Despite appearances, we are running out of sand. While that might seem farfetched&#;sand is seemingly everywhere&#;there is not only a thriving international trade in the commodity, but it&#;s the second-most heavily exploited natural resource after water and, by volume, the most heavily extracted solid material in the world.
Link to AnYiCheng
Like any commodity, sand requires uniformity. Uniform sand, or "aggregate," includes gravel, crushed stone and concrete, each of which has unique applications. Specialty sands, with a high concentration of silica and oxygen, also exist for industries such as golf, volleyball, sports fields, and playgrounds, as well as retail and technical services. Each has unique shape, size, hardness and color specifications.
From Playgrounds to Fracking Wells
Sand is formed by erosive processes over thousands of years and, according to a UN Environmental Program (UNEP) report, is being extracted far more quickly than it can be renewed. According to the United States Geological Survey, the U.S. imports only about 0.5% of the total sand that it uses. However, countries like China (13.1%) and Canada (9.42%) import significantly larger quantities of the world's sand imports. Sand's scarcity translates to price appreciation, which makes investing in sand compelling.
The U.S. Geological Survey reports that the price of sand and gravel has increased dramatically in the United States, from $3.96 per ton in to $9.90 in . Specialty sands generate even higher prices: frac sand is used in the process of extracting oil through hydraulic fracturing. According to Rytsad Energy, costs in have skyrocketed nearly 185% higher than the previous year, between $40&#;$45 per tonne, due to import constraints on Russia because of the war in Ukraine.
But investing in sand is challenging. Sand&#;s weight relative to its value makes it expensive and challenging to move and store. Investors are also unable to buy or sell futures contracts tied to sand, as they would with other commodities, such as soybeans or oil. As a result, investors interested in deepening their exposure to sand need to look to equity in companies associated with sand production.
Fueling Construction Growth
Conservative estimates in place world sand consumption in excess of 50 billion tonnes a year, according to UNEP. That number is twice that of the annual amount of sediment carried by all of the rivers of the world, which means that mankind is the largest transforming agent in the world with respect to aggregates. Demand is asymmetric: increasing demand is predominantly tied to urban growth in Asia, though it is worth noting that information on global sand consumption, particularly in emerging and frontier markets, is scarce.
Aggregate is the main constituent of both concrete and asphalt. It is also the primary foundation for building roads, parking lots and runways, homes, buildings and landscapes. For each cubic meter of cement used, the construction industry needs about 150 liters of water, 250kg of cement, and 1,900kg or sand and gravel.
In , according to the Global Cement and Concrete Association, China produces 52% of the world's cement, followed by India (6.2%) and the European Union (5.3%). Global cement production is expected to increase from 5.17 BMT in to 6.08 BMT by .
Frac Sand Boom and Bust
Energy Exploration and Production (E&P) also consumes vast quantities of sand, mostly due to its use as a primary proppant in hydraulic fracturing. Proppants are mixed with a liquid to keep fracking wells open and facilitate the removal of oil and natural gas. For scale, individual fracking wells often use seven million pounds of sand, with some requiring up to three times as much. Wells have grown longer and wider since modern-day hydraulic fracking came about in the s.
Frac sand suppliers are highly fragmented, with some 50 producers globally. In addition to energy producers themselves, frac sand suppliers were among the hardest hit by the shale oil bust beginning mid-, as drilling activity plummeted. Major oil and gas producers saw their market halve, but the carnage among sand suppliers was worse. With the steep decline in rig counts, sand suppliers like Emerge Energy Services (EMES) and Hi-Crush Partners (HCLP) saw their stock prices depreciate drastically from their highs.
But by , the U.S. frac sand market heated up, even as oil prices remained depressed, due to the increasing size of wells. Producers also increased the number of fractured stages per well, which fueled a boom in the amount of sand used to drill. As U.S. crude continues to recover in price, coupled with high demand for U.S. natural gas, frac sand demand should continue to surge.
Among those producers that are publicly traded, is U.S. Silica Holdings (SLCA) the largest pure-play fracking sand provider. Bison Merger Sub I (FMSA) also has a significant business for mining and quarrying nonmetallic minerals. Hi-Crush Partners and Emerge Energy Services are structured as master limited partnerships. EOG Resources (EOG) is a large producer but uses all of the sand it mines in its own wells.
The barriers to entry for frac sand producers are high. Not only does it take time, expertise and capital to build a new mine, but it&#;s also difficult to time the market exactly. Furthermore, there can be supply limitations due to infrastructure or shipping constraints.
