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The Global Proppants Industry

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Publicada em

Objective Capital's Proppants Investment Forum
Alison Saxby, Roskill
City of London - April 21, 2016

Publicada em: Economia e finanças
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The Global Proppants Industry

  1. 1. PROPPANTS INVESTMENT FORUM GRANGE CITY HOTEL, CITY OF LONDON ● THURSDAY, 21 APR 2016 www.ObjectiveCapitalConferences.com The Global Proppants Industry Alison Saxby – Director & Manager, Roskill
  2. 2. The Global Proppants Industry Alison Saxby Objective Capital 21 April 2016
  3. 3. The statements in this presentation represent the considered views of Roskill Information Services Ltd. It includes certain statements that may be deemed "forward-looking statements“. All statements in this presentation, other than statements of historical facts, that address future market developments, government actions and events, are forward-looking statements. Although Roskill Information Services Ltd. believes the outcomes expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include changes in general economic, market or business conditions. While Roskill Information Services Ltd. has made every reasonable effort to ensure the veracity of the information presented it cannot expressly guarantee the accuracy and reliability of the estimates, forecasts and conclusions contained herein. Accordingly, the statements in the presentation should be used for general guidance only. Disclaimer
  4. 4. • Solely focused on metals and minerals information and research since 1970 • Independent company, privately owned • Publishes over 40 industry market reports and briefings • Bespoke consultancy and market studies • Coverage: • Steel Alloys • Minor Metals • Industrial Minerals • Carbon and Chemicals Who are Roskill?
  5. 5. Proppants – a global $6bn industry in 2016 North American frac sands – a $2.2bn industry in 2016 Today • Evolution of Hydraulic Fracturing • Proppants – Frac sands • Proppants - Ceramic • Trends and Developments • Outlook Outline of today’s presentation
  6. 6. Evolution of hydraulic fracturing (fracking)
  7. 7. Evolution of hydraulic fracturing Source:aogr.com First commercial treatments – 1949 in Duncan. Oklahoma by Haliburton for Stanolind Oil Co. Source: Montgomery & Smith 2010 1930s – First horizontal well 1949: 100-150lbs of sand used 1950s: Water was used as a fracturing fluid 1960s: First 500,000lbs job (Pan American now BP)
  8. 8. Barnet Shale US - first fracturing and horizontal drilling combined
  9. 9. Exploiting unconventional oil and gas demand
  10. 10. Vertical wells – lower proppant use per well Vertical wells - Main characteristics Technical Very shallow (3,000 feet) to very deep (18 000 feet) wells Wells productivity not sufficient to offset decline Both Oil and Gas basins, used in conventional and tight reservoirs High EUR (Estimate ultimate recovery) achieved >75% Relatively low available volume Low number of stages (<8 stages) Economics D & C (Drilling & completion) costs $1.5M (US on-shore) Proppant mass: 300,000lbs Proppants 1-10% of D & C costs Source: Saint Gobain
  11. 11. Exploiting unconventional oil and gas demand
  12. 12. Higher proppant use in unconventional wells Main Characteristics – unconventional wells Technical Always deeper than sandstone formations in the same area Both oil and gas basins Low EUR (Estimate ultimate recovery) achieved <20% Large available volume High number of stages (>20 stages) and increasing rapidly Economics D & C (Drilling & completion) costs $6.5-10M (US on-shore) Proppant mass: 8-12M lbs Proppants 10-40% of D & C costs Source: Saint Gobain, Roskill
  13. 13. Modern art of fracking
  14. 14. Costs driving innovation Mid 2000s Multi frac stages, 4-6m lbs (3,000st) proppant/well From 2013 40-50 frac stages, up to 20m lbs (10,000st) proppant/well Source: M O’Driscoll, IMFORMED 2015
  15. 15. Main proppant types Source: M. O’Driscoll, IMFORMED Silica sand (“frac sand”, FS): derived from silica sand deposits, 99% SiO2 Ceramic proppants (CP): derived mainly from bauxite and/or kaolin, >50% Al2O3 Resin coated proppants
  16. 16. US proppant market share (80Mlbs, 36Mt) 2014 Source: Carbo Ceramics, M O’Driscoll IMFORMED 2015 Resin coated sands (5-10%) Silica sands (Frac sands) (80-90%) Ceramic proppants (5-10%)
  17. 17. Proppant market structure Source: Carbo Ceramics Resin coated sands (5-10%) Silica sands (Frac sands) (80-90%) Ceramic proppants (5- 10%)
