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Proppant Prospects for Industrial Minerals Mike O'Driscoll IMFORMED at SME 2015

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The quest for low cost, clean, and efficient energy sources has assisted the drive for the exploration and development of unconventional oil and gas resources worldwide, especially shale gas and shale oil resources. Advances in hydraulic fracturing and horizontal drilling technologies has enabled this resource exploitation. Imperative for this industry has been the evolution and development of proppants in hydraulic fracturing – mainly natural silica sand (frac sand), but also ceramic proppants manufactured from kaolin and bauxite. However, the supply of ceramic proppants is limited, especially outside North America, and meeting demand from the existing and anticipated boom in shale gas exploration and development is challenging. There are only certain industrial minerals that can meet ceramic proppant specifications, and their commercial development, until recently, has been somewhat limited. This paper highlights ceramic proppant raw materials, main sources, and supply to the oilfield industry – especially new markets in the Middle East, China, Asia-Pacific, South America – as we enter a new era of resource development which relies heavily on proppant utilisation.

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Proppant Prospects for Industrial Minerals Mike O'Driscoll IMFORMED at SME 2015

  1. 1. Proppant prospects for industrial minerals Ceramic proppant supply and demand trends imformed.com Networking and knowledge for the industrial minerals business
  2. 2. imformed.com enquiries@imformed.com ▪ +44 (0)1372 450 679 ▪ mobile +44 (0)7985 986 255 Mike O’Driscoll Ismene Clarke
  3. 3. imformed.com enquiries@imformed.com ▪ +44 (0)1372 450 679 ▪ mobile +44 (0)7985 986 255 • Launched in January 2015 • The new source of professional networking opportunities and market research expertise for the global non-metallic minerals industry • Focused high profile Forums on specific market areas • Research and consultancy • Market briefings • Training seminars • Field trips • Special publications
  4. 4. imformed.com enquiries@imformed.com ▪ +44 (0)1372 450 679 ▪ mobile +44 (0)7985 986 255
  5. 5. Outline 1. Hydraulic fracturing 2. Proppants 3. Ceramic proppants (CP) & raw materials 4. Trends and developments 5. Outlook 6. Conclusions Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com
  6. 6. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 1. Hydraulic fracturing Exploiting unconventional oil and gas resources Drivers • Energy demand Evolution of: • Horizontal drilling • Hydraulic fracturing • Proppants Source: EIA
  7. 7. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 1. Hydraulic fracturing Squeezing out oil and gas from low permeability rocks Source: Carbo Ceramics
  8. 8. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 1. Hydraulic fracturing Pumping water and proppants under high pressure Propping agent = “proppant” Props open fracture Permits oil/gas flow (conductivity) Drinking water acquifer <1,000ft (305m) Target rock formation 6-10,000+ft (1,829-3,048+m), fractures extend ’00s ft 8,000ft (2,438m) Source: original graphic by Al Granberg
  9. 9. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 1. Hydraulic fracturing Objectives: reservoir contact + conductivity Reservoir Contact (Fractures) Primarily driven by fluid rate and fluid/proppant volume Enhanced Flow Capacity (Conductivity) Primarily driven by the proppant Source: after Mark Chapman, Carbo Ceramics 2014 $!!
