With oil and gas prices expected to remain subdued in the near term, demand for proppants will decelerate from the rapid growth posted between 2004 and 2014. Future gains will result primarily from increases in proppant loadings in unconventional well completions. The demand in North America is forecast to increase 7.6 percent annually through 2019 to 162 billion pounds, valued at $8.2 billion.
In addition to growth in unconventional drilling and completion activity, dramatic increases in the volume of proppants used per well have also supported rising proppant demand and a changing product mix. As oil and gas companies gain experience in optimizing hydraulic fracturing design, they have increasingly shifted away from premium resin-coated sand and ceramic proppants toward using much larger volumes of raw frac sand.
While a period of high and relatively stable oil prices between 2011 and 2014 led to growth in well completion and hydraulic fracturing activity in the U.S. and Canada, prices have fallen substantially since then and are not expected to recover fully until after 2019. As a result, drilling activity in liquids-rich unconventional plays is expected to be constrained through 2019, with export opportunities for natural gas providing some incentive to drill in gas-bearing formations. Improvements in drilling efficiency and falling well costs will allow for modest increases nonetheless. In large part, well productivity has increased as a direct result of the use of greater volumes of proppants in fracturing operations.
A number of specific unconventional resource plays are expected to see significant future growth in well completions, creating above-average opportunities for proppants. Among the largest proppant markets in the U.S., Colorado, North Dakota and Oklahoma are expected to hold the best short-term prospects for volume demand growth, while Texas and Pennsylvania are forecast to grow more slowly.
In large part, this volume demand growth will result from the relative maturity of the Eagle Ford shale in Texas and the Marcellus shale in Pennsylvania as compared with the less developed unconventional plays in the slower-growth states. Canada is expected to see strong growth, because the country holds a large volume of tight oil and shale gas resources. But Canada lags the U.S. in their development, having focused investment more heavily on oil sands resources to date.