And getting more complex, along with the ceramics that have joined the proppant ranks. Meanwhile, growing demand, shrinking mesh sizes typify changes for the proppant industry.
“Be a tiny grain of sand
Words of wisdom, ‘Yes, I can.’”
So sang Earth Wind and Fire more than a few years ago, and today, tinier and tinier grains of sand, along with a growing number of ceramics, are saying yes, they can produce more oil from horizontal wells in the Permian Basin.
“What’s happening in the Permian Basin is people are starting to make much more economical wells out of geologic rock that used to be really just uneconomical,” said Cadre Proppants COO Rex Tucker. “Nobody was interested in having a tremendous play in the Wolfcamp—until horizontal techniques came along that actually made it economically viable, indeed, very lucrative.”
The tight rocks of the Wolfcamp shale have been the target of much development over the last 12-18 months, Tucker noted. “We’ve seen instances where the formations are very tight, and what happens if you pump a proppant that’s too large, is the proppant will not suspend very well in the fracture, and the rock won’t accept the larger grains.”
Spending huge amounts of money on multi-stage horizontal frac jobs, only to have those stages not accept the proppant, means huge amounts of money were wasted on a procedure that essentially must be redone if the proppant screens out. “You’ll have to clean the hole out and start over,” he pointed out.
So producers are interested in finding ways to keep the proppant from screening out and, instead, entering the formation as planned. That way there is not a workover needed before production even begins. If the proppant settles out, the proppant tends to fill the hole instead of going into the fracture.
There must be enough fluid velocity, along with a light enough fluid load, to get the proppant into the tight formations. “People have gone progressively toward smaller grain sizes in their fracturing” to accomplish this, along with lower fluid viscosity, Tucker stated.
Part of the impetus to lower fluid viscosity was a sudden hike in the price of the thickener, guar gum. Tucker explained that the only way to make thinner fluid work is to use smaller proppant grains—so the push in that direction came from both sides of the equation. Thinner fluid, or “water fracs,” can’t hold the larger grains, so those grains settle out before reaching the frac.
All this has prompted Cadre to release a 40/70 grain proppant, planned for this month. Other proppant suppliers are also producing or preparing to produce up to 70 grain product.
The largest number of wells and the most productive ones using these small sizes are in the upper and middle layers of the Wolfcamp, which account for the final destination of most of Cadre’s Basin product, according to Tucker. Large frac jobs in the area may require 6-8 million pounds of proppant. Since Cadre’s plant is near Brady, in central Texas, they can economically ship product to both the Permian Basin and to south Texas’s Eagle Ford shale. At about 200,000 pounds per rail car, that would be 30-40 cars worth of sand for each frac job.
Every mile involved in shipping all that weight adds to its cost. It is no wonder that location is a key factor in the use of proppants. For those who use ceramic proppants, there are other factors at work in the decision process.
Chris Coker, president of ceramic proppant manufacturer Oxane Materials, says his company has sold as much product, to be shipped from its Van Buren, Ark., plant, in the last 60 days as in its entire, admittedly brief, history. Almost all of that proppant is evenly divided between the Permian Basin and the Duvernay shale in western Canada. Clients are buying so much proppant that the company’s entire production is sold out through the end of 2013, even with a new production line that was expected to come online in November. All of that sold in the last 60 days is going to horizontal wells.
While Arkansas is a neighbor to Texas, it is a long, long way from Alberta and British Columbia, making its shipping costs seemingly over the top. But Coker says ceramic proppants, because of their uniformity, make up the difference by providing better production from formations.
“Ceramic, particularly advanced ceramic, is very low-cost compared to the marginal barrel produced,” he contended.
Currently Oxane’s sources for the clay on which the proppant is based are both domestic and international, but the company is moving toward more domestic sources.
The Oxane proppant model, Advanced Ceramic Proppants, was developed at the Rice University under the direction of the school’s Andrew Barron. Barron is on the Oxane board of directors.
Like others, Oxane is developing smaller screen sizes for their proppants. “As slickwater fracturing becomes more and more important, proppant selection also grows in importance. We’re going to be introducing… right now, our 50/60, much more mono-dispersed product size, first in the OxBall, then in the OxSteel.” A 60/70 particle size will follow soon after. “That, particularly in the Delaware Basin, where getting good frac initiation can be more difficult than the Wolfcamp section, we’re optimistic these materials can find very strong adoption.”
As to the product’s benefits, he said, “We have three operators reportedly making their best wells with Oxane proppant in the Permian Basin,” Coker reported. Most are in the Wolfcamp formation.
The plant expansion will add 150 million pounds per year to the company’s production capacity. Growth in customer demand has caused the company to expand its staff to 120, up more than 20 from this time last year. As horizontal activity continues to grow in the Basin and elsewhere, Oxane is preparing for further growth in plant capacity.
The boom in proppant demand is fostering further growth in the industry as others come online. One company hoping to begin shipping a new formula of ceramic proppant in the next 18-24 months is Brownwood Clay Holdings, founded by Austin businessmen Gary Davis and Richard (Sandy) Watkins.
The company owns approximately 467 acres of land just west of the city limits of Brownwood, Texas. According to a geologic study commissioned by the Company in 2012, approximately 409 acres of the property near Brownwood contains inferred resource deposits of approximately 106.611 million bulk wet tons of clay and shale minerals, of which approximately 9.969 million tons consists of proppant grade clay minerals, according to a press release.
Davis noted that most clay used in ceramic proppants requires bauxite or kaolin, of which this clay will have neither. They plan to use a patented formula to make this clay work, a formula Davis says has been tested and proven by third party laboratories.
Brownwood’s biggest selling point, said Davis, is that its clay will come from another central Texas location—one that, ironically (and happily), is just a few miles from Cadre’s Voca plant, near Brady. Pointing out that most domestic clays now come from Georgia, Davis said his plant will be able to reduce its supply costs in producing a finished product.
“Our fundamental innovation is not that it’s highly unique, but it’s ‘Let’s find a material that is in close proximity to the developing shale plays and use that material to manufacture the ceramic proppant.’”
Currently working through licensing and regulatory paperwork, Davis said the company will eventually produce proppants in 20/40, 30/50, 40/70,2 and 40/80 mesh sizes.
Davis sees larger sizes being used in oil drilling now, but he also knows that frac designs are changing constantly, causing him to have the smaller sizes also on hand.
Cadre’s Tucker agreed that producers are experimenting right now, trying to find the best mix. He has seen producers vary the proppant mix on numerous wells in the same field.
Plus, producers such as Pioneer and EOG are buying sand mines themselves because they are using so much.
Another thing moving producers to internalize sand supplies, said Tucker, was that two or three years ago there was a shortage and attendant price spike in sand, causing some producers to get behind schedule on well completions due to the unavailability of the needed proppant. “That really moved a lot of operators to kind of hedge their bets regarding their ability to develop the oilfield that they were in. They didn’t want to be held hostage by some service company because of sand supply.”
While it is interesting to think that an oil operation could be held hostage by something as tiny as 70 mesh sand, it shows the growing complexity involved in producing the previously unproduceable. The more components involved, the more interdependent the nation’s energy sources become.
For now, however, supply is able to keep up with the pace of production, albeit only by racing full speed ahead.