Thursday, February 06, 2020

2019 FRAC SAND NEWS


Fracking sand company sees its stock almost halve on big customer loss

John Kingston Tuesday, November 12, 2019


The oil patch has become so depressed that a company that supplies frac sand saw its stock drop almost in half Nov. 11, after it said it may not be able to continue as a “going concern.”

Carbo Ceramics (NYSE: CRR), a Houston-based manufacturer of proppants, the industry name for frac sand, said in its third-quarter earnings that its largest frac sand client “intends to discontinue purchase of frac sand under our current contract,” Carbo President and CEO Gary Kolstad said in a conference call with investors. The identity of the buyer was not revealed.

“We are in discussions with this client to determine if there’s an agreeable alternative to this matter,” Kolstad said, according to a transcript of the earnings call supplied by Seeking Alpha.

The problem for the company is not only the loss of the revenue stream from the client, Kolstad said. It is also that the contract with the buyer “covered significant fixed costs associated with our distribution facility and railcar leases.”

It was in the company’s press release about the earnings that the issue of Carbo remaining a “going concern” was raised. A “going concern” notice posted by a company’s auditor in its financial statements is one that is issued only for a company in fairly dire straits.

“Given the existing North American oilfield market headwinds, expectations for these headwinds to continue into 2020 and the loss of revenues associated with this sand contract, there is an elevated risk associated with the company meeting its existing financial forecast, and the company may ultimately conclude it is unable to continue as a going concern in a future period,” Carbo said in its earnings release.

In his closing remarks on the earnings call, Kolstad noted how tough the market has become for companies supplying frac sand. It’s a market that has seen the North American land rig count, according to Baker Hughes, drop to 793 in the most recent weekly report from 1,057 a year ago.

“The U.S. onshore oilfield market is very tough,” Kolstad said in what could be viewed as a warning to everyone in the frac sand supply chain. “A low-quality reservoir rock combined with low oil and gas commodity prices has resulted in little or no returns for the industry. And that means activity pricing and the use of technology products is likely lower.”

The cuts the company is implementing are not just coming from halting operations. They also involve reducing railcar and distribution facility leases and other stops in the proppant supply chain. “In particular, the cost of distribution assets, which includes rail car leases and distribution facility leases … we have to lower those,” Kolstad said.

The end result of the announcement was that the stock of Carbo dropped roughly 48% on Nov. 11 to 82 cents per share. It’s down almost 85% in the last 52 weeks.
In the call and in the company’s earnings release, Kolstad and Carbo said it would look at asset divestitures and overhead reductions — SG&A — of 20% in the coming year. Its loss for the quarter was $1.03 per share, down from a loss of 62 cents per share in the third quarter of 2018. More ominously, its balance sheet showed a drop in cash on hand to $39.8 million from $72.7 million a year earlier.

Oil and gas is not the company’s only business. On the same day it announced the loss of its customer and its earnings, it also said it had signed a new significant deal in the agriculture sector.

John Kingston
John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.

 Sand deposit could be 'game-changer' for North Dakota oil
Oct 13, 2019



Fred Anderson, a geologist with the North Dakota Geological Survey in 
Bismarck, shows samples of sand extracted from soil in the state used 
to research and locate the appropriate type of sand used for fracking

in the oil industry. Mike McCleary

WILLISTON — A deposit of sand in north-central North Dakota could be a boon to the state's oil industry.

The sand — a variety specifically needed in the process of hydraulic fracturing — has been found in McHenry County, roughly 160 miles west of Grand Forks between the towns of Rugby and Minot. Another has been found in Mercer County, northwest of Bismarck.

Fred Anderson, a North Dakota Geological Survey geologist, said the sand could be a "game-changer" for the state

“The reduction in cost would be high,” Anderson said. “It’s a huge deal for the state of North Dakota."

Asgard Resources, of Williston, has received a permit to dig sand in McHenry County, the auditor’s office there confirmed. Asgard Resources also applied for a permit to excavate sand in Mercer County, the Mercer County auditor’s office said.