  10. 10. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 1. Hydraulic fracturing Typical fracturing fluid components Source: FracFocus Water up to 98% Proppants up to 1-2%
  11. 11. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 1. Hydraulic fracturing Evolution of hydraulic fracturing 17 March 1949 Duncan, OK First fracturing by Halliburton for Stanolind Oil Co. Images: Montgomery & Smith 2010 1949 patent filed; excl. licence Halliburton, Stephens OK, Orchard TX; 100-150lbs sand, 332 wells; 75% up in output
  12. 12. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 1. Hydraulic fracturing Evolution of hydraulic fracturing Mid-2000s: • Multiple frac stages/well • Increased to 4-6m lbs (3,000 st) proppant/well From 2013 • 40-50 frac stages • Up to 20m lbs (10,000 st) proppant/well
  13. 13. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 1. Hydraulic fracturing Significant growth in world proppant demand 2014 90bn lbs 2003 5bn lbs
  14. 14. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 2. Proppants Proppant types “The ideal proppant is one that has: • the specific gravity of water, • the strength of iron, • and is cheaper than dirt!” • walnut shells • silica sand • alumino-silicates • fused zirconia • plastic pellets • steel shot • glass beads • aluminium pellets • fly ash
  15. 15. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 2. Proppants Proppant types Silica sand (“frac sand”, FS): derived from silica sand deposits, 99%SiO2 Ceramic proppants (CP): derived mainly from bauxite and/or kaolin, >50% Al2O3 Resin coated proppants
  16. 16. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 2. Proppants Proppant specifications API RP 19C ; ISO 13503-2 Particle size 90% within specified size ranges, frequently: 12/20# (1700-850 microns) 20/40# (850-425 microns) 40/70# (425-212 microns) 70/140# (212-106 microns) Particle shape Well-rounded, spherical grains (>0.6 for frac sand, >0.7 for resin coated sand and ceramic proppants) Crush resistance Withstand compressive stress 4000-6000 psi (28-42 MPa), determined at 10% crush material Acid solubility Limits on acid soluble material (<2% ≥30/50, <3% <30/50, <7% for resin coated sand or ceramic proppants) Turbidity Limits on clay (<2 microns) and silt (2 - 63 microns) content, maximum turbidity 250 FTU (Formazin Turbidity Unit)
  17. 17. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 2. Proppants Proppant specifications Source: Krumbein & Sloss 1955 API ≥ 0.6
  18. 18. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 2. Proppants Proppant market structure US proppant market 80bn lbs (40m short tons; 36m tonnes) Silica sand (“frac sand”) 80-90% Resin coated proppant 5-10% Ceramic proppant 5-10%
  19. 19. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 2. Proppants Proppant market structure Source: after Carbo Ceramics COST $0.25- 0.90/lb $0.20- 0.30/lb $0.0135- 0.0675/lb80-90% 5-10% 5-10% Estimated US market share Up to 10,000 psi Up to 12,500 psi Up to 15,000+ psi
  20. 20. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 2. Proppants Selection criteria • Proppant properties Strength Shape Size Durability • Proppant availability Supply source, quality, and cost • Fracture treatment eg. fluid system required, slickwater vs cross-linked fluids and impact on proppant size • Conductivity requirements Desired conductivity Cost vs benefit, ie. proppant cost set against oil recovery
  21. 21. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 3. Ceramic proppants Superior performance Uniform size/shape enhances conductivity of proppant pack Inconsistent sized, irregular shaped, tightly packed grains reduce conductivity INCREASED CONDUCTIVITY = IMPROVED EUR, ROI • Higher cost • Stronger, more durable • Uniform density • Uniform sphericity • Uniform size • Higher conductivity • Superior performance
  22. 22. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 3. Ceramic proppants High pressure environments favour ceramic proppants Source: Carbo Ceramics
  23. 23. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 3. Ceramic proppants Raw material feedstock Primary raw materials • bauxite • kaolin • bauxitic kaolin • bauxite/kaolin blends Additives: • diatomite • titanium dioxide • chromite • boron • magnetite • magnesia • manganese oxide • rare earth oxides Alternative raw materials • magnesium silicate (derived from serpentinite, olivine, dunite) • andalusite • metabasalt • fly ash – cenospheres • alumina-rich clays • nanostructured ceramics/glass • metallurgical slag • mine tailings Source: Carbo Ceramics Carbo Ceramics, Toomsboro, GA, 1,000m lbs/y
