'Last Mile Logistics' Could Be A Choke Point Early Next Year

Global oil market events in late-2016 all but guarantee that the Lower 48 oilfield recovery will gather steam in early-2017. As the upstream supply chain tightens early in the new year, weaker links in the onshore supply chain will be exposed. We recently identified four potential choke points that could become problematic during a 1Q17 activity surge. One of these challenges is last mile frac sand logistics.

For now, there is plenty of frac sand available at the basin level, and frac sand prices are not running up yet. That may change as 2017 matures. More concerning in the short-run though is a different potential choke point in the sand supply chain: 'last mile logistics.' In other words, this means proppant delivery from transload facilities to well sites (often 50 miles or less). This is essentially the transfer of sand from train to truck to blender.

Frac Sand Transloading. Photo Credit: Titan Lansing

Remember the guar crisis back in 2012? 'Last mile logistics' could bring back those memories for a few months in early-2017. This new choke point will be easier and quicker to fix, but it could be a source of demurrage, higher costs, delays, and general headaches in the early part of the recovery.

We Are Hearing Some Anecdotes From The Field Already

Sand customers have recently said they are having trouble finding adequate trucking capacity to take proppant from transload facilities to the blenders on multi-well pads. Physical trucking fleets aren't the problem; the problems are i) a lack of qualified drivers and ii) increasing well site complexity. Point ii may be even more important for even when trucking is available, navigating well sites is increasingly difficult.

Many truckers simply left the industry when volumes collapsed. Some frac sand trucking companies shut down. So as completions have picked up this quarter, trucking reliability has been put to the test.

This quarter, we've heard increasing chatter that contracted trucking outfits are failing to show up for jobs or backing out of commitments last minute.

Meanwhile, sand tonnage pumped per well continues to rise. That means more truckloads for each well. This complicates last mile logistics, even in a scenario where trucks and drivers are plentiful and on time.

A 1Q17 Completions Surge Could Exacerbate The Issue

Last mile logistics could become a real challenge during 1Q17 as frac calendars fill up. Delays and headaches for pressure pumpers and operators alike are probable.

The good news is that last mile logistics capacity has low barriers to entry and low costs, relatively speaking. Furthermore, containerized solutions (i.e. US Silica's Sandbox) may be part of the answer to help address complexity. Despite low cost solutions that can be brought on quickly, we believe this is a potential choke point worth monitoring as the industry starts to grow again.

This is one of four potential bottlenecks we've recently identified that could become problematic early in the new year. Looking at these four issues another way, we see some great opportunities for the industry's problem solvers. Read about the other three in the full update (free trial needed).

About the source of this post: Joseph Triepke created Infill Thinking in 2016 to deliver high-caliber oilfield research updates to O&G decision makers. No ads. No clutter. No noise. Just research on the trends that matter most delivered to subscriber inboxes. Try it free for 30 days.

New service from OilVoice
Trip Shepherd is for companies who need to track their staff in areas of risk.
It's free to use, so we invite you to try it.

Visit source site


completionsShaleFrackingonshorefrac sand

More items from joseph

A December To Remember – The Biggest US Drilling Gain In Three Decades

US land drillers sent 2016 packing with a bang. Since May, the drilling recovery has looked exceptionally strong on a percentage basis. The December trend looked exceptionally strong on an absolute basis too with 65 US rigs returning to work. December 2016 delivered the best absolute rig cou ...

Joseph Triepke - Infill Thinking

Posted 2 years agoOpinion > Rig CountDrillingShale +1

On OPEC Day, US Operators Focused On Making Better Wells Instead

While the rest of the world focused on OPEC on November 30, US operators were focused on making their tight oil wells more effective with cutting edge innovation. I spent OPEC day in Houston with 35 senior US completions executives at the Darcy Completions Forum , squarely focused on emerging tech ...

Joseph Triepke - Infill Thinking

Posted 2 years agoOpinion > completionsFrackingTechnology +2
All posts from joseph