  18. 18. Typical fracturing fluid components Water 98% Proppants 2% Water Proppants Surfactant KCl Gelling agent Scale inhibitor pH adjusting agent Breaker Crosslinker Iron control Corrosion inhibitor Biocide Acid Friction reducer Source: Frac Focus
  19. 19. Proppants – properties
  20. 20. What do you need from a proppant? • Properties – Strength, shape, size, durability • Proppant availability – Supply source, quality and cost • Fracture treatment suitability • Conductivity requirements – Desired conductivity, cost vs benefit, ie the proppant cost set against oil recovery
  21. 21. Krumbein and Sloss roundness and sphericity chart Source: www.GlobalEnergyLaboratories.com, Frac Sand Specifications "Quick Reference Guide"
  22. 22. Proppants – Frac sands
  23. 23. Shale gas (and oil) basins in North America Source: Canadian Association of Petroleum Producers©
  24. 24. In 2002 demand for frac sand began to rise… USA silica sand production from 1915 and frac sand from 1970 to 2014 (mt) 0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000 80,000,000 IS Production US Frac Prod Source: USGS Mineral Commodity Statistics; Roskill
  25. 25. Proppants – ceramic
  26. 26. Primary raw materials • bauxite • kaolin • bauxitic kaolin • bauxite/kaolin blends Alternative raw materials •magnesium silicate (derived from serpentinite, olivine, dunite) •andalusite •metabasalt •fly ash – cenospheres •alumina-rich clays •nanostructured ceramics/glass •metallurgical slag •mine tailings Ceramic proppant feedstocks
  27. 27. Ceramic proppant grade examples Carbo Ceramics LWC Lightweight ceramic proppant IDC Intermediate density ceramic proppant HDC High density ceramic proppant Raw material kaolin bauxite bauxite Apparent SG 2.71 3.27 3.56 Bulk Density (g/cm3) 1.57 1.88 2.00 Alumina % 51.0 72.0 83.0 Silica % 45.0 13.0 5.0 Iron % 1.0 10.0 7.0 Titania % 2.0 4.0 3.5 Raw material kaolin bauxite bauxite Source: Carbo Ceramics
  28. 28. Ceramic proppant producers – relatively few worldwide China Over 100 producers Russia Borovichi Fores Carbo Brazil Mineral Curimbaba USA Carbo Ceramics Imerys Saint-Gobain Located near feedstock deposits, bauxite, kaolin & serpentine
  29. 29. Ceramic proppant producers – facing headwinds • D&C activity decline in 2015 & 2016 especially in North America • Closures in last 12-18 months • Expansions put on hold • In USA, E&P using higher volumes of frac sands and tailings than ceramic proppants – short term solution? as after initial high well productivity it declines steeply Developments • Ultra high strength Proppants from Carbo Ceramics, Saint-Gobain, CoorsTek • Highway by Schlumberger – slugs of proppant pumped down well to create flow channels. Enhances conductivity and reportedly uses 40% less proppant • Proppant transport technology – Fairmount Santrol. Proppant polymer coating decreases specific gravity enables proppant to go further and higher into formation therefore increases stimulated reservoir volume
  30. 30. Outlook
  31. 31. Oil prices & US drilling activity subdued in early 2016 Source: Baker Hughes, World Bank
  32. 32. In the long term, energy production forecast to increase spurring exploration, drilling & proppant use to 2035 Source: BP Energy Outlook 2016 ‘ 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 Liquids Natural Gas Coal Nuclear Energy Hydroelectricity Renewables Bn toe
  33. 33. More importantly the new sources of supply will require proppants to 2035 Source: BP Energy Outlook 2016
  34. 34. Top ten countries with technically recoverable shale gas resources Source: EIA, IMFORMED, 1EIA used for ranking order Rank Country Shale gas (trillion cubic feet Estimated order of commerical development? 1 China 1,115 2 2 Argentina 802 1 3 Algeria 707 2 4 USA 1 665 1 (GOM) 5 Canada 573 1 6 Mexico 545 1 7 Australia 437 2 8 South Africa 390 4 9 Russia 285 3 10 Brazil 245 1 World Total 7,299
  35. 35. Long term positive outlook for proppants • Long term demand assured by anticipated world gas demand • Volumes assured by increase in horizontal drilling, longer laterals and rise in fracking stages • Higher volume of proppant consumed per well – up to 16M lbs per well up from 5Mlbs in 2010-12 • Move to pad drilling • World shale gas potential • Long term demand assured by anticipated world gas demand • Anticipated growth markets outside the USA to evolve at different rates
  36. 36. Thank you
  37. 37. • Founded in 1930 as a management consultancy • Focused on Metals and Minerals information and research since 1970 • Publish over 40 industry market reports and briefings • Bespoke consultancy and market studies • Coverage: • Steel Alloys • Minor Metals • Industrial Minerals • Carbon and Chemicals Who are Roskill?