“We know it’s being developed and shipped, but we don’t know where it’s going,” Anderson said.

Hydraulic fracturing, commonly called “fracking,” is an oil extraction method that injects water, sand and chemicals into underground formations. Sand, or “proppant,” is used to hold open the fracture in the rock so oil and gas can flow from the rock formation into the wellbore. Fracking is the process that prompted the Bakken oil boom in western North Dakota, but the sand required for the process is unique and typically found elsewhere.

The North Dakota Geological Survey began researching whether North Dakota sand could be used for fracking about 10 years ago, and learned it was marginal, Anderson said. The North Dakota “windblown,” or quartz, sand contains minerals, so it typically is not the proppant sand preferred for fracking.

If oil companies can use North Dakota sand for fracking, it will mean they no longer must haul it in from other places, Anderson said. The change could boost the margin for the companies in western North Dakota.

Bakken completions can require about 4,000 to 5,000 tons of sand per well, the North Dakota Department of Mineral Resources said. The sand can cost as much as $34 per ton, Anderson said.

Spencer Stone, vice president of business development for a company called TracFrac Inc., said Friday that a more regional-sourced supply of sand could mean substantial savings for wells in the Bakken region of North Dakota.

“Sand mined in North Dakota could reduce costs for new Bakken wells by $150,000 to $300,000,” Stone said. “It levels the footing between Bakken operators and its Permian counterparts, who are able to utilize sand mined in Texas.”

Generally, oil companies want to use sand for fracking that has crush-resistant values up to 8,000 to 9,000 pounds per square inch, Anderson said. Results of laboratory tests conducted on McHenry County sand show lower crush-resistant values.

“What we’ve seen is our sands are coming in from five to seven,” Anderson said.

That sand can be processed to make it more crush resistant, but that increases its cost, Anderson said.

“Most people want to dig it out of the ground, wash it and get it to the well site,” he said.

While the McHenry County sand has lower crush resistance than is optimal, sampling and testing work by the North Dakota Geological Survey, in conjunction with EOG Resources, showed that deposits of wind-blown sand in the Hazen-Stanton area of Mercer County may be viable sources of proppant sand. The dunes in that area cover about 34 square miles, the study said.

Sand deposit could be 'game-changer' for ND oil industry

Finding the sand in North Dakota could mean a savings of $150,000 to $300,000 per new Bakken well.

A deposit of sand in north-central North Dakota could be a boon to the state's oil industry.
The sand – a variety specifically needed in the process of hydraulic fracturing – has been found in McHenry County, roughly 160 miles west of Grand Forks between the towns of Rugby and Minot. Another has been found in Mercer County, northwest of Bismarck.
Fred Anderson, a North Dakota Geological Survey geologist, said the sand could be a "game-changer" for the state.
“The reduction in cost would be high,” Anderson said. “It’s a huge deal for the state of North Dakota."
Asgard Resources, of Williston, has received a permit to dig sand in McHenry County, the auditor’s office there confirmed to the Grand Forks Herald. Asgard Resources also applied for a permit to excavate sand in Mercer County, the Mercer County auditor’s office said.
“We know it’s being developed and shipped, but we don’t know where it’s going,” Anderson said.
Hydraulic fracturing, commonly called “fracking,” is an oil extraction method that injects water, sand and chemicals into underground formations. Sand, or “proppant,” is used to hold open the fracture in the rock so oil and gas can flow from the rock formation into the wellbore. Fracking is the process that prompted the Bakken oil boom in western North Dakota, but the sand required for the process is unique and typically found elsewhere.
The North Dakota Geological Survey began researching whether North Dakota sand could be used for fracking about 10 years ago, and learned it was marginal, Anderson said. The North Dakota “windblown,” or quartz, sand contains minerals, so it typically is not the proppant sand preferred for fracking.
If oil companies can use North Dakota sand for fracking, it will mean they no longer must haul it in from other places, such as Minnesota and Wisconsin, Anderson said. The change could boost the margin for the companies in western North Dakota.
Bakken completions can require about 4,000 to 5,000 tons of sand per well, the North Dakota Department of Mineral Resources said. The sand can cost as much as $34 per ton, Anderson said.
Spencer Stone, vice president of business development for a company called TracFrac Inc., told the Herald Friday that a more regional-sourced supply of sand could mean substantial savings for wells in the Bakken region of North Dakota.
“Sand mined in North Dakota could reduce costs for new Bakken wells by $150,000 to $300,000,” Stone said. “It levels the footing between Bakken operators and its Permian counterparts, who are able to utilize sand mined in Texas.”
Generally, oil companies want to use sand for fracking that has crush-resistant values up to 8,000 to 9,000 pounds per square inch, Anderson said. Results of laboratory tests conducted on McHenry County sand show lower crush-resistant values.
“What we’ve seen is our sands are coming in from five to seven,” Anderson said.
That sand can be processed to make it more crush resistant, but that increases its cost, Anderson said.
“Most people want to dig it out of the ground, wash it and get it to the well site,” he said.
While the McHenry County sand has lower crush resistance than is optimal, sampling and testing work by the North Dakota Geological Survey, in conjunction with EOG Resources, showed that deposits of wind-blown sand in the Hazen-Stanton area of Mercer County may be viable sources of proppant sand. The dunes in that area cover about 34 square miles, the study results said.


