The fracking industry runs out of sand in the midst of a rise in oil prices

Years dreaming of a barrel of oil close to 100 dollars and when the time finally comes there is not enough sand for everyone. After struggling for months and freezing all investments due to low oil prices, the oil industry fracking in the US he has seen his dreams come true: a barrel of oil at a price that far exceeds the level that makes his operations profitable. However, an unexpected enemy (besides the policies of Joe Biden) is standing in the way of this industry.

With crude oil prices at their highest level in years, frackers Americans are trying to increase their production at a forced pace, but their efforts have been held back by scarcity of sand to complete all operations fracking (hydraulic fracturing).

Oil production is expected to reach new records soon in the Permian Basin, which lies between Texas and New Mexico, the heart of activity in the fracking and the shale oil In U.S.A. However, sand supplies are so scarce that they are slowing down the work rate of some oil drillers (they drill big holes or drill into the ground to extract the shale oil or shale oil), while the higher costs of the sand are also eroding the results of these companies, as revealed by the agency Reuters.

In the process of hydraulic fracturing Several ingredients that flow with the water are needed, including sand to keep cracks in the rock open and chemicals used to facilitate extraction.

High demand for sand

The demand for sand is still very high. All the frackers they are looking for sites to drill new wells and take advantage of rising oil prices. Oil is close to seven-year highs after reaching $97 a barrel at the peak (for now) of this new cycle. These prices have encouraged companies in fracking that now seek to find sand at a forced march all at the same time, generating one more bottleneck of so many that economies suffer today.

“We can’t get enough sand. We’re drilling less (from the drilling process). fracking) than we could achieve in one day because we run out of sand every day,” says Michael Oestmann, CEO of Private Equity-Backed Tall City Exploration, which operates in the Permian Basin of West Texas, the region of largest shale in the U.S. “Ultimately, It will set everyone back if it’s not resolved soon.”

After months of oversupply, the sand markets have turned around and there is now a clear shortage. The consultancy Rystad estimates that spot prices are between 50 and 70 dollars per ton, a big jump compared to the first months of the pandemic and well above last year’s levels, which were between 20 and 25 dollars per tonne.

Rystad researcher Artem Abramov rates current sand prices as fracking as “unheard of in the modern history of the industry”. Supply shortages will likely push sand prices higher still, Abramov says.

Fracking and shale oil

The production of shale oil US oil increased by 109,000 barrels per day in March, to 8.7 million bpd, according to the US Energy Information Administration. The Permian Basin is expected to increase production to 5.2 million bpd in March, which would be a new record, plus there are now 301 oil rigs operating in that basin, the most since April 2020.

The frackers The US have added three more drilling rigs in the first week of February, raising the total to 264 from about 167 last year, according to consultancy Primary Vision.

The sand market is so tight, says Oestmann, because there have been fewer people working in the mines and there is a shortage of truckers. This businessman assures that his company is looking to bring sand by rail, a supply method that went out of style after the arrival of local mines a few years ago.

“Railed sandboxes are working flat out,” says Richard Spears, vice president of oilfield consultancy Spears & Associates. “When demand kicks in at high volume and the local mine is full, you know you have a challenge.” Much of the sand being shipped comes from Wisconsin, according to Rystad.

The independent American company fracking Liberty Oilfield Services, which recently acquired the PropX sandbox, says they are facing significant bottlenecks in getting the sand to the Permian Basin, both in terms of availability and transportation.