Monday, October 22, 2018

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Demand for Wisconsin frac sand to balloon: report

Expanded exploration for oil, natural gas driving the need for high-quality Wisconsin sand

MADISON— Domestic oil exploration drilling is expected to cause “extreme” demand for high-quality frac sand in western Wisconsin in coming years, according to a report.

The IHS Markit report indicated that the value of proppant sand that is used to keep open cracks in rock formations deep underground in the extraction process for oil and natural gas will exceed $4 billion this year and is expected to grow to nearly $6 billion over the next five years.

Western Wisconsin has historically produced about a third of the domestic supply of industrial sand used in the extraction process known as hydraulic fracturing, or fracking, the Wisconsin State Journal reported. Continued exploration for oil and natural gas and the use of more sand per well are driving demand for sand, according to the report.

Analyst Brandon Savisky authored the report. He said oil production in Texas’ Permian basin accounts for roughly 40 percent of the demand.

The U.S. Energy Information Administration estimates that domestic crude oil production will reach record levels in 2018 and 2019. The EIA also forecasts U.S. natural gas production, consumption and exports will grow through 2019.

In efforts to avoid transportation charges, which account for more than 65 percent of sand costs, oil producers are turning to lower-quality sand that can be mined near the well sites in states including Texas, Pennsylvania, Oklahoma, North Dakota, West Virginia and Colorado, as well as Canada. Geologists are also looking into whether North Dakota sand reserves could be used for fracking.

But Savisky said infrastructure challenges and the scarcity of water needed to wash the sand are hindering Texas sand, and many producers are sticking with the proven quality of “northern white” sand.

“There still are operators that are definitely demanding northern white, and that’s not going to go away,” he said.

Wisconsin sand is the most economical alternative for producers in Appalachia, North Dakota and Canada, where demand could still grow, said Kent Syverson, an industry consultant and chair of the geology department at UW-Eau Claire.

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