It’s well established that the boom of natural gas production in the US has led to increased demand for things used for production — more rigs, more trucks, more workers, more proppants.
For those who don’t know, proppants are the particles used in hydraulic fracturing to hold open tiny underground fissures caused by fracturing, allowing gas or liquids to escape and be recovered. Sand, the most widely used and often cheapest proppant, saw its demand begin to skyrocket a few years ago, and now things have come full circle: more gas is needed to produce more sand in order to keep producing more gas and oil.
And also for those who didn’t know, an Ouroboros is a symbol of a snake or dragon eating its own tail, often used to represent cyclicality. And the relationship between proppants and Ouroboros will become clear in a moment.
According to an early January report from Bentek Energy, a unit of Platts, WE Energies, a primary utility provider in Wisconsin, is considering building a new $150 million pipeline in the western part of the state in part because of more gas demand for industrial silica (aka frack sand) production. Wisconsin, Illinois, Minnesota and Michigan are among the top producing states for sand in the US.
In September 2012, US Silica (the second-largest producer of industrial sand and gravel in the US, according to the US Geological Survey) and other sand mining operators launched the Wisconsin Industrial Sand Association. US Silica is developing a new facility in Sparta, Wisconsin, which is slated to open in the second quarter of 2013 with a capacity of 800,000 tons annually. And in October, the company announced an agreement with SH Bell Company to open a new sand storage facility to support demand from energy producers in the Utica and Marcellus shales.
Also in September 2012, Fairmount Minerals (another member of WISA) announced it had increased sand production at its Maiden Rock, Wisconsin, and Wedron, Illinois, mines. Just last week, Trempealeau County in Wisconsin gave the go-ahead for two new sand mining projects, according to a news story from the local Star-Tribune.
Blog entry continues below…
|Request a free trial of: Gas Daily|
|Gas Daily offers the most detailed coverage of natural gas prices at interstate and intrastate pipeline and pooling points in major U.S. markets. Gas Daily keeps you informed about complex state and federal regulations that affect competition in the gas industry.|
Sand isn’t just used in the energy industry. But according to the USGS, about 41% of US industrial sand and gravel was used in hydraulic fracturing, well packing and cementing sand in 2012. The average price of sand per ton in 2011 was $34.51, the report states, up from $27.64 in 2007, so it makes sense that higher demand and good prices would incentivize sand production.
But the Bentek report points out that sand production itself requires gas. Bentek groups sand production with industrial demand, which as a total has seen a resurgence on cheap gas prices and has therefore demanded more and more gas. So it’s like an Ouroboro.
Keep an eye out for more on this topic: it’s something I’m trying to dig into more for a future story. (And yep, that pun was deliberate.) Just how much gas is the sand industry using to produce more gas and oil?