Environmental issues are also a concern. Sand extraction lowers water tables and decreases sediment supply, resulting in the destruction of ecosystems like fisheries. Sand extraction has also been linked to inland and coastal land loss, water contamination, and river embankment and coastal infrastructure damage.
Despite appearances, we are running out of sand. While that might seem farfetched&#;sand is seemingly everywhere&#;there is not only a thriving international trade in the commodity, but it&#;s the second-most heavily exploited natural resource after water and, by volume, the most heavily extracted solid material in the world.
Like any commodity, sand requires uniformity. Uniform sand, or "aggregate," includes gravel, crushed stone and concrete, each of which has unique applications. Specialty sands, with a high concentration of silica and oxygen, also exist for industries such as golf, volleyball, sports fields, and playgrounds, as well as retail and technical services. Each has unique shape, size, hardness and color specifications.
From Playgrounds to Fracking Wells
Sand is formed by erosive processes over thousands of years and, according to a UN Environmental Program (UNEP) report, is being extracted far more quickly than it can be renewed. According to the United States Geological Survey, the U.S. imports only about 0.5% of the total sand that it uses. However, countries like China (13.1%) and Canada (9.42%) import significantly larger quantities of the world's sand imports. Sand's scarcity translates to price appreciation, which makes investing in sand compelling.
The U.S. Geological Survey reports that the price of sand and gravel has increased dramatically in the United States, from $3.96 per ton in to $9.90 in . Specialty sands generate even higher prices: frac sand is used in the process of extracting oil through hydraulic fracturing. According to Rytsad Energy, costs in have skyrocketed nearly 185% higher than the previous year, between $40&#;$45 per tonne, due to import constraints on Russia because of the war in Ukraine.
But investing in sand is challenging. Sand&#;s weight relative to its value makes it expensive and challenging to move and store. Investors are also unable to buy or sell futures contracts tied to sand, as they would with other commodities, such as soybeans or oil. As a result, investors interested in deepening their exposure to sand need to look to equity in companies associated with sand production.
Fueling Construction Growth
Conservative estimates in place world sand consumption in excess of 50 billion tonnes a year, according to UNEP. That number is twice that of the annual amount of sediment carried by all of the rivers of the world, which means that mankind is the largest transforming agent in the world with respect to aggregates. Demand is asymmetric: increasing demand is predominantly tied to urban growth in Asia, though it is worth noting that information on global sand consumption, particularly in emerging and frontier markets, is scarce.
Aggregate is the main constituent of both concrete and asphalt. It is also the primary foundation for building roads, parking lots and runways, homes, buildings and landscapes. For each cubic meter of cement used, the construction industry needs about 150 liters of water, 250kg of cement, and 1,900kg or sand and gravel.
In , according to the Global Cement and Concrete Association, China produces 52% of the world's cement, followed by India (6.2%) and the European Union (5.3%). Global cement production is expected to increase from 5.17 BMT in to 6.08 BMT by .
Frac Sand Boom and Bust
Energy Exploration and Production (E&P) also consumes vast quantities of sand, mostly due to its use as a primary proppant in hydraulic fracturing. Proppants are mixed with a liquid to keep fracking wells open and facilitate the removal of oil and natural gas. For scale, individual fracking wells often use seven million pounds of sand, with some requiring up to three times as much. Wells have grown longer and wider since modern-day hydraulic fracking came about in the s.
Frac sand suppliers are highly fragmented, with some 50 producers globally. In addition to energy producers themselves, frac sand suppliers were among the hardest hit by the shale oil bust beginning mid-, as drilling activity plummeted. Major oil and gas producers saw their market halve, but the carnage among sand suppliers was worse. With the steep decline in rig counts, sand suppliers like Emerge Energy Services (EMES) and Hi-Crush Partners (HCLP) saw their stock prices depreciate drastically from their highs.
But by , the U.S. frac sand market heated up, even as oil prices remained depressed, due to the increasing size of wells. Producers also increased the number of fractured stages per well, which fueled a boom in the amount of sand used to drill. As U.S. crude continues to recover in price, coupled with high demand for U.S. natural gas, frac sand demand should continue to surge.
