Texas-size glut of frack sand means steep drop in prices

Over­sup­ply de­vel­ops just as the de­mand for hy­draulic frac­tur­ing takes a hit from late-2018 slump in crude oil, ex­pert says

Houston Chronicle Sunday - - FUELFIX - By David Wethe

Just a year af­ter rush­ing into Amer­ica’s busiest oil field with new mines, frack-sand pro­duc­ers may have over­done it.

West Texas sand used in the hy­draulic frac­tur­ing process will drop 19 per­cent this year to about $30 a ton com­pared to 2018, ac­cord­ing to in­dus­try con­sul­tant Rys­tad En­ergy AS. Sand pric­ing is a key fi­nan­cial in­put for oil ex­plor­ers be­cause frack­ing is the most ex­pen­sive phase in drilling an oil well.

A slew of new West Texas mines close to Per­mian Basin drilling sites is el­bow­ing Mid­west mines that for­merly dom­i­nated the frack-sand trade. Min­ers in and around Wis­con­sin that con­trolled 75 per­cent of the mar­ket in 2014 will see that di­min­ish to 34 per­cent in 2020, Ryan Car­brey, Rys­tad’s se­nior vice pres­i­dent of shale re­search, told Petroleum Con­nec­tion’s Frac Sand In­dus­try Up­date con­fer­ence in Hous­ton on Wed­nes­day.

“We do think that things con­tinue to be rather sloppy from a pric­ing stand­point in 2019,” Chase Mul­ve­hill, an an­a­lyst at Bank of Amer­ica Mer­rill Lynch, said in a pre­sen­ta­tion dur­ing the con­fer­ence. “We’ll see if people rene­go­ti­ate con­tracts. What we’ve heard so far is people are ac­tu­ally start­ing to do that for some in-basin con­tracts.”

The sand over­sup­ply has de­vel­oped just as de­mand for frack­ing is tak­ing a hit from the late-2018 slump in crude prices and more mod­est ex­plo­ration pro­grams by oil pro­duc­ers, Mul­ve­hill said. Frack­ing de­mand is set to drop 3 per­cent in 2019, he said.

Frack­ing in­volves blast­ing high-pres­sure jets of sand, wa­ter and chem­i­cals un­der­ground to crack open oil- or nat­u­ral gas-soaked rocks that don’t re­spond to tra­di­tional drilling meth­ods.

Staff file photo

Piles of sand mined at a WildHorse Re­source De­vel­op­ment in Cald­well sit ready to be used in frack­ing op­er­a­tions. West Texas sand used in the process will drop 19 per­cent this year to about $30 a ton com­pared to 2018, ac­cord­ing to Rys­tad En­ergy AS.

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