastructures, paving the way for Midland-Odessa to effectively accommodate moderate workforce increases.

"We hope to avert housing capacity shortages and other issues that have plagued us previously, and that newcomers will discover affordable housing and competitive wages," he emphasizes. "Once they arrive, they will see that the Permian is indeed a desirable place to live and work."

Regarding trucking specifically, Taylor concurs that driver availability remains tight and that a lack of experienced drivers could pose problems. "Truck driving consistently appears on our targeted occupations list, which requires a minimum of 50-100 job openings statewide, offering at least $17.00 per hour," he explains.

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Truck driving has maintained a prominent spot on the Permian Basin Workforce Development Board's priority list over the years, he continues, noting that efforts for recruitment and driver training persist. "The oil and gas sector incentivizes high wages to attract skilled individuals, causing wage increases across the region when workers are in short supply. As oil and gas enterprises ramp up operations, we see wages and incentives rise, drawing in new talent."

Tight Supply Expected

As completion activity surges, operators may encounter hurdles in securing frac sand, warns Hunter Wallace, Chief Operating Officer of Atlas Sand, which operates two mines in West Texas. He predicts particularly tight supplies for 40/70 proppant.

Interestingly, Atlas stands out as the sole company with dual operations that remained fully functional throughout the pandemic, says CFO John Turner. "Despite a significant downturn in sales volumes, our efficient operational practices allowed us to maintain our plants and employees," he notes.

Atlas invested time during the downturn to enhance the efficiency of its facilities in Kermit and Monahans while minimizing operating expenses by shifting from traditional mining methods to dredge mining, which requires less heavy equipment—effectively slashing operational costs by 75%.

Wallace further illustrates the value of leveraging data analytics to enhance operations. "For instance, our knowledge regarding sand dryer function allows us to monitor downtime and pinpoint root causes," he states. "With consistent evaluation, we can identify prevalent issues and troubleshoot effectively over extended periods."

One transformative change Atlas implemented last year involved the transition to dredge mining, which simplifies sand extraction from their unique deposits containing naturally occurring water. This shift has enabled vast cost reductions and efficiency gains.

Centralized Loading Operations

In addition to modifications at the mines, Atlas optimized their workforce logistics by relocating their loading teams to a centralized command center in Austin, Texas. This arrangement facilitates cost savings compared to traditional on-site accommodations while enhancing employee satisfaction by allowing greater work-life balance.

This central configuration unites both plants, streamlining operations. When traffic delays impact one facility, the team can allocate resources swiftly to the other, enhancing throughput.

Further efficiencies stem from improved communication between truckers and loaders, enabling faster problem resolution during deliveries. This collaborative approach contributes to maintaining an average site turnaround time of 10 minutes, while also decreasing operational costs and enhancing driver experience.

Dependability

Wallace acknowledges, "Every sand plant has challenges; every piece of equipment is constantly exposed to the abrasive nature of sand, which causes wear and tear." However, he proudly states, "Since commissioning our facilities, we have yet to miss or cancel a single order—a feat that few, if any, other Permian sand plants can boast."

Atlas's strategy includes robust contingencies to offset potential equipment failures while adhering to a disciplined sales approach. "Due to unexpected delays—often commonplace in the field—customers may pull fewer sand units than anticipated. Though attractive, overbooking capacity can reduce reliability," Wallace emphasizes. "We prioritize honesty over short-term gains to uphold commitments."

By maintaining transparency, Atlas fosters strong customer relationships. "When we inquire about their anticipated needs for the next 30-60 days, our customers trust our judgment and provide candid responses," he shares.

Atlas utilizes this data to secure trucking capacity adequately. "Through proactive planning, we have managed to ensure consistent deliveries in an environment strained for truckers. While we cannot guarantee immunity from trucking challenges, ongoing communication helps us mitigate risks effectively," Wallace concludes.

Simultaneous Fracturing

Seeking efficiency, many operators have transitioned toward simultaneous fracking techniques, reports Charley E. McIntyre from Cudd Energy Services. This approach involves completing multiple wells concurrently, which maximizes operational efficiency but raises demands on supply chains.

Cudd Energy Services is actively implementing measures to bolster the efficiency and reliability of its frac operations. Innovations include transitioning fleets to dual-fuel systems and acquiring high-horsepower pumps that facilitate enhanced productivity.

To maximize their footprint, Cudd has proactively retired outdated equipment and expanded their horsepower capabilities. The new generation of pump trucks, meeting environmental standards, not only reduces emissions but also enhances operational performance.

These upgrades are integral to supporting customer goals while reducing expenses for operators, as McIntyre notes. Cudd is refining its understanding of operational dynamics through data-driven decision-making, with the ultimate aim of improving overall efficiency.

Through comprehensive service delivery, operators can also expect tailored support for varied completion demands. As industry trends shift toward achieving higher long-term returns, opportunities for nuanced completion designs will likely reappear, enabling producers to balance total cost with operational yield. For further insights on sourcing frac proppant manufacturing, please visit our website.