Among those producers that are publicly traded, is U.S. Silica Holdings (SLCA) the largest pure-play fracking sand provider. Bison Merger Sub I (FMSA) also has a significant business for mining and quarrying nonmetallic minerals. Hi-Crush Partners and Emerge Energy Services are structured as master limited partnerships. EOG Resources (EOG) is a large producer but uses all of the sand it mines in its own wells.
The barriers to entry for frac sand producers are high. Not only does it take time, expertise and capital to build a new mine, but it&#;s also difficult to time the market exactly. Furthermore, there can be supply limitations due to infrastructure or shipping constraints.
Environmental issues are also a concern. Sand extraction lowers water tables and decreases sediment supply, resulting in the destruction of ecosystems like fisheries. Sand extraction has also been linked to inland and coastal land loss, water contamination, and river embankment and coastal infrastructure damage.
Limits on Infrastructure Development
Furthermore, the planned expansion of infrastructure in many parts of the world is more ambitious than had previously been estimated. India's current more than $52 billion building boom making has placed sand in such high demand that illegal mining has engendered a sand mafia. In October , Saudi Arabia, which already made headlines for importing sand despite its desert locale, announced a plan to build Neom, a $500 billion mega-city spanning 10,230 square miles.
Sand mining and dredging have been largely ignored by policymakers. But as climate change's ramifications on coastal cities become more evident, this too will likely change. Today, in the U.S., the fastest-growing use of sand includes fortifying shorelines eroded from rising sea levels and increasingly powerful ocean storms, particularly after recent powerful hurricanes. Inland uses include temporary sand dams and sandbag installations to protect residents and property from surging lakes and rivers, as well as mudslides, like those that impacted California in .
While sand substitutes exist, they are expensive. Increasingly, producers have begun to turn to recycled asphalt and cement, although comparative usage is quite small.
In addition to producers, investors looking to make a play on sand could look into dredging companies and dredging/blasting equipment manufacturers, given recent advancements in robotic crushing technologies. For investors concerned about the long-term effects of a sand shortage, glassmakers (windows, glassware and cell screens), water filtration, septic systems, swimming pools, solar panels, and wind turbine manufacturers all rely on the material. Sand is used in the railroad industry, as well as for molds in foundries that make everything from airplane and cruise missile parts to artificial hips.
Not unlike other boom and bust industries, the frac sand industry has been a turbulent one in recent years, with oil prices crashing and recovering, but industry experts are anticipating the continuation of a positive trend for the upcoming years. A new study by the Freedonia Group estimates demand for frac sand to grow 4% each year through .
While demand for frac sand continues to surge, production is struggling to keep up, but new plants coming online are anticipated to ease the pressure.
The US currently holds the title for both largest producer and consumer of frac sand. Demand for the proppant sandproppant sand pumped down wells in an effort to hold open fissures in shale formations, allowing hydrocarbons to flow out has seen increasing demand in recent years as oil prices bounce back and natural gas gains a greater share of the energy market.
According to an expert at OilPrice.com, demand for frac sand sat at 34 million tons. This jumped to 61.5 million tons in and dropped off after oil prices crashed. Upon recovery, however, Rystad Energy is quoted as anticipating 100 million tons in demand for &#; almost double pre-crash levels.
In addition to the frac sand industry&#;s relationship with oil prices, two major trends have caused frac sand demand to swell: advances in horizontal drilling and the growing amount of sand employed per foot of well.
While hydraulic fracturing has been a progressive technology in its own right, its merger with advancements in horizontal drilling has brought oil and gas production to a new level.
Where drillers once drilled a number of vertical wells to access the resources in a shale formation, they can now drill a single horizontal well off of a vertical one that allows them to access a much greater portion of the targeted shale formation.
Advancements in horizontal drilling in recent years have promoted longer lateral lengths, further increasing the efficiency of a single well and upping requirements for the volume of sand per well. A write-up in Oil & Gas Journal on horizontal drilling states wells to be between 500 &#; 3,000 feet long. In November of , ExxonMobil announced they were getting close to reaching 4 miles in lateral length with their wells &#; an astounding feat.
Many in the industry are referring to these progressive lateral length wells as &#;super laterals.&#;
The amount of sand per well has also been on an upward trend in recent years; drillers experimenting with more sand per foot discovered that the more sand they pumped down a well, the greater their recovery. This has led to exponential rises in the amount of sand employed per well.
According to a report by International Oilfield Research group Kimberlite, the amount of sand employed per foot of well was between 300 &#; 800 lbs. three to five years ago. More recently, this number has reached around 1,755 pounds per foot, with some reports claiming even higher volumes.
