By Pierre-Luc Mathieu, President, OmniTRAX Energy Solutions
Frac sand is an integral element to the rapidly growing U.S. shale oil and gas industry. Shale drillers credit the use of large quantities of sand with capturing more oil and gas from nearly every well. This has resulted in a record seven million barrels of shale oil produced per day and equal growth on the natural gas side, according to the International Energy Agency.
Demand for frac sand more than doubled in five years, from 34 million tons in 2012 to more than 77 million tons in 2017. In 2018, Frac sand use is expected reach 100 million tons, according to Rystad Energy.
The sand is mined in several areas, notably in Wisconsin, Illinois and Minnesota (Northern White) and Texas (Brown), and now increasingly from regional mines in Texas and Oklahoma. From these mines, it then needs to be transported to the major shale basins in North Dakota, Colorado, Montana, Wyoming, Texas, Ohio and Pennsylvania.
This is where the challenge starts.
With frac sand use on the rise, all the major exploration and production companies (E&Ps) are looking for the most efficient and effective way to source, transport and store the material and that involves a sophisticated logistics system. It’s challenging because even though a greater share of the frac sand used in several basins is expected to come from local mines in the future, “last mile” logistics — the delivery of sand from the mine, plus unloading and storage of sand at the well site — is complex and currently sub optimal.
E&Ps really want to focus on what they do best – finding productive sites and safely extracting oil and gas. Most prefer not to assume supply chain responsibility for frac sand or other materials used in the drilling process for that matter. They would rather spend their time and resource on developing and implementing increasingly sophisticated and well-specific completion strategies that bring ever-increasing volumes of energy from their wells. So, an increasing number of E&Ps are outsourcing their logistics functions to third party experts that have the skillsets and experience to move the right amount of frac to the right wells at exactly the right time.
The emergence of these energy logistics specialists isn’t unexpected. Business operations with similar execution strategies like the fast moving consumer goods channel moved at least partially to an outsourced model years ago, allowing the manufacturers in that case to concentrate on making and marketing their brands. In a way, that’s what the E&Ps are doing and they’re seeing the benefits in the form of improved supply chain performance through to the wellhead, increased safety, lower capital investment and enhanced sustainability.
Several executives here at OmniTRAX, including CEO Kevin Shuba and myself, have direct experience in developing outsourced logistics systems for industries and we’ve brought that know-how to the energy supply chain. We are now offering a comprehensive solution that addresses all of the logistics challenges and opportunities facing energy and mining companies and allows them to concentrate on their core competencies. More about these services is available here.
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In the next blog post, Chief Operations Officer Sergio Sabatini will share his thoughts on turning everyday processes into Best Practices
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