Frac Sand Prices Forecast to Remain Flat Through 2024


May 29, 2019 
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A new report forecasts that prices for frac sand will remain flat in the U.S. through 2024. Image courtesy of Pixabay
A new report forecasts that prices for frac sand will remain flat in the U.S. through 2024. Image courtesy of Pixabay
Although demand for frac sand is expected to increase in the U.S. hydraulic fracturing market through 2024, prices for Northern White and Permian proppant sand are forecast to remain more or less flat over the next five years, according to a new report released this month by Rystad Energy.
The energy research and business intelligence company’s latest Proppant Market Report posits that prices for Northern White sand will bounce between $20/ton to $25/ton from 2019 to 2024. Prices for in-basin Permian sand from West Texas are projected to range from $19/ton to $23/ton during the same period.
In 2018, one ton of Northern White sand sold for $34, while one ton of Permian sand went for $35. The report’s authors note that frac sand prices “have been under pressure for some time thanks to oversupply in the market.”
Rystad Energy predicts that frac sand supply in the U.S. will grow by 10% this year and then dip by 2% in 2020 as operators shift away from Northern White sand. On the other hand, demand for the material is forecast to experience an uptick of 10% in 2019 and 17% in 2020. By 2024, supply is estimated to reach 239 million tons and demand is projected to hit 181 million tons. 
“Adoption rates for in-basin sand in Eagle Ford will determine the future of Northern White sand. Lower quality, in-basin sand found in Eagle Ford may not be widely adopted due to higher downhole pressures found in that basin,” said Rystad Energy Senior Analyst Thomas Jacob in a statement. 
A major takeaway from the report is that researchers expect industry to pivot away from use of Northern White sand in their operations in the coming years. Rystad Energy forecasts that Permian sand demand will grow from 55 million tons in 2019 to 85 million tons by 2024. The authors also opine that 35% to 40% of the supply of Northern White sand will come off the market by next year. The Eagle Ford Basin in south Texas is described in the report as a “key market to watch” in the proppant sand industry. 
“In-basin sand mines in Eagle Ford have struggled to reach desired utilization levels in recent months, but we expect this issue to be solved in the near term,” Jacob said. 
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What is frac sand?  


Frac sand is a type of sand with small, uniform particles. It is injected into the rock formation along with the water used to fracture the rock in the process known as hydraulic fracturing ("fracking"). The sand is used to prop open the fractures that are created. Because the particles are uniform, fluids like water, oil, and gas are able to flow through the spaces between the particles. Frac sand is currently mined in a range of states, with the Great Lakes Region, consisting of Illinois, Minnesota, Michigan, and Wisconsin, contributing approximately 70% of the silica sand used in America as a proppant in 2014.

