Making the Switch to Natural Quartz and Resin Coated Proppant

Fabian Ros & Joey Chbeir

IS THERE A CASE FOR USING SAND AS A PROPPANT IN LA VACA MUERTE?

IS THERE A CASE FOR USING SAND AS A PROPPANT IN LA VACA MUERTE?

When it comes to proppant, there is a consensus in the O&G industry that the best product should be: • Stronger than diamond; • Lighter than water; and • Cheaper than dirt.

SAND IS AVAILABLE THROUGHOUT THE WORLD

• Naturally occurring non-metallic mineral • Sandstone: Cemented silica sand particles • Sandstone was deposited nearly 500 million years ago • Easily mined (if closer to surface) • Silica sand or quartz is regularly used as proppant • It is available in Argentina

Sand: Primary ingredient in several industries

• Glass manufacturing • Water filtration & treatment • Building structures & roads • Turf & Landscape • Sand blasting • Paint • Oil & Gas

HISTORY OF SAND USE IN HYDRAULIC FRACKING

1940’s

• 1947: First experimental fracturing (sand from Arkansas River).

• 1949: Halliburton got exclusive license to pump Hydrafac process. 100-150 lb of sand was used.

1980’s • 1981: George Mitchell started horizontal drilling techniques.

Barnett Shale formation in Texas. • 1988: Hydraulic fracturing was applied nearly one million times

1990’s • 1990: Horizontal drilling technology perfected. • 1999: Frac sand technology was perfected.

HISTORY OF SAND USE IN HYDRAULIC FRACKING

2003 • Emphasis on exploration of natural gas formations in

Texas, Pennsylvania, West Virginia, Wyoming, Utah and Maryland.

2004 • EPA: Hydraulic fracturing NOT a threat to underground

drinking water supplies.

2005 • HF exempted from the Energy Policy Act of 2005

NOW • About 35,000 wells of all types (vertical and horizontal,

oil and natural gas) are being fractured every year. • Sand is the primarily proppant.

HYDRAULIC FRACKING IN THE TWENTIETH CENTURY

• Sand is the preferred proppant:

– Abundant – Economic

• Not every sand can be used as a proppant • Average well takes several MM tons of sand • U.S. consumption of sand has increased exponentially • 2010: Silica sand production exceeded $ 1 billion • 2011: 24.3 million tons of sand was used • 2012: Frac sand used exceeded total U.S.

consumption of sand & gravel in 2009

GOOD FOR U.S. = GOOD FOR ARGENTINA

0

20

40

60

2002

20

03

2004

20

05

2006

20

07

2008

20

09

2010

20

11

U.S. Sand Production (MMT)

U.S. Sand Production (MMT)

GOOD FOR U.S. = GOOD FOR ARGENTINA

0

10

20

30

40

50

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Consumption of Sand In Hydraulic Fracking Total Consumption of Sand & Gavel

WHAT, IF ANY, IS THE COST ADVANTAGE?

Price

Sand Based Products

Ceramic Based

Products

WANT v. NEED

• Coated Ceramic

• Ceramic

• Resin Coated Sand

• Frac Sand

• CONDUCTIVITY

• STRENGTH

• PERFORMANCE

• COST, COST, & COST

Coated Ceramic

Ceramic Resin

Coated Sand

Natural

Sand

BEST PRODUCT

PRICE

CAN SAND AND RESIN-COATED PROPPANT PLAY A ROLE IN THE EXPANDED DEVELOPMENT OF ARGENTINA’S SHALE INDUSTRY?

• La Vaca Muerte Shale (2010 – 2012): • Wells drilled & stimulated (Massive hydraulic fracturing):

Thirty-one (31) vertical and four (4) horizontal wells. • Proppant: Mixture of 50/120, 40/80, 30/50, & 20/40 mesh. • Number of stages per well: varies, one to four for vertical

wells and seven to 11 for horizontal wells. • Ceramics & RCS (due to high initial shut-in pressures). • Average treating pressure: Approx. 7,200 psi • Range: 2,800 to 10,300 psi

Analysis to Characterize an Unconventional Reservoir, Journal of Petroleum Technology, February 2013 p. 131.

