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North American proppant demand has risen sharply during the past decade. While growth is expected to slow from the early years, double-digit annual gains are still expected, with overall demand reaching more than 100 billion pounds in 2017, valued at nearly $9.4 billion.
Proppants are relatively simple products, but they have been critical to the expansion of oil and gas production in North America, setting off a chain of events that is revitalizing the region’s chemical processing and other manufacturing industries.
Proppants have been used in oil and gas production for more than 60 years, but the advent of horizontal drilling technology coupled with multistage hydraulic fracturing created significant new opportunities for growth, starting around the mid-2000s, especially as success in early applications such as the Barnett Shale in Texas translated to even more productive formations. These advances became more prominent at the same time that oil and gas prices skyrocketed, providing further growth impetus to drilling and completion activity. Continued high oil prices and a recovery in natural gas prices will sustain oilfield activity in the U.S. and Canada, with particularly good opportunities expected in several states including Texas, North Dakota and Pennsylvania. Opportunities are also expected in several developing plays in Western Canada, including the Montney and Horn River plays. However, nearly every area with significant unconventional reserves is expected to benefit from these trends.
Raw sand will continue to account for the lion’s share of proppant demand. Although it generally cannot be used in wells with high closure pressures, raw sand performs suitably in most conditions. Because of their higher cost, ceramic proppants will be restricted to areas that require high performance products, especially as improved fracturing techniques have allowed raw sand to be used in applications previously thought to be beyond their performance range.
However, these production areas include some of the larger centers of upstream activity, such as the Eagle Ford Shale in Texas and the Bakken Shale in North Dakota, Montana and Canada, where sand and ceramics are often used together. Coated sand proppants are expected to increase their market presence because they offer cost advantages over ceramic proppants and performance advantages over raw sand. These different product types (and sizes) are often used in combinations that maximize well productivity. For example, coated proppants are often used to prevent the flowback of raw sand.
Development of unconventional resources such as shale oil and gas has been the driving force behind growth in proppant demand during the past decade. While significant demand began with drilling in the Barnett Shale in Texas, more recent growth has been in liquids-rich formations such as the Bakken and Eagle Ford plays.
Demand in these and similar formations is being driven by high oil prices, which is spurring drilling activity, as well as by the deep and highly challenging geology of these wells, which require greater amounts of proppant to complete because they generally involve more fracturing stages.