Learn More 

Mining: Frac Sand (Webpage), Wisconsin Geological Survey
A short overview of frac sand, where it is found, and how it is mined, with links to other resources.
Frac Sand in the United States (Report), U.S. Geological Survey
A geological and industry overview of frac sand mining in the U.S.
DNR and Silica Sand (Webpage and Map), Minnesota Department of Natural Resources
Webpage on frac sand mining in Minnesota, with information on relevant legislation, answers to frequently asked questions about frac sand, and a map of sand mines in Minnesota.




Frac Sand Health and Environmental Impacts

Sand is critical to fracking. After workers drill down into rock, they create fractures by pumping in a mixture of water, chemicals and sand. The sand keeps the cracks propped open so that oil and gas are released.

Frac sand mining creates significant air pollution from the handling, mining, and processing of the sand. The important sources of air emissions come from the tiny dust particles – known as particulate matter – scattered during mining and processing.

These tiny dust particles, usually only a few microns in diameter, when inhaled in the lungs can lead to Silicosis – cancer of the lungs that poses a danger to miners and nearby communities.

Frac sand linked to lung disease in workers

The chronic silicosis caused by silica exposure poses unique dangers for employees working at frac sand mining sites. Because long-term exposure can be fatal, the Labor Department’s Occupational Safety and Health Administration (OSHA) issued draft regulations designed to reduce the health risk and previously issued a hazard alert.

Sand is basically silica — and breathing in silica is one of the oldest known workplace dangers. Inside the lungs, exposure to the tiny particles has been shown to sometimes lead to serious lung diseases like silicosis and lung cancer.

Workplace safety expert Eric Esswein and his team visited 11 fracking sites in five states: Arkansas, Colorado, North Dakota, Pennsylvania and Texas. At every site, the researchers found high levels of silica in the air. It turned out that 79 percent of the collected samples exceeded the recommended exposure limit set by the National Institute for Occupational Safety and Health.

There were some controls in place, says Esswein, who notes that “at every site that we went to, workers wore respirators.”

But about a third of the air samples they collected had such high levels of silica, that the type of respirators typically worn wouldn't offer enough protection.

Neighbors fear for their health

Wisconsinites and Minnesotans (the two states producing most of the frac sand) who live around frac sand mining, processing and transportation facilities are concerned about the long term impacts of their exposure to silica dust.

As a result, some local governments have enacted bans and moratoria.

Mining puts water at risk

Frac sand processing also poses dangers to water sources. Miners commonly use chemicals called flocculants to clean, wash, or remove unwanted minerals or other fine particles from the processed sand. These chemicals can infiltrate in to groundwater after washing.

Long term exposure to common flocculants like polyacrylamides and acrylamides in high concentrations of drinking water can lead to nervous system, blood problems or increased risk of cancer.

Neither the federal nor state governments have developed drinking water standards for flocculants.

For More Information

EARTHblog Frack sand mining doesn't just suck, it blows

EARTHblog In Frac Sand Land, Residents Have Little Protection Against Silica Dust Exposure

NPR Sand From Fracking Could Pose Lung Disease Risk To Workers

OSHA Worker Exposure to Silica during Hydraulic Fracturing

Price of Sand Film

CDC Silica

Civil Society Institute Communities At Risk: Frac Sand Mining in the Upper Midwest


What is Frac Sand?

Frac sand is a high-purity quartz sand with very round grains. It is very durable and provides a crush-resistant material used in the oil and gas industry for hydraulic fracturing (also called “fracking). Rock units composed of quartz grains that have gone through multiple cycles of weathering and erosion are potential sources of frac sand material. This evolution has removed most mineral grains other than quartz resulting in grains with very round shapes.