PRODUCTION INCREASE IN U.S.

GOOD FOR U.S. = GOOD FOR ARGENTINA

Cause: Horizontal drilling Multi-stage hydraulic fracturing Additional technological and management improvements

GOOD FOR U.S. = GOOD FOR ARGENTINA

ECONOMIC REWARD OF SHALE OIL & GAS IN U.S.: • O&G industry employment increased by 65,000 to 971,000 in 2012; • $237B of growth to the US economy in 2012; • US production of NG & NGL are at all time record highs; • Crude oil production is headed back to levels not seen since the early 1980s; • High production led to lower crude prices; improved the competitiveness of refiners; • Prior to 2008 the US was a net importer of both diesel and gasoline. • Exports of diesel and gasoline were close to 1 MMb/d and 500 Mb/d in 2012; • Significant new infrastructure investment; • In 2013, as much as $45 billion may be spent on transportation infrastructure

(pipelines, rail cars, rail terminals and other projects); • Huge investments in secondary processing facilities; • Multi-billion dollar petrochemical plants over the next 5 years to process NGL and

produce byproducts; • Refineries on the east cost that were scheduled for closure came back online; • Increased interest in using NGL for truck transportation and proposals to build

prototype NGL locomotives; • Work for the army of investors, analysts and consultants needed to finance, inform

and navigate the industry through all the changes.

GOOD FOR U.S. = GOOD FOR ARGENTINA

“After all, the impacts of the shale revolution we are all involved in are far broader than the energy business. They are leading to a renaissance in US manufacturing and the prospect of US energy independence. The economic and geopolitical impacts of those developments will start new games rather than change existing ones.”

Sandy Fielden’s article is found at: http://www.ogfj.com/articles/2013/04/the-economic-bounty-of-shale-oil--gas.html

Argentina Produces Silica Sand or Quartz

0 100,000 200,000 300,000 400,000 500,000 600,000

2006 2007 2008 2009 2010

Argentina: Production of Mineral Commodities U.S. Geological Survey (May 2012)

Silica Sand

ARGENTINA’S PRODUCTION OF MINERAL COMMODITIES ACCORDING TO U.S. Geological SURVEY (MAY 2010)

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

2006 2007 2008 2009 2010

Silica Sand Gravel Construction

SAND IS AVAILABLE IN ARGENTINA

Is the appropriate sand available?

API RP56’s Recommendation for Testing Sand Used in Hydraulic Fracturing Operations:

– Sand Size (US Mesh) – Sphericity & Roundness – Maximum Acid Solubility – Silt Test (Turbidity) – Crush Resistance Test (KSI) – Sand Mineralogical Analysis (Si O4%)

Recommended Sand Size:

RECOGNIZED FRAC SAND SIZES Frac Sand

Size Designation

Mesh Mesh Mesh Mesh Mesh Mesh Mesh Mesh

6/12 8/16 12/20 16/30 20/40 30/50 40/70 70/140

Nest of U.S.A. Sieves.

Recommended for Testing.

4 6 8 12 16 20 30 50

6 8 12 16 20 30 40 70

8 12 16 20 30 40 50 100

10 14 18 25 35 45 60 120

12 16 20 30 40 50 70 140

16 20 30 40 50 70 100 200

Pan Pan Pan Pan Pan Pan Pan Pan

A minimum of 90 % of the tested sand sample should fall between the designating sieve sizes; i.e., 16/30, 20/40, 30/50, etc. Not over 0.1 % of the total tested sand sample should be larger than the first sieve and not over 1.0 % should be smaller than the last sieve size.