  24. 24. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com Bauxite 70% Al2O3 for IDC grade 70% Al2O3, 25.5% SiO2, 0.61% Fe2O3, 3.82% TiO2 55-71% Al2O3, 7-16% SiO2, 1.5-19% Fe2O3, 2.5-3.8%TiO2 Bauxite (calcined) +Kaolin +Bayer alumina fines (dust collector by-product) 82%Al2O3, 7% SiO2 (Australia) 52% Al2O3, 45% SiO2 99% Al2O3 Calcined kaolin (75-90%) +Calcined diatomaceous earth (5-10%) 45.60% Al2O3, 51.21% SiO2, 0.96% Fe2O3 4.37% Al2O3, 87.51% SiO2, 1.91% Fe2O3 Bauxite (55%) +Kaolin (45%; + iron oxide, 7%) 85% Al2O3, 7% Fe2O3 45% Al2O3, 1% Fe2O3 Bauxite/kaolin blend 72% Al2O3 total for IDC grade Kaolin 48% Al2O3 for LWC grade 45-50% Al2O3; <0.13 S, <1.0% Fe2O3, <1.0% K2O “Alumina clays” 41.5-49.0% Al2O3 by wt. calcined basis 3. Ceramic proppants Known specifications: a range chemical compositions
  25. 25. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 3. Ceramic proppants Grades categorised by density and strength Grade Density SG Al2O3 % Feedstock Ultra High Strength 3.9 >98 Alumina High Strength 3.5 80-85 Bauxite Intermediate Strength 3.2 70-75 Bauxite Low Strength 2.7 45-50 Kaolin In general, increasing alumina content is proportional to increasing strength
  26. 26. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 3. Ceramic proppants Traditional grades Ceramic proppant grade examples (Carbo Ceramics) LWC Lightweight ceramic proppant IDC Intermediate density ceramic proppant HDC High density ceramic proppant Raw material kaolin bauxite bauxite Apparent SG 2.71 3.27 3.56 Bulk Density (g/cm3) 1.57 1.88 2.00 Alumina % 51.0 72.0 83.0 Silica % 45.0 13.0 5.0 Iron % 1.0 10.0 7.0 Titania% 2.0 4.0 3.5 Source: Carbo Ceramics
  27. 27. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com Proppant Feedstock Size Avg. US$/lb Volume (lbs) Cost m$/well Carbo Econoprop kaolin 20/40 $0.32 6,000,000 $1.92 Imerys ProLite LWC kaolin 20/40 $0.32 5,769,231 $1.84 Chinese LWC bauxite 20/40 $0.26 6,230,769 $1.62 Carbo CarboProp bauxite 20/40 $0.42 7,230,769 $3.03 VersaProp ISP bauxite 20/40 $0.42 7,230.769 $3.18 3. Ceramic proppants Examples of typical cost and consumption in Bakken 2014 Source: Coretrack Ltd
  28. 28. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 3. Ceramic proppants Raw abrasive bauxite grade feedstock % Abrasive Refractory Chemical Metallurgical Al2O3 min. 55.0 min. 59-61.00 min. 55-58.00 50-55.00 SiO2 max. 5.00 max. 1.50-5.50 max. 5-12.00 0-15.00 Fe2O3 max. 6.00 max. 2.00 max. 2.00 5-30.00 TiO2 min.2.50 max. 2.50 0-6.00 0-6.00 Source: Errol Sehnke, USGS, 1995• Al2O3 content 55-70%; increases with calcination to 85-90% • not as strict as refractory grade • flexibility with iron, not critical • low silica and alkalies (CaO <0.1 to minimise glass phase) • supply sources: Australia, Brazil, China, Greece, Guinea, Guyana, Italy
  29. 29. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 3. Ceramic proppants Kaolin feedstock % Calcined kaolin for LWC Al2O3 45.60 SiO2 51.21 Fe2O3 0.96 CaO 0.05 MgO 0.07 TiO2 1.86 Na2O 0.07 K2O 0.17 Typically calcined kaolin with min. 40% Al2O3 Kaolin has been used containing: 45-55% Al2O3 <1.0% Fe2O3 <0.15% K2O <0.13% S Kaolins maybe blended with bauxite and alumina fines prior to sintering Source: US Patent 2008/0058228 Source: ImerysC-E Minerals mining, Andersonville, GA
  30. 30. Extrusion Calcining Kiln Cooling Drum Milling Classification Binder Mixing Pelletization Green Pellet Screen Sintering Kiln Cooling Drum Grading Screen Feedstock mineral(s) Proppant Source: AJ DeCenso, M-I Swaco 2013 Dry process Calcined ore, HS grades. Wet process Uncalcined ore, IS and LS grades; slurrying prior to binder mixing; fluidizer sprays slurry onto seed particles prior to sintering Proppant prospects for industrial minerals Ceramic proppants 3. Ceramic proppants Manufacturing ©IMFORMED 2015 | imformed.com
  31. 31. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 3. Ceramic proppants Primary sources, production, & raw material feedstock Company Plant Capacity (m. lbs/yr) Feedstock Carbo Ceramics Inc. Carbo Ceramics Inc. Eufaula, Alabama 275kaolin McIntyre, Georgia 275kaolin & bauxite Toomsboro, Georgia 1,000kaolin Millen, Georgia 250 (+250 Q3 2015) kaolin & bauxite Carbo Ceramics (China) Co. Ltd Luoyang, Henan, China 100kaolin & bauxite Carbo Ceramics Eurasia Kopeysk, Chelyabinsk, Russia 100bauxite Carbo total 2,000 Saint-Gobain Proppants Saint-Gobain Proppants Fort Smith, Arkansas 180-200+bauxite Bryant, Saline, Arkansas 330bauxite closed 2011 Puerto Ordaz, Venezuela 110.2bauxite Saint-Gobain Proppants (Guanghan) Co. Ltd Guanghan, Sichuan, China 198.4bauxite S-G total 730