The demand for frac sand has risen dramatically in recent years as an increasing number of oil and natural gas wells use the hydraulic fracturing process. A single well using hydraulic fracturing can use a few thousand tons of frac sand. The surge of specialized drilling has created a billion dollar frac sand industry in just a few years.
How Frac Sand is Used

Some subsurface rock contains large amounts of oil, natural gas, or natural gas liquids that cannot flow freely to a well because the rock is impermeable to the degree that the fluids cannot flow through them. The fracking process presents a solution by creating fractures in the rock.

This is accomplished by drilling a well into the rock and sealing the portion of the well in the petroleum-bearing zone. Water treated with chemicals and thickeners to create a viscous gel is then pumped into that portion of the well using a high pressure process. The gel facilitates the water’s ability to carry grains of frac sand in a suspended state.

Large pumps at the surface increase water pressure in the sealed portion of the well until pressure is sufficient to fracture surrounding rocks. Water rushes rapidly through the fractures, making them larger and pushing them deeper into the rock. Because billions of sand grains are pushed deep into the fractures, it can take several thousand tons of frac sand to stimulate a single well.

Why Frac Sand Makes a Good Proppant

After the surface pumps are turned off, the fractures contract but do not close completely because they are propped open by billions of grains of frac sand. This occurs when there is sufficient sand remaining in the rock to resist the force of the closing fractures.

Frac sand is known as a “proppant” because it props the fractures open by forming a network of pore spaces that allow petroleum fluids to flow out of the rock and into the well. Although there are other types of proppants available, depending on the type of well, frac sand often delivers the highest performance.

Characteristics of High Quality Frac Sand

Proppants used in the petroleum industry must meet very demanding specifications. The typical characteristics of high quality frac sand include:

high-purity silica sand

a grain size that is perfectly matched to job requirements

a round shape that allows it to be carried in hydraulic fracturing fluid with little turbulence
durability to resist the crushing forces of closing fractures

Frac sand comes in various sizes. It can be as small as 0.1 millimeter in diameter to over 2 millimeters in diameter. Most frac sand used in the oil and gas industry is between 0.4 and 0.8 millimeters in size. 

 Understand the frac sand mining process - YouTube

▶ 2:34
- Uploaded by WKBT TV Frac sand mining is the mining of sand that is used in the fracking process to get oil and natural gas out of the


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FRAC SAND OVERPRODUCTION CRISIS
U.S. Silica cuts 10% of workforce as frac sand demand wanes

(Reuters) - U.S. Silica Holdings Inc said on Friday it had cut about 230 jobs, or 10% of its workforce, as demand for its frac sand comes under pressure from oil and gas producers reducing drilling in the backdrop of volatile prices.

The job cuts included employees impacted by idling of its two mines in Utica, Illinois and Tyler, Texas, the company said, adding that it expects to incur about $1.7 million in related severance costs in the fourth quarter of 2019.

Last month, U.S. Silica said it expects demand to slow down in the fourth quarter and reported a bigger-than-expected quarterly loss weighed down by lower prices.

Prices for the proppant used to crack the ground and extract oil have dropped in North America, as low oil prices and demands for higher investor returns stunted drilling activity.

The company had also forecast net sales and profits in its industrial business, which supplies sand to construction companies and glass manufacturers, to stay flat or rise marginally in 2020, hurt by trade tariffs and fears of a global slowdown.

“The difficult decisions announced today are an important element of our plan to protect margins and generate free cash flow in a.n increasingly competitive oil and gas completions market,” Chief Executive Officer Bryan Shinn said on Friday
Frac sand slump continues to sting industry
Sergio Chapa Nov. 22, 2019 

Frac sand suppliers have been hit by the slowdown in drilling activity.
Photo: Michael Ciaglo, Houston Chronicle / Staff photographer

Falling demand, abundant supplies, lower prices and and increased competition are hitting the frac sand industry as as it contends with a slowdown in the nation's shale oil and gas fields.