.1 %

1.0 %

90%

SPHERICITY & ROUNDNESS

Maximum Acid Solubility:

RECOMMENDED MAXIMUM ACID SOLUBLE MATERIAL CONTENT IN FRAC SAND

Sand Size (mesh)

Maximum Solubility (Weight percent)

6/12 through 30/50 40/70 through 70/140

2.0 3.0

The acid-soluble material in frac sand should not exceed the values shown in the table below:

SILT TEST:

• Several methods could be used to test the turbidity • Method I: Turbidity Measurement of Silt- and Clay-

Size Particulate Matter – The turbidity of tested frac sand should be 250 FTU or less

• Method II: Field On-Site Turbidity Test • Method III: Centrifugal Measurement of Clay and Soft Particle Content

– Frac sand clay and soft particle content should not exceed 1 percent, for example, 0.1 milliliters of sediment in a 10-milliter sand sample

CRUSH RESISTANCE TEST:

Mesh Size Load On Cell (lb

force) Stress on Sand (PSI) Suggested Maximum

Fines (%by Weight)

6/12 6,283 2,000 20

8/16 6,283 2,000 18

12/20 9,425 3,000 16

16/30 9,425 3,000 14

20/40 12,566 4,000 14

30/50 12,566 4,000 10

40/70 15,708 5,000 8

70/140 15,708 5,000 6

Stress to Be Applied and Suggested Maximum Fines for Frac Crush Resistance Tests

SAND MINERALOGICAL ANALYSIS: 99% SILICA

Mine Sand

Wet Process

Dry Process

Sand Meeting API RP

56?

Imported Washed Sand

•Domestic API Sand

YES

NO

•Domestically Process API Sand

Domestic or Domestically

Processed API Sand

Resin Coating Sand

Proppants Transload

Facility

Resin Coating Process

Mobile System

YES IPS (MSS)

IPS (MPT) NO

Resin Coating: MYTH OR FACT?

• RC corrects grain’s sphericity &

roundness problems • Resin coating improves crush strength • Resin coating improves conductivity • Ceramic should be used at closure

pressures > 9,000 psi • RCS can be used at closure pressures up to

12,000 psi

MYTH FACT FACT MYTH FACT

WHAT ARE THE LOGISTICAL CHALLENGES ASSOCIATED WITH SAND AND RESIN COATED PROPPANT’S ENTRY INTO ARGENTINA’S FRAC SAND SUPPLY CHAIN?

• Availability of sand • Supply should cover demand

– Average well requires approx. 3MM lbs per treatment.

• Transportation cost – Ideally, proppant should be

within 60 miles from well site

ADVANTAGES SAND AND RESIN COATED

PROPPANT’S ENTRY INTO ARGENTINA’S FRAC SAND SUPPLY CHAIN

• Cost effective alternative • Unprecedented economic

development • Less contamination • Less delays* • No tariffs, duties, or Ad

Valorem* • No import fees*

WHAT ARE THE LOGISTICAL CHALLENGES ASSOCIATED WITH SAND AND RESIN COATED PROPPANT’S ENTRY INTO ARGENTINA’S FRAC SAND SUPPLY CHAIN?

SAME CHALLENGES FOUND IN THE U.S. • Importance of adequate & sufficient storage

– Minimize proppant degradation – Reduce contamination exposure – Eliminate multiple handling of product – Warranty proppant supply

WHAT ARE THE LOGISTICAL CHALLENGES ASSOCIATED WITH SAND AND RESIN COATED PROPPANT’S ENTRY INTO ARGENTINA’S FRAC SAND SUPPLY CHAIN?

SOLUTIONS IMPLEMENTED IN THE U.S. – Large storage trans-load facilities at the

port of entry to offset shipping lead-time – Modular movable trans-loads systems near

shale plays – Large stationary trans-load facilities in

strategic areas

WILL SAND NEED TO BE IMPORTED, AND IF SO, HOW WILL THAT AFFECT OPERATOR’S BOTTOM LINE?

DOES LOCAL SAND MEET INDUSTRY STANDARDS & NEEDS?

YES NO

Industry will import frac sand until the infrastructure is developed

SAND IS STILL THE MOST ECONOMICAL ALTERNATIVE

Should be imported and coated Cost of shipping will fluctuate with oil prices, tariffs, duties, and taxes imposed on imported products

WI Washed Sand

Washed Sand TX

U.S. Port

Puerto de Bahia Blanca