  32. 32. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 3. Ceramic proppants Primary sources, production, & raw material feedstock Company Plant Capacity (m. lbs/yr) Feedstock Imerys C-E Minerals Mulcoa Plant 5, Andersonville, Georgia 220.4kaolin (formerly PyraMax Ceramics LLC) Wrens, Georgia 500 kaolin Treibacher Schliefmittel SpA Domodossola, Italy 13-22 bauxite (?andalusite) Imerys total 740 Mineração Curimbaba, Ltda Pocas de Caldas, Minas Gerais 661.2bauxite Fores LLC Sukhoy Log, Chelyabinsk, Russia 550 magnesium silicate from asbestos mining waste JSC Borovichi Refractories Plant Borovichi, Novgorod, Russia 440.8kaolin
  33. 33. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 3. Ceramic proppants China: leading producer, modernising • Total production capacity est. 10bn lbs/y. Production est. <50%. • Export market boomed from 2001, peaked in 2011 at >1m tonnes; 40-50% of output; mostly to USA • ~100 plants producing ceramic proppants 10% >220m lbs/y 20% 132-220m lbs/y 70% <110m lbs/y • Feedstock is bauxite (except Carbo Ceramics plant also uses kaolin) • Located close to bauxite resources: Henan, Guizhou, Shanxi, and Sichuan • Major players: Producers >441m lbs/y: Gongyi Tianxiang Ceramic Proppant Co. Ltd Hebei Haihua Petroleum Proppants Ltd Xinmi Wanli Industry Development Co. Ltd. • Addressing quality and inefficiency issues Companies investing in modern capacity Xinmi Wanli Industry Development Co. Ltd Yangquan Changqing Petroleum Fracturing Propping Agents Co. Ltd Luoyang Maide Ceramics Co. Ltd Yixing Orient Petroleum Proppant Co. Ltd
  34. 34. Source: Bauxite province map Hill & Sehnke 2007 Bauxitic kaolin: Alabama Bauxite: Arkansas Kaolin: Georgia Carbo Ceramics, AR, AL Imerys, GA Saint-Gobain, AR Bauxite, Minas Gerais Mineracao Curimbaba, MG Bauxite: Henan, Guizhou, Shanxi, Sichuan ~100 producers Kaolin: Novgorod Borovichi, Novgorod Serpentinite (MgSiO2): Sverdlovsk Fores, Chelyabinsk Bauxite: Komi Carbo, Kopeysk Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 3. Ceramic proppants Primary sources & production: proximity to feedstock deposits
  35. 35. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments January 2015 US plant closures Saint-Gobain Proppants Temporarily closed Ft Smith, AR plant 21 January 2015 $15m upgrades 2010-2011 180-260m lbs/yr cap. Started 1979 as Norton Proppants Oxane Materials Inc. Closed Van Buren, AR plant 23 January 2015. Developed HS/IS/LW “advanced ceramic proppant”; a sprayed mixed-metal oxide shell over a hollow sphere – included fly ash in coating; launched 2013 End-2013, production rising 1.8m lbs/month to 4.0m lbs/month; expected to produce 40m lbs in 2014 end-2014. Ultimate objective was 2 x 100m lbs/year lines at Van Buren. Source: Fives Source: Oxane Materials
  36. 36. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Expansions and investments Curimbaba Group, Brazil Oil price impact has placed on hold planned 70,000 tpa (154.2m lbs/yr) expansion with new plant originally scheduled end-2015/early 2016 Source: Sintex Prime Meridian/Hallmark Minerals Prime Meridian Resources Corp., Canada LOI for 55% stake in Hallmark Minerals (I) Pvt. Ltd, India Aims to add 25,000 tpa (55m lbs/yr) to 10,000 tpa (22m lbs/yr) plant using bauxite/clay blends. Carbo Ceramics Inc. Deferred completion of Millen Line 2 (250m lbs) until Q3 2015/2016
  37. 37. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Developing projects Baltic Ceramics SA Building initial 60,000 tpa (132m lbs/y) plant at Lubsko, western Poland, expected on stream by the H2 2015. 135,000 tpa (298m lbs/y) full cap. production. Feedstock: • captive 4.8m tonnes high alumina kaolin resource close to plant • bauxite from Greece • kaolin from the Czech Republic • fly ash from power stations. Source: Baltic Ceramics SA
  38. 38. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Developing projects Ecopropp Pty Ltd/Coretrack Ltd Building 250kg/hr pilot plant using fly ash, at Clontarf, near Brisbane, Queensland. Production expected Q2 2015. “Highly positive” results of testing fly ash- based proppants at 15,000 psi. Aim to sell technology licences to third parties to build satellite plants near coal fired power stations and oilfields. Claimed low processing cost factor: Ecopropp fly ash proppant at US$0.26/lb = US$0.06- 0.18 cheaper than US/Chinese proppants Source: Ecopprop Pty Ltd