Katy sand products company U.S. Silica said Friday that it will idle two sand mines and cut 230 jobs, or about 10 percent of its workforce. With crude oil prices stubbornly stuck in the $50 to $60 per barrel range, many exploration and production companies are cutting back on their drilling and hydraulic fracturing operations.

Sand is a critical component of the horizontal drilling and hydraulic fracturing processes. It is mixed with water and chemicals and pumped into wells at high pressure to crack geological formations. The sand props open fissures that allow the oil and gas to flow into the well.

In a statement, U.S. Silica CEO Bryan Shinn said the job cuts and idled mines were difficult decisions. but necessary for the company’s survival.

"The actions taken realign our operational footprint and cost structure to more efficiently serve energy customers while simultaneously supporting the expected growth of our Industrials & Specialty Products segment,” Shinn said.

Shale Slump: Lower hydraulic fracturing activity stings frac sand business

In the early days of the shale revolution, most of the nation’s frac sand came from mines in Wisconsin and Minnesota, from where it was shipped by rail to regional depots, stored in silos and then hauled by 18-wheelers to drilling sites. Over the past three years, that business model has given way to lower mines near oil fields so sand could be hauled to drilling sites less than 100 miles away.

The crude oil price slump hit in Dec. 2018 just after several sand companies opened dozens of new mines in the Permian Basin of West Texas, the Eagle Ford Shale of South Texas and other shale plays across the United States.

Oil and gas companies have pulled more than 270 drilling rigs out of operation over the past year, pushing the U.S. rig count down by 25 percent, according to the Houston oil field services company Baker Hughes. Services companies, such as Halliburton of Houston, have cut the number of fracking crews and laid off workers.

Oil settled Friday at $57.77 in New York, down 81 cents.

During an Oct. 29 investors call, Shinn said the industry has a glut of 35 million tons of sand — driving down prices as companies compete for market share. He estimated that seven sand mines have closed and more will follow over the next several months.

As part of a plan to save $20 million a year, U.S. Silica is pairing its jobs cuts with plans to idle mines in Utica, Ill. and Tyler.. The company is reducing operations at other mines, including its Permian Basin mine in Crane County. The reductions are expected to take 7 million tons of frac sand off the market.

Following a $23 million loss on $362 million of revenue during the third quarter, the company is also looking to diversify by making a number of commercial and industrial products ranging from roofing materials to filters for blood and plasma.

Analysts say that market conditions for frac sand suppliers will get worse before they get better. James West, an analyst with the Houston investment research firm Evercore ISI, noted that U.S. Silica lowered its sand volumes guidance for the fourth quarterm expecting overall demand from the oil and natural gas industry to decline by 10 percent.

“The biggest questions everyone is trying to answer now are how much of a rebound will the industry experience when (oil and gas) budgets reset in the New Year and will it be a sharp pickup in activity or a slow grind until toward the end of the first quarter,” West wrore in a recent research note. “Slow grind is our view.”

Shares of U.S. Silica were down slightly, closing at $4.55 at the end of trading on Friday.

sergio.chapa@chron.com

Demand for Frac Sand and Concrete Drives Scarcity

By SHELLEY GOLDBERG June 25, 2019 INVESTOPEDIA

Despite appearances, we are running out of sand. While that might seem farfetched – sand is seemingly everywhere – there is not only a thriving international trade in the commodity, but it’s the second-most heavily exploited natural resource after water and, by volume, the most heavily extracted solid material in the world.

Like any commodity, sand requires uniformity. Uniform sand, or "aggregate," includes gravel, crushed stone and a number of recycled materials, such as crushed concrete, each of which has unique applications. Specialty sands also exist for industries such as golf, volleyball, sports fields, and playgrounds, as well as retail and technical services. Each has unique shape, size, hardness and color specifications.

