Originally published in E&P Magazine on February 20th, 2018
Author: Velda Addison
(Link to original article)
Julie Lerner experienced what she described as a moment reminiscent of an American television drama series while attending a recently held frack sand industry event in Houston. Operations at one sand mine had temporarily gone down in the Permian Basin.
“It kind of reminded me of one of the episodes of ‘The West Wing’ where everybody’s phones start buzzing and everybody gets up and walks fast out of the room. It was kind of crazy,” said Lerner, CEO of the newly launched PanXchange frack sand exchange service. “The next thing we see is a bid for 5,000 tons on our exchange because the supply suddenly wasn’t there. It is tight today. People know it’s going to ease up a little in the future. But it can’t be soon enough for people.”
Life in the Permian, where some operators pump more than 5,000 tons of sand per well to help free trapped hydrocarbons, may not be as cutthroat as it was for characters of the fictional West Wing of the White House. But tight supplies are causing some angst in the basin.
The 100-mesh sand appears to be the most desired.
Additional supplies are expected to come online with sand suppliers such as Badger Mining Corp., Emerge Energy Services, Hi-Crush Partners, Smart Sand, Unimin and U.S. Silica planning to add new capacity.
But there is some consternation in the market about whether all mines planned to come online this year will happen.
“Not all the mines that are permitted will come online this year. The industry has seen this type of sand rush before in Wisconsin,” Todd Bush, principal and cofounder of Energent Group, told Hart Energy in a statement. “Thus far, four Permian sand mines are producing and selling sand. As the new mines come online, spot pricing for Permian sand will likely move the average price per ton closer to $75 per ton.”
That could be considered an improvement given how much sand costs have increased in recent years.
Price uncertainty was part of the reason why Lerner, a commodity trader by background, said PanXchange launched in October 2017, becoming the first known exchange for frack sand in the U.S. The exchange provides aggregate spot, forward physical procurement and sales via a Web-based platform. It has more than two dozen members that comprise E&P, oilfield service and sand supply companies.
The PanXchange benchmark price—which Lerner told Hart Energy is predominantly based on bids, offers and trades in the marketplace—was $112 per ton for the week of Feb. 5 and $120 per ton for the week of Feb. 12. The price, which is for Northern White sand in Odessa, Texas, continues to rise, she said.