Frac Sand Market Ready to Explode

There is sand, sand and more sand in our future.

According to the study “ProppantIQ” by PacWest Consulting Partners, the U.S. proppant market is expected to grow at 8 percent per annum through 2015, from 63 billion lb. in 2013 to 75 billion lb. in 2015. The frac sand portion of the market specifically will drive the majority of growth, which is expected to increase at 9 percent per annum, from 56 billion lb. in 2013 to 67 billion lb. in 2015

Driving growth in the market, in addition to an increase in wells, is the amount of sand being used per well. In a new note, researchers Ole Slorer, Benjamin Swomley and Connor Lynagh of Morgan Stanley write that exploration and production companies have discovered that if they use more sand at unconventional shale plays, they are able to increase the amount of reserves they can extract from the ground. MS forecasts sand demand growth of 96 percent in 2016 from 2013, compared with just 76 percent of sand capacity growth.

“We believe the industry is beginning to form a consensus regarding the superior economics of high sand usage, and believe we will see continued movement towards these operators’ consumptions levels,” MS said. They also noted that sand prices could increase as much as 50 percent.

Demand for well-stimulation materials in the United States is forecast to climb more than 10 percent annually to $15.2 billion in 2018, according to Well Stimulation Materials, a new study from The Freedonia Group Inc., a Cleveland-based market research firm.

According to analyst Lee Steinbock, “Historically high oil prices and rebounding natural gas prices are expected to be the main factors promoting continuing growth in well completion activity. The use of newer technologies such as horizontal drilling and high-volume, multistage hydraulic fracturing will increase the amount of materials used per well.”

Although raw sand dominates the market in terms of volume sales, value-added coated sand and ceramic proppants each account for a greater share of dollar demand. Resin-coated sand proppants are expected to register the fastest growth as proppant loads continue to expand and operators develop formations with higher closure pressures.

This is all positive news for producers of frac sand. While market restraints such as adequate storage, over-burdened rail transport issues and the distance from deposit to well are all in play, the market appears to be poised for active success in the coming years.

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