  39. 39. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Developing feedstock projects Latin Resources Ltd Developing the Guadalopito heavy minerals project 25km from Chimbote, northern Peru. Seeking j-v partners. Contains estimated 14-16m tonnes andalusite; 15m tpa conventional dredge mining operation envisaged to yield 155,000 tpa andalusite. Envisage proppant potential with andalusite blended with kaolin or other. First Bauxite Corp. Developing Bonasika bauxite deposit 60km south-west of Georgetown, Guyana. Evaluating revised plan for bauxite mining and beneficiation in Guyana; 150,000 tpa calcining and sintering plant in south Louisiana aimed at ceramic proppant and refractory makets. Source: First Bauxite Corp.
  40. 40. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Developing projects: Where did they go? Shamrock Proppants LLC In 2013, acquired Mid America Brick & Structural Clay Products plant, Mexico, MO. Planning started 2013 2x 36.8 tph rotary kilns Wellsville, MO. Feedstock: own kaolin resource (affiliated with Christy Minerals Inc.) Applied Minerals Inc. October 2013 agreement with OPF to formulate ceramic proppants based on halloysite clay from AMI’s developing Dragon Mine, Utah. March 2014 clay process plant commissioned Brownwood Clay Holdings LLC Since 2011, developing with OPF Enterprises LLC a deposit in Brownwood, TX, reportedly >10m s.tons inferred resource of “proppant grade clay”. March 2014 secured property for plant build in Brownwood, but no construction expected for “a couple more years”. Source: Applied Minerals Inc.
  41. 41. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Developing projects: Bubbling under? Kaolin AD, Bulgaria: kaolin Pasek Minerales, Spain: dunite Source: Pasek Minerales Source: Kaolin AD
  42. 42. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Ultra High Strength Proppants – clash of the giants 2013: a new upper tier category of ultra-high strength ceramic proppants based on high-alumina raw materials introduced for ultra-deep wells eg. 30,000 ft in Lower Tertiary, Gulf of Mexico – offshore fracking a new frontier Carbo Ceramics Kryptosphere: >98% Al2O3; 3.9 SG; 0.9 S/R 25#; Feedstock: ?kaolin, Inner Mongolia High conductivity at 20,000 psi HD/LD grades Retrofit of existing plant to produce 250m lbs/y Kryptosphere LD, on schedule for completion by end-Q2 2015. Source: Carbo Ceramics
  43. 43. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Ultra High Strength Proppants CoorsTek Inc. February 2014: opened 5m lbs/month plant in Golden, CO; were plans to double cap. in 2015 CeraProp: lightweight, 2.67-2.72 SG; 0.9 S/R 16/30, 20/40, 30/50, 40/70# Feedstock: kaolin Saint-Gobain Titan: 30/50# Feedstock: bauxite “World’s only 30k proppant” Source: CoorsTek Source: Saint-Gobain
  44. 44. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Innovations HiWay – Schlumberger • “Slugs” of proppant pumped down well • Synthetic fibres bond proppants together • Creates flow-channels • Enhances conductivity • Uses 40% less proppant! Source: Schlumberger
  45. 45. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Innovations Propel SSP – Fairmount Santrol • Proppant transport technology • Proppant coating swells upon contact with water to form hydrogel layer • Decreases proppant's effective specific gravity, eg. 2.6 to 1.3 for frac sand • Allows proppant to go further and higher into the formation. • The increased stimulated reservoir volume reduces cost per barrel of oil equivalent • “solves decades-old problem of uniformly distributing proppant throughout the full length of a created hydraulic fracture” Unique polymer coating swells to 3x original particle size Source: Fairmount Santrol
  46. 46. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Innovations Propynite – Imerys Oilfield Solutions • Produced in Italy; bauxite feedstock • Rod-shaped design exhibits strength and proppant permeability “far in excess of conventional HSP.” • Greater fracture conductivity and flowback control • Permits high well productivity at closure stress levels >15,000 psi. • Higher pack permeability improves the mobility of the residue from high viscosity fracturing fluids, and therefore improves fracture clean-up. Source: Imerys
  47. 47. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Innovations In-situ proppant formation – Oil Chem Technologies • fracturing fluid itself forms the proppant • little or no material is carried back to be treated or disposed of • size of proppant can range <1mm - >20 mm by modifying fracturing fluid composition. • No polymer is required to suspend the proppant, hence no breakers are required • proppants are perfectly spherical particles with hardness equal or exceeding conventional proppants. • Highly permeable solid masses can also be formed within the fracture using hydraulic fluids containing no solids.
