According to an article in Business Insider, Morgan Stanley forecasts sand demand growth of 96 percent in 2016 from 2013.
Morgan Stanley’s Ole Slorer, Benjamin Swomley, and Connor Lynagh write that exploration and production (E&P) companies have discovered that when they frack unconventional shale plays, sand helps increase the amount of reserves extracted from the ground by propping open the rock, which allows hydrocarbons to flow better.
“As E&P operators seek to optimize well results, they are using significantly more frac sand per well and experimenting with different types of proppants,” they write. “In particular, the trend toward higher frac sand volume completions has accelerated frac sand demand YTD, and we believe the industry now sits on the verge of a prolonged frac sand supply shortage.”
Currently, the country’s top 10 sand users pump approximately two times more sand than other operators on average, but the gap is likely to close once other drillers realize the benefits of using higher sand volumes, they say. The trio believes that we will continue to see movement toward increased sand usage among these operators.
They also suggest that sand prices could increase as much as 50 percent and that oil and gas companies’ profitability per ton of sand used will likely increase because of output gains, says the article.
