Douglas-Westwood: Why the shortage of frack sand in Lower 48 Shale?

Advancements in the horizontal drilling and completion techniques of leading shale E&Ps are driving frack sand demand to new highs. The significance of multi-well pad drilling in the Permian has increased in recent years, even during the downturn. In 2016, 42% of the wells completed in the Permian were drilled on multi-well pads compared to only 22% of wells in 2015. Most notably, Encana Corporation initiated a 64-well pad programme in 2016 that continues to headline pad drilling discussions in the Permian Basin.

High-intensity completions ('mega fracksk) use increased amounts of frack sand, fluid and chemicals to stimulate the near wellbore rock, further contributing to a potential shortfall in frack sand supply. Based on Q1 2017 data from Energent Group, the majority of new Delaware Basin completions use on average 1990 lb of frack sand per lateral foot and 1920 gal. of fluid per lateral foot.

Another key driver of the frack sand shortage is the longer laterals per well in the shale plays. The two-mile lateral will be much more common in 2017, as E&Ps acquire contiguous acreage positions. For the last two years, an average Bakken well was greater than 10 000 lateral ft. Other major shale plays are fast approaching the Bakken horizontal well lengths, with the Midland Basin nearing 7500 lateral ft and Haynesville at 6000 lateral ft.

E&Ps continue to monitor the frack sand supply chain for shortages, choke points, and opportunities to maintain prices at current levels. Last-mile logistics are critical for both northern white frack sand and regional brown suppliers. Demand for regional sand and northern white frack sand is expected to increase in 2017 and 2018. The regional sand suppliers are expanding the capacity of mines with close proximity to Permian, Eagle Ford, Barnett, and Haynesville shale plays. Meanwhile, the premium northern white sand suppliers are optimising last mile logistics, establishing longer term contracts, and adding production capacity.

For more information on the US market, you can contact Energent Group, a Westwood Global Energy Group company, at http://www.energentgroup.com

Todd Bush, Energent (part of the Westwood Global Energy Group)

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