From Playgrounds to Fracking Wells

Sand is formed by erosive processes over thousands of years and, according to a UN Environmental Program (UNEP) report, is being extracted far more quickly than it can be renewed. While the U.S. imports only about 1% of the total sand that it uses, according to the United States Geological Survey, developing countries like China and India have had to import significantly larger quantities to meet the demand created by recent construction booms. Sand's scarcity translates to price appreciation, which makes investing in sand compelling.The price of sand and gravel has increased dramatically over the last decade, from $7.06 per metric ton in 2007 to $8.80 in 2016. Specialty sands generate even higher prices: frac sand, which is used in the process of extracting oil through hydraulic fracturing, cost about $25 per tonne in 2017 but in times of short supply has climbed to $70 per tonne.

But investing in sand is challenging. Sand’s weight relative to its value makes it expensive and challenging to move and store. Investors are also unable to buy or sell futures contracts tied to sand, as they would with other commodities, such as soybeans or oil. As a result, investors interested in deepening their exposure to sand need to look to equity in companies associated with sand production.

Fueling Construction Growth

Conservative estimates place world sand consumption in excess of 40 billion tonnes a year, according to UNEP. That number is twice that of the annual amount of sediment carried by all of the rivers of the world, which means that mankind is the largest transforming agent in the world with respect to aggregates. Demand is asymmetric: Increasing demand is predominantly tied to urban growth in Asia, though it is worth noting that information on global sand consumption, particularly in emerging and frontier markets, is scarce.

Aggregate is the main constituent of both concrete and asphalt. It is also the primary foundation for building roads, parking lots and runways, homes, buildings and landscapes. According to the U.S. Geological Survey, for each metric tonne of cement used, the construction industry needs about six to seven times more tonnes of sand and gravel.

China produces over half the world’s cement, an estimated 2.41 billion metric tons (BMT) in 2017. Global cement production is expected to increase from 3.27 BMT in 2010 to 4.83 BMT in 2030.

Frac Sand Boom and Bust

Energy Exploration and Production (E&P) also consumes vast quantities of sand, mostly due to its use as a primary proppant in hydraulic fracturing. Proppants are mixed with a liquid to keep fracking wells open and facilitate the removal of oil and natural gas. For scale, individual fracking wells often use seven million pounds of sand, with some requiring up to three times as much. Wells have grown longer and wider since modern-day hydraulic fracking came about in the 1990s.

Frac sand suppliers are highly fragmented, with some 50 producers globally. In addition to energy producers themselves, frac sand suppliers were among the hardest hit by the shale oil bust beginning mid-2014, as drilling activity plummeted. Major oil and gas producers saw their market halve, but the carnage among sand suppliers was worse. With the steep decline in rig counts, sand suppliers like Emerge Energy Services (EMES) and Hi-Crush Partners (HCLP) saw their stock prices depreciate more than 90% from their 2014 highs.

But by 2016, the U.S. frac sand market heated up, even as oil prices remained depressed, due to the increasing size of wells. Producers also increased the number of fractured stages per well, which fueled a boom in the amount of sand used to drill. As U.S. crude continues to recover in price, coupled with high demand for U.S. natural gas, frac sand demand should continue to surge.

Among those producers that are publicly traded, is U.S. Silica Holdings (SLCA) the largest pure-play fracking sand provider. Fairmount Santrol Holdings (FMSA) also has a significant business line supplying for foundry, building products, water filtration, glass, and recreation markets. Hi-Crush Partners and Emerge Energy Services are structured as master limited partnerships. EOG Resources (EOG) is a large producer but uses all of the sand it mines in its own wells.

The barriers to entry for frac sand producers are high. Not only does it take time, expertise and capital to build a new mine, but it’s also difficult to time the market exactly. Furthermore, there can be supply limitations due to infrastructure or shipping constraints.

Environmental issues are also a concern. Sand extraction lowers water tables and decreases sediment supply, resulting in the destruction of ecosystems like fisheries. Sand extraction has also been linked to inland and coastal land loss, water contamination, and river embankment and coastal infrastructure damage.

Limits on Infrastructure Development 

Furthermore, the planned expansion of infrastructure in many parts of the world is more ambitious than had previously been estimated. India's current $120 billion building boom making has placed sand in such high demand that illegal mining has engendered a sand mafia. Saudi Arabia, which already made headlines for importing sand despite its desert locale, announced a plan to build Neom, a $500 billion mega-city spanning 10,230 square miles.