Although some wells have seen slight declines in the amount of sand employed per well as a result of optimizing other factors, the general increase in the more-sand-per-well trend remains strong.
According to Credit Suisse, US frac sand production had a record-setting year in , garnering almost 70 million tons of the sand. The group anticipates to be another one for the books with an additional 30 million tons mined.
Despite booming production, however, frac sand supply has had a hard time keeping up with the torrent of demand. This has been aggravated by delays in rail deliveries and the lack of infrastructure near oil basins for mining and processing the quartz sand.
At present, a large portion of the sand comes from the Midwest, particularly Wisconsin, which is home to the best frac sand money can buy, but this frac sand comes at a high price when transportation by rail to oil basins is taken into account. A growing trend looks to provide relief.
A shift in production to &#;in-basin sand&#; &#; sand sources closer to oil rigs that can be trucked in &#; is bolstering development of mines and processing plants around oil basins. Despite being a lower quality, the local proppants provide sufficient recovery at a significantly decreased cost by eliminating the need for rail transport. This is especially being seen around the Permian basin &#; the current hotbed for oil and natural gas production, where the majority of frac sand is destined for.
Frac sand dryer expert, Shane Le Capitaine, commented on his experience on a recent trip to the basin: &#;They can&#;t get sand fast enough. When a well is under production, they are literally trucking in sand every 6-10 minutes, 24 hours a day to keep things moving. It&#;s really something to see.&#;
Although frac sand is a natural material, it still requires processing upon mining to optimize its characteristics for use as a proppant. Mined sand is washed and dried at a processing plant. It is then screened to segregate the various grades required by drillers and transported to rig sites.
Outside of sand production from Wisconsin and around the Permian Basin, according to the USGS, activity around frac sand production is also growing in Oklahoma, Minnesota, Iowa, Illinois, Ohio, Michigan, Missouri, South Dakota, Arkansas, Nebraska, Utah, and Arizona.
The frac sand industry is slated for record-setting times in both supply and demand in the coming years, thanks to recovering oil prices, advancements in horizontal drilling, and the increasing amount of sand employed per well.
Around the country, but particularly surrounding the Permian Basin, frac sand mines and processing plants are being constructed to support the skyrocketing demand with an in-basin source of sand while Wisconsin picks up the slack in the meantime.
FEECO is the premiere provider of rotary dryers for the frac sand industry. Our dryers are especially robust and can tolerate variance in feedstock, offer reduced carryover dust, and provide a high throughput. For more information, contact us today!
Limits on Infrastructure Development
Furthermore, the planned expansion of infrastructure in many parts of the world is more ambitious than had previously been estimated. India's current more than $52 billion building boom making has placed sand in such high demand that illegal mining has engendered a sand mafia. In October , Saudi Arabia, which already made headlines for importing sand despite its desert locale, announced a plan to build Neom, a $500 billion mega-city spanning 10,230 square miles.
Sand mining and dredging have been largely ignored by policymakers. But as climate change's ramifications on coastal cities become more evident, this too will likely change. Today, in the U.S., the fastest-growing use of sand includes fortifying shorelines eroded from rising sea levels and increasingly powerful ocean storms, particularly after recent powerful hurricanes. Inland uses include temporary sand dams and sandbag installations to protect residents and property from surging lakes and rivers, as well as mudslides, like those that impacted California in .
While sand substitutes exist, they are expensive. Increasingly, producers have begun to turn to recycled asphalt and cement, although comparative usage is quite small.
In addition to producers, investors looking to make a play on sand could look into dredging companies and dredging/blasting equipment manufacturers, given recent advancements in robotic crushing technologies. For investors concerned about the long-term effects of a sand shortage, glassmakers (windows, glassware and cell screens), water filtration, septic systems, swimming pools, solar panels, and wind turbine manufacturers all rely on the material. Sand is used in the railroad industry, as well as for molds in foundries that make everything from airplane and cruise missile parts to artificial hips.
Not unlike other boom and bust industries, the frac sand industry has been a turbulent one in recent years, with oil prices crashing and recovering, but industry experts are anticipating the continuation of a positive trend for the upcoming years. A new study by the Freedonia Group estimates demand for frac sand to grow 4% each year through .
While demand for frac sand continues to surge, production is struggling to keep up, but new plants coming online are anticipated to ease the pressure.
