Talk Grows of Frac Sand Shortage in Shale Oil Industry

Warnings are surfacing over a shortage of frac sand and according to Halliburton,it is leading to higher drilling costs and threatening shale production in Oklahoma and other states.

As the Wall Street Journal recently reported, when Halliburton CFO Chris Weber talked of the shortage, he said his company’s first quarter earnings could suffer as much as a dime a share. It led to a brief halt of trading of Halliburton shares.

Weber blamed delays by Canadian rail companies and slow delivery of frac sand coming out of Wisconsin. The sand is critical to shale drilling as developers use it to squeeze out oil in the shale layers. Reports indicate the demand has grown in recent years, going from 34 million tons in 2012 to more than 61 tons in 2014. The industry’s use of frac sand in 2017 was higher than previous years.

Most of the frac sand out of Wisconsin is known as “northern white sand” and is considered to be high quality, but also expensive, costing $120 million a ton last year.

But some developers in west Texas have started commercial operations to mine “brown sand” near the Permian Basin. While the quality isn’t as high as the Wisconsin sand, it costs nearly a third less. Transportation costs are lower too.

 

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