Sand mining and dredging have been largely ignored by policymakers. But as climate change's ramifications on coastal cities become more evident, this too will likely change. Today, in the U.S., the fastest-growing use of sand includes fortifying shorelines eroded from rising sea levels and increasingly powerful ocean storms, particularly after recent powerful hurricanes. Inland uses include temporary sand dams and sandbag installations to protect residents and property from surging lakes and rivers, as well as mudslides, like those that impacted California in 2018.

While sand substitutes exist, they are expensive. Increasingly, producers have begun to turn to recycled asphalt and cement, although comparative usage is quite small.

In addition to producers, investors looking to make a play on sand could look into dredging companies and dredging/blasting equipment manufacturers, given recent advancements in robotic crushing technologies. For investors concerned about the long-term effects of a sand shortage, glassmakers (windows, glassware and cell phone screens), water filtration, septic systems, swimming pools, solar panels, and wind turbine manufacturers all rely on the material. Sand is used in the railroad industry, as well as for molds in foundries that make everything from airplane and cruise missile parts to artificial hips.

Frac Sand Mining

Hydraulic fracturing uses high pressure water to break open underground geologic formations – most commonly shale. – containing oil and gas.

Once the shale is fractured, if the fractures are not propped open, they will close again.

So frackers use frack sand to prop open the fractures to allow the oil and gas to be extracted.

They use a lot of sand:, up to 10,000 tons of sand per well.

Frack “sand” is actually tiny pieces of quartz- silicon dioxide (SiO2) also known as silica sand. It is not garden variety sand found in your kids sandbox. Because it is special, it is found in only a few places. In the United States, that currently means in the Midwest near the Great Lakes. The Southeast corner of Minnesota and neighboring Wisconsin contain vast deposits of the most desirable highly spherical sand close to the surface.

Alternatives to sand include the use of manufactured ceramic beads and even hemp. Some drillers in western Colorado’s Piceance Basin have experimented with sandless fracking in more naturally brittle formations where the broken portions of shale can themselves act as a proppant.

Overburden Removal

Before mining for frack sand, operators must remove “overburden” – topsoil or subsoil overtop the sand that is mainly composed of clay, silt, loam, or combinations of the three.

Removing the overburden requires scrapers or tracked excavators. After removal, the operator stockpiles the material in man-made earth mounds called berms. These berms can serve as light and noise barriers between the mine and nearby communities.

Excavation

After peeling away and storing the overburden, the operator then must excavate the sand. Excavation may require blasting; depending upon how tightly cemented the target silicates reside within the geological formation.
Processing

In order for the frack sand to effectively hold open the formation fissures, it must have a fairly uniform hardness and shape. To achieve this uniformity, the silicates must undergo further processing at a plant:
Washing — which involves high pressure spraying of water and dangerous chemicals on to the sand that often leaches in to the ground;
Drying — depositing the sand in to large rotating drums fed by hot air, powered by either combustion or natural gas;
Screening and sorting — sorting allows the operator to capture the sands suitable for fracking and dispose or sell the sands better suited for other purposes.

For More Information
EARTHblog Frack Sand Mining Doesn't Just Suck, It Blows
EARTHblog Where do you think the fracking sand comes from?
EARTHblog Minnesotans Declare Independence from Frac Sand Land
MPR News Wisconsin Sen. Vinehout proposes legislation to control frac sand mining
Minnesota DNR Industrial Silica Sand
Allamakee County Protectors Grassroots Iowa Group
Sandpoint Times Grassroots Minnesota Group
WBEZ Behind the fracking boom, a sand mining rush
Journal Sentinel Wisconsin attorney general levies fine against sand mining company, Dec. 16, 2013
Wisconsin Center for Investigative Journalism Frac sand mines credited for rising, dropping property values March 30, 2014


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