The Newest and Largest Commercial Actor in Oil and Gas Production “SAND”. The oil extraction race in the US has started a new craze: the sand rush. It is used as an important component for the hydraulic fracturing method used in the extraction of sand shale oil.
Hydraulic fracturing is the technique of mixing sand and chemicals with water and then spraying the resulting mixture with high pressure into a well to create small cracks (normally smaller than 1mm). With this method, natural resources such as gas and oil are reached through the cracks opened.
Energy companies are expected to use a total of 28 million tons of sand this year for this purpose. Sand use has increased 2011 percent since 25, according to consulting firm PacWest. The company expects an additional 20 percent increase in this rate in the next two years.
The white sand, which is densely found in the US state of Wisconsin, stands out as a very suitable sand for hydraulic fracturing. While in 2010 only five sand mines were found here, this number is now over a hundred.
Of course, the shares of companies that use sand as a commercial product also gain value. Shares of Houston-based Hi-Crush Partners' HCLP -1.59% have risen 2012 percent since August 59. Shares of Frederick-based Silica Holdings have doubled in value since going public in 2012. The company's market capitalization has now increased to $1,9 billion.
Just 10 years ago, the US company Silica was trading sand for industrial and consumer products. These consumer products include glasses and, more recently, displays for the iPhone and iPad. However, the amount of sand used for these areas is only half of the amount of sand the company produces, and the income it generates from it is at a lower level.
In the first nine months of this year, $245 million worth of sand was sold to energy companies, accounting for 62 percent of Silica's sales. In the same period of 2012 and 2011, this rate was 53 percent and 33 percent, respectively.
Hydraulic fracturing is the technique of mixing sand and chemicals with water and then spraying the resulting mixture with high pressure into a well to create small cracks (normally smaller than 1mm) in hard rock. With this method, natural resources such as gas and oil find their way to the surface through the cracks opened.
Sand is transported by railcars to shale fields in West Texas, New Mexico, North Dakota, and Pennsylvania.
White sand in Wisconsin is preferred for hydraulic fracturing, although most of these areas have sufficient sand. The white sand here has larger and rounder grains, making it easier for shale oil and gas to open wider cracks for uptake.
In the first half of this year, 94 wagons of white sand were transported via the Union Pacific Railroad. In the same period of 2012, this rate was at the level of 20 percent.
Canadian National Railroad spent $68 million over three years to rebuild and rehabilitate the tracks in Wisconsin.
The U.S. Silica and BNSF Railroad is establishing a sand distribution center south of San Antonio in the immediate vicinity of the oil-rich Eagle Ford. Thus, Silica will be able to transport 500 thousand tons of sand from Ottawa to here every year.
Commenting on the subject, Silica's CEO Bryan Shinn says that an average of 25 wagons of sand is needed for a well.
Companies have even started experiments to use more sand. Wells Fargo WFC +0.36% analyst Matt Conlan emphasizes that instead of pumping 2 tons of sand into a well, pumping 4 tons of sand creates an additional cost of $600 per well, but in some cases doubles the natural resource to the surface.
Demand for sand was so high last year that the average price per tonne rose to $75. Prices have dropped back to around $50 due to new sand collection sites in Wisconsin, according to PacWest.
However, this demand for sand draws the reaction of the local people due to the air pollution created by the sand clouds as well as the concerns about the safety of the employees. In particular, the Clayton-based company Pattison Sand is under scrutiny.
The US Centers for Disease and Control has asked the company to be penalized for the grains of sand in the air, which is linked to quartz dust disease and lung cancer.
Commenting on the subject, epidemiologist David Kriebel of the University of Massachusetts said, “There is a simple understanding of sand and people are constantly exposed to sand. However, crystal sand from mines is a very dangerous substance. Every piece of this substance inflicts wounds on the lungs it reaches,” he said.
Source : informed