The practice of hydraulic fracturing has rightly received a lot of the credit for allowing the U.S. to boost its oil production in recent years by as much as 60%. The U.S. is now producing more oil than it has in decades and the boom is expected to continue. But in order to fracture a well, there is one key ingredient needed: sand. Also called “frac-sand” or more officially known as “proppant,” sand is vital to opening up shale to allow oil and gas to escape.
When oil and gas companies conduct a fracking job, they send a mix of water, sand, and proprietary chemical cocktails down a well. The extraordinary pressure at which they inject the mixture fractures shale rock, and the frac-sand props open the fissures. With cracks kept open by frac-sand, oil and gas flow out from shale rock and into the well.
Frac-sand often comes from high-purity quartz and is crush resistant, allowing it stay intact while shale rock fractures. A single frac job can require several thousand tons of sand. But oil and gas companies have found that by increasing the volume of sand in the fracturing process, they can increase output, often by as much as 30%. The number of shale wells using that extra burst of sand stands at just 20%, but may rise to 80% according to RBC Capital Markets.
All of this is creating a run on frac-sand, which has turned into a booming industry virtually overnight. Prices have climbed as demand has increased. In 2010, frac-sand sold for between $45 and $50 per ton, but that jumped to $54 per ton the following year. Sand prices could increase by 50% in the coming years as demand rapidly rises.
Most frac-sand is produced in the Midwest, which has the most favorable geology. There are other regions that have high-quality sand, such as Appalachia. However, sand in Appalachia has been ravaged by tectonic forces, which has weakened the grains of sand, making it much less suitable compared to sand found in the Midwest.
That means that states like Wisconsin, Minnesota, and Illinois have become powerhouses in terms of frac-sand production, where the most highly-prized frac-sand – Northern White sand – is located. One of the biggest problems with the frac-sand market is transit. Most drilling occurs in Canada, in the Bakken, and in South and West Texas – regions that are relatively far from Wisconsin and Minnesota. That means only the companies with secure transportation links will be the ones that will ride the frac-sand wave over the next several years.