  48. 48. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 4. Trends & developments Proppant application: trend to using more frac sand • 2013-14 E&P practice of using higher volumes of frac sand, and only “tailing in” ceramic proppants • In softer, ductile formations like Eagle Ford, Permian, rock wraps around proppant reducing conductivity – solution to overload with proppants to plug short, wide fractures = using more lower cost FS rather than CP • Major players switched to FS-only in Eagle Ford: EOG, Pioneer, Anadarko, ConocoPhillips • EOG also intensive FS use in Bakken wells increased productivity • Q2 2014; Rosetta Resources Inc. revised completion design in Eagle Ford by increasing FS volumes against CP volumes = cost savings $0.5m/well or 250-500m lbs CP • But after initial high well productivity, it declines steeply soon after, therefore perhaps only a short term solution – CP will always outperform FS
  49. 49. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 1,358 active US land rigs 13/2/15 weekly drop of 98, one of the biggest declines in the past three decades Source: Fuel Fix; data based on Baker Hughes, Bloomberg 5. Outlook Market situation: oil drilling market in doldrums WTI oil price “jumped” $1.68 to $52.89/bbl
  50. 50. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 5. Outlook Cyclical market: a similar recovery to 2008-09 recession? Source: After Schlumberger Dec 2014 2015-16/17
  51. 51. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com • most shale operations are profitable at $70/bbl • improved efficiencies of drilling and lower cost prices could result in more shale projects becoming profitable at $50/bbl [Goldman Sachs: margin of profitability of majority of shale operations is $45-40/bbl.] New CEO at Total: Patrick Pouyanne Speaking at the World Economic Forum, Switzerland, 22 January 2015 5. Outlook A cyclical market: higher prices will return • widespread industry investment cuts may not necessarily be long term: “There is a natural decline of 5% a year from existing fields around the world. That means by 2030 more than half of the existing global oil production will disappear. There is an enormous amount of money that needs to be invested to get another 50 million barrels per day of new production. The cycle will come back and higher prices will come back.” Source: Reuters/Andrew Winning
  52. 52. Proppant prospects for industrial minerals Ceramic proppants 5. Outlook Demand driver: forecast future for gas + shale gas as source ©IMFORMED 2015 | imformed.com
  53. 53. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 5. Outlook Demand driver: US energy production to 2040: gas 38% Source: EIA Sept 2014 (quadrillion BTU)
  54. 54. China USA 5. Outlook Demand driver: US shale gas contribution to grow to c.50% Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com
  55. 55. China USAUSA Latin America India Asia Australia Proppant prospects for industrial minerals Ceramic proppants 5. Outlook Demand driver: regional market growth ©IMFORMED 2015 | imformed.com
  56. 56. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 5. Outlook World proppant consumption: increasing trend – comparison of research organisation estimates Research and Markets 2013 45.12m tons 2019 84.20m tons ($19bn) 10.7% CAGR BCC Research 2014 $49.0bn 2019 $83.2bn 11.2% CAGR Grand View Research -- 2020 96.03m tons -- Freedonia 2012 37m tons 2017 65m tons 12% CAGR
  57. 57. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 5. Outlook IHS (PacWest Consulting) US onshore proppant demand 20 21 22 23 24 25 26 27 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 Source: based on 2014 data from IHS (PacWest) million lbs • consumption to rise 2% p.a. through 2016 • from 80bn lbs in 2013 to 111bn lbs in 2016 • most growth in FS • RCS decline at 5% p.a. • CP decline at 17% p.a.
