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Study Predicts Growth in Frac Sand Consumption

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.

Growth in frac sand consumption will drive the majority of growth in the proppant market, which is expected to grow at 9 percent per annum, from 56 billion lb. in 2013 to 67 billion lb. in 2015

The RCS and ceramic markets will grow at a slower pace between 2013 and 2015, at 5 percent and 4 percent per annum, respectively, from 3.6 to 4.0 billion lb. for RCS and from 3.3 to 3.5 billion lb. for ceramic

Robust completion activity and increasing proppant intensity are the primary drivers of market growth.

“We expect the number of horizontal wells frac’ed to increase by 14 percent between 2012 and 2015; the total number of frac stages will increase by 15 percent during the same time period,” said PacWest’s Samir Nangia.

Proppant intensity/well has increased due to two factors:

  1. Increasing stages/well.
  2. Increased proppant loading (lb. per 1,000 gal. H2O) within the last year.

“The average mass /horizontal well in the United States increased from 3.3 MM lb. to 4.1 MM lb. between 12Q3 and 13Q2, a 25 percent increase; we expect this trend to increase through 2015,” Nangia said.

The “premium” proppant (RCS, Ceramic) share of the market (by mass) is decreasing due to E&Ps switching to lower-cost options (sand). The premium proppant share of the market peaked at 13 percent (by mass) in 2012, before falling to 11 percent in 2013; the premium share of the market is expected to decrease to 10 percent by 2015.

Although debate rages on within the technical community about the long-term cost/benefit tradeoffs of higher crush-strength proppant, many E&Ps have switched away from RCS and ceramic proppant to frac sand, particularly in the Haynesville, Anadarko and Eagle Ford.

Frac Sand Market
PacWest Consulting Partners expects improving conditions in the North American market for hydraulic fracturing services, with pricing increases forecasted in many regions by early 2015.  

Demand for frac services in the U.S. market is expected to increase by 5 percent in 2014 and an additional 3 percent in 2015. The increase is driven by significant growth in the number of horizontal wells and frac stages.  

“We estimate that a record-breaking number of frac stages were stimulated in 2013, over 375 thousand,” said Christopher Robart, partner of PacWest Market Intelligence. “We expect another record year in 2014 ¬– more than 400 thousand stages."”

Capacity utilization is expected to increase to 77 percent in 2014; however, potential market improvements are being dampened by frac capacity additions. PacWest forecasts that frac companies will deploy 400,000 hydraulic horsepower (HHP) of net additions to the U.S. land market in 2014, after adding 660,000 HHP in 2013.  

Frac assemblers and component manufacturers report improvements in newbuild orders; however, the destinations for most of those newbuild orders are for markets outside North America.  

Despite the capacity additions, tightening conditions in key oil/liquids plays will lead to pricing increases by early 2015. Pricing in gas plays will likely be flat through 2015.  

The Canadian market for frac services is expected to develop similarly to the U.S. market; however, improved pricing is expected by late 2014. Increases in frac demand, led by activity ramp-ups in the Duvernay and Montney plays, will lead to tightening market conditions and increased pricing that will begin in late 2014 and continue through 2015.  

Globally, frac capacity is expected to increase by 11.8 MM HHP (+48 percent) between 2013 and 2018 (year-end capacity), with markets outside North America accounting for 75 percent of that growth. China, which overtook Canada as the second largest frac market in the world sometime in 2013, will lead the world in frac capacity additions in 2013.

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