Sand Demand

There is a new land grab in the Permian Basin that may ease the bottlenecks of oil producers in the west Texas region. Oil Producers pump frac sand and other materials into wells to break up shale rock in order to produce oil.  These wells are getting longer and wider which increases the amount of sand used.  The need for frac sand is increasing as U.S. rig counts hover above 1,000 nationwide.

Frac sand is a high-purity quartz sand with very durable and round grains that can be found in sandstone.  The large granules resemble marbles and is ideally shaped to prop open crevices in shale rock so that the oil can seep out freely.  This type of sand is mined in quarries in Wisconsin and Minnesota, then shipped by rail to West Texas.  The shipping cost is roughly $90 per ton of sand.  Oil producers were dependent on importing the sand some 1,300 miles because it was the only option at the time.

In 2014, the price of oil plunged and there was no cheaper place to pump shale oil than the Permian Basin.  Oil producers started to cut-cost and realized that there was an alternative option for sand in their backyard.  West Texas sand isn’t as sturdy as the sand from Wisconsin and Minnesota but it is serviceable and most importantly cheaper.  The average cost for the sand goes for $25 per ton because it is easier to mine and ship per truck load rather than rail.

As many as 23 new frac sand mines are being developed in West Texas this year and are expected to ship 22 million tons of sand which account for almost a quarter of U.S. supply.  According to Market Study Report, the global frac sand market is expected to grow at a Compound Annual Growth Rate (CAGR) of around 14.7 percent over the next five years, reaching $6.7 billion by 2023, up from around $2.9 billion last year.

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