  58. 58. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 5. Outlook Demand drivers: more horizontal wells, more frac stages, more proppant consumed per well; up to 16m lbs/well Source: IHS (Pac West) 5m lbs 10-16m lbs
  59. 59. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 5. Outlook Demand driver: pad drilling practice = much reduced footprint Source: Statoil
  60. 60. Proppant prospects for industrial minerals Ceramic proppants 5. Outlook Demand driver: world shale gas resource potential ©IMFORMED 2015 | imformed.com
  61. 61. 5. Outlook Regional emerging shale gas markets for proppants in estimated order of commercial development (ex-onshore USA/Canada) Proppant prospects for industrial minerals Ceramic proppants 1 1 1 2 2 2 3 3 1 GoM/Mexico - South America - Middle East 2 N. Africa – Australia - China/SEA 3 Europe - Russia ©IMFORMED 2015 | imformed.com
  62. 62. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 6. Conclusions • CP are high performance proppants with a premium price • There are relatively few producers worldwide • Feedstock raw material traditionally bauxite/kaolin, but new lower cost alternative raw materials are emerging • Critical to secure quality material and correct process route/expertise • Several new players emerging outside USA; many in China • Established producers have heavily invested in new capacities in recent years and near term – market climate has cooled some projects for now • New grades of CP are being developed for a new era of application – trend to drill more HPHT wells using ultra-high strength CP grades • Despite competing with low priced FS, CP’s higher performance ensures future demand • Long term demand assured by anticipated world gas demand • Volume consumption improved by more wells, longer laterals, more stages, greater volumes used per stage and thus per well • Anticipated growth markets outside USA to evolve at contrasting rates
  63. 63. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com 6. Conclusions • CP are high performance proppants with a premium price • There are relatively few producers worldwide • Feedstock raw material traditionally bauxite/kaolin, but new lower cost alternative raw materials are emerging • Critical to secure quality material and correct process route/expertise • Several new players emerging outside USA; many in China • Established producers have heavily invested in new capacities in recent years and near term – market climate has cooled these projects for now • New grades of CP are being developed for a new era of application – trend to drill more HTHP wells • Despite competing with “dirt” (FS), CP’s high performance ensures future demand • Long term demand assured by anticipated world gas demand • Volume consumption improved by more wells, longer laterals, more stages, greater volumes used per stage and thus well • Anticipated growth markets outside USA Proppant prospects for industrial minerals…are good!
  64. 64. Proppant prospects for industrial minerals Ceramic proppants ©IMFORMED 2015 | imformed.com Sponsors Media Partner
  65. 65. Proppant prospects for industrial minerals Ceramic proppants Brazilian proppants: Curimbaba Group past, present, & future Peter Muira Nakachima, Manager Research & Development Curimbaba Group, Brazil Proppant market demand outlook Samir Nangia, Principal IHS (PacWest Consulting Partners), USA Oilfield minerals: supplying the market Dave Frattaroli, Chief Commercial Officer Unimin Energy Solutions, USA Frac sand: US exploration and production – where’s it heading? Mark Zdunczyk Consultant Geologist, USA ©IMFORMED 2015 | imformed.com The future of ceramic proppants in the unconventional shale market Jack Larry, General Manager Saint-Gobain Proppants, USA Chinese proppants supply & markets Gene Kim, CEO AM2F Energy Inc., USA Ceramic proppant development using fly ash as raw material Siegfried Konig, Executive Director, Coretrack Ltd, Australia Frac sand developments for the Argentinean shale gas market Richard Spencer, President & CEO South American Silica Corp., USA SAVE $300 WITH EARLY BIRD RATE Presenting in Proppants session as of 15 February 2015
  66. 66. Thank you for your attention. If you have any questions or comments, or would like more information, please contact me. Proppant prospects for industrial minerals Ceramic proppants imformed.com mike@imformed.com | +44 (0)1372 450 679 | mobile +44 (0)7985 986 255

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