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Permian Basin - Major Savings anticipated from changing frac sand supply chain

Posted by OilVoice Press - OilVoice

09-Mar-2018


Dramatic Changes To the Supply of Frac Sand Will Lead to

Huge Well Savings in the Permian Basin

  • Energent, part of Westwood Global Energy Group, predicts a seismic shift in the supply of frac sand to the Permian Basin, Texas, this year.
  • Its new report says that operators will turn to in-basin frac sand, rather than sand hauled across long-distances, to meet demand growth.
  • By doing this, operators will be able to save 40-50 per cent on the cost of frac sand resulting in potential savings of $500,000 (or 10-20 per cent) per well.

(Houston, USA) – March 2018 – a major report from Energent, part of Westwood Global Energy Group (Westwood), the energy market research consultancy, predicts dramatic changes to the frac sand supply chain to the Permian Basin – the world's most important oil growth region.

The Permian Basin produces 2.9 million barrels of oil per day, approximately 45 per cent of light-tight oil production in the US. Over 800 E&P operators, 25 pressure pumpers, and 30 frac sand producers are engaged in activities there. With 2,430 drilled uncompleted wells and increasing capital expenditures for E&Ps in the basin, the Permian is poised to continue growing.

Frac sand is vital to the industry as it is pumped into the ground at high pressure to help extract oil and gas. Until now, the industry has relied upon Northern White premium frac sand hauled over 1,200 miles from Wisconsin at a cost of $110 per ton.

The Energent report shows that all this is about to change. Mines based within the Permian basin itself are now producing sand of the required technical standard and volume to meet the expected demand growth of 2.5 million tons per quarter over 2018-19.  

By the end of 2018, Energent anticipates over seven million tons per quarter of available premium sand capacity inside the Permian Basin. This will remove almost 800,000 tons of sand requiring long-haul rail logistics in 4Q18 compared with 1Q18.

Todd Bush, Founder of Energent, comments: “The cost and availability of frac sand has been a major challenge for operators in the region. So much so, that new entrants and existing frac sand companies have dedicated over $850 million to opening their own miles near Winkler county, Texas.

“The potential savings of in-basin sand are huge – as long as operators are satisfied that it meets their technical requirements, they could save up to 50 per cent on frac sand hauled from Wisconsin.

“Assuming a 50 per cent adoption rate of locally mined sand, incumbent suppliers will see a material decline in non-contracted volumes by the third quarter. It will also focus attention on logistics within the basin itself - the truck fleet, retaining drivers and transport technology – which will also drive well economics.”

The full report - Frac Sand in the Permian – Near-Term Outlook -  has been put together using Energent and Westwood's proprietary data detailing frac sand demand and consumption patterns across the US shale plays. The report is available for purchase at http://energentgroup.com/in-basin-frac-sand-supply-demand-report/.



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