The US currently holds the title for both largest producer and consumer of frac sand. Demand for the proppant sand pumped down wells in an effort to hold open fissures in shale formations, allowing hydrocarbons to flow out has seen increasing demand in recent years as oil prices bounce back and natural gas gains a greater share of the energy market.
According to an expert at OilPrice.com, demand for frac sand sat at 34 million tons. This jumped to 61.5 million tons in and dropped off after oil prices crashed. Upon recovery, however, Rystad Energy is quoted as anticipating 100 million tons in demand for &#; almost double pre-crash levels.
In addition to the frac sand industry&#;s relationship with oil prices, two major trends have caused frac sand demand to swell: advances in horizontal drilling and the growing amount of sand employed per foot of well.
While hydraulic fracturing has been a progressive technology in its own right, its merger with advancements in horizontal drilling has brought oil and gas production to a new level.
Where drillers once drilled a number of vertical wells to access the resources in a shale formation, they can now drill a single horizontal well off of a vertical one that allows them to access a much greater portion of the targeted shale formation.
Advancements in horizontal drilling in recent years have promoted longer lateral lengths, further increasing the efficiency of a single well and upping requirements for the volume of sand per well. A write-up in Oil & Gas Journal on horizontal drilling states wells to be between 500 &#; 3,000 feet long. In November of , ExxonMobil announced they were getting close to reaching 4 miles in lateral length with their wells &#; an astounding feat.
Many in the industry are referring to these progressive lateral length wells as &#;super laterals.&#;
The amount of sand per well has also been on an upward trend in recent years; drillers experimenting with more sand per foot discovered that the more sand they pumped down a well, the greater their recovery. This has led to exponential rises in the amount of sand employed per well.
According to a report by International Oilfield Research group Kimberlite, the amount of sand employed per foot of well was between 300 &#; 800 lbs. three to five years ago. More recently, this number has reached around 1,755 pounds per foot, with some reports claiming even higher volumes.
Although some wells have seen slight declines in the amount of sand employed per well as a result of optimizing other factors, the general increase in the more-sand-per-well trend remains strong.
According to Credit Suisse, US frac sand production had a record-setting year in , garnering almost 70 million tons of the sand. The group anticipates to be another one for the books with an additional 30 million tons mined.
Despite booming production, however, frac sand supply has had a hard time keeping up with the torrent of demand. This has been aggravated by delays in rail deliveries and the lack of infrastructure near oil basins for mining and processing the quartz sand.
At present, a large portion of the sand comes from the Midwest, particularly Wisconsin, which is home to the best frac sand money can buy, but this frac sand comes at a high price when transportation by rail to oil basins is taken into account. A growing trend looks to provide relief.
A shift in production to &#;in-basin sand&#; &#; sand sources closer to oil rigs that can be trucked in &#; is bolstering development of mines and processing plants around oil basins. Despite being a lower quality, the local proppants provide sufficient recovery at a significantly decreased cost by eliminating the need for rail transport. This is especially being seen around the Permian basin &#; the current hotbed for oil and natural gas production, where the majority of frac sand is destined for.
Frac sand dryer expert, Shane Le Capitaine, commented on his experience on a recent trip to the basin: &#;They can&#;t get sand fast enough. When a well is under production, they are literally trucking in sand every 6-10 minutes, 24 hours a day to keep things moving. It&#;s really something to see.&#;
Although frac sand is a natural material, it still requires processing upon mining to optimize its characteristics for use as a proppant. Mined sand is washed and dried at a processing plant. It is then screened to segregate the various grades required by drillers and transported to rig sites.
Outside of sand production from Wisconsin and around the Permian Basin, according to the USGS, activity around frac sand production is also growing in Oklahoma, Minnesota, Iowa, Illinois, Ohio, Michigan, Missouri, South Dakota, Arkansas, Nebraska, Utah, and Arizona.
The frac sand industry is slated for record-setting times in both supply and demand in the coming years, thanks to recovering oil prices, advancements in horizontal drilling, and the increasing amount of sand employed per well.
Around the country, but particularly surrounding the Permian Basin, frac sand mines and processing plants are being constructed to support the skyrocketing demand with an in-basin source of sand while Wisconsin picks up the slack in the meantime.
FEECO is the premiere provider of rotary dryers for the frac sand industry. Our dryers are especially robust and can tolerate variance in feedstock, offer reduced carryover dust, and provide a high throughput. For more information, contact us today!
Are you interested in learning more about frac proppant? Contact us today to secure an expert consultation!