A Massive Paradigm Shift In Frac Sand’s Last Mile Is Happening Now
Retail giant Amazon and the hydraulic fracturing business have something in common: costly and complex last mile logistics. Distributing proppant requires just as much sophistication as distributing Echo Dots, Yeti Tumblers, and Kleenex.
In the completions market, “last mile logistics” means proppant (sand) delivery from trans-load facilities to well-sites (often 50 miles or less). This is essentially the intra-basin transfer of sand from train to truck to wellhead.
In 2017, more sand will be pumped into the average well than ever before. As the frac industry tries to suck a growing proppant milkshake through fewer straws, the last mile is flush with new risks and new opportunities.
Competitive dynamics are changing faster in frac sand's vital last mile logistics system than in any other oilfield segment today. The challenges are not just a frac sand issue, for the entire completions value chain is exposed as sand must be delivered with pinpoint accuracy for efficient hydraulic fracturing to take place.
To say it is an exciting time in this niche of the completions market would be an understatement. Many new contenders are creating solutions, but no one approach has clearly established itself as the future of the last mile yet.
This week, InfillThinking.com subscribers were sent a 30-page PDF breaking down this dynamic market. Shown below are three key points taken from the executive summary (you can read the full report here by taking out a free 30-day trial to our independent oilfield research service).
- This year, cyclical forces will catch up to structural shifts in demand, catapulting the last mile into the spotlight (or heat lamp as it were). Structural Shifts: High intensity well designs have become the norm as completions incorporate ever growing proppant loadings across longer laterals. This year, the average US well is expected to consume 4x the 2013 average sand volume, with some taking up to 8x more. This is complicating staging at the well-site and sending a disruptive ripple back up the last mile delivery system to trans-load. Cyclical Forces: As the frac industry rebounds, 2017 US sand demand is expected to double from 2016 levels. The trucking fleet is not ready. Truckers are battered - pricing is down, they've lost drivers and some have gone out of business. Labor is tight and it's just the second inning of the frac recovery. Many available owner operators have already been recruited, so truckers must hire and train company drivers to accommodate growth.
- The last mile is a canary in a coal mine for the frac sand business. In-basin logistics will show the stress of frac sand demand evolution well before rail availability and mine capacity are tested again.
- We believe a combination of rising last mile logistical complexity and the emergence of new companies with more efficient solutions will accelerate outsourcing of the last mile. Pressure pumpers and operators are likely to increasingly seek out turnkey solutions in the last mile so they can focus on completions efficiency. Rapidly transforming sand demand creates risk but it also creates big new opportunities, and dozens of companies are developing new solutions.
The surge of interest in InfillThinking.com following this report confirms the vast implications of this new trend.
There's a lot more to this story, read the full report here>>
About the source of this post: Joseph Triepke created Infill Thinking in 2016 to deliver high-caliber oilfield research updates to O&G decision makers. No ads. No clutter. No noise. Just research on the trends that matter most delivered to subscriber inboxes. Try it free for 30 days.
Transforming Businesses with Digital and Automation | Innovation | Strategy | Tactics - Views expressed here are my own
8 年Also, a useful post on Quintiq blog about use of technology in mining to solve many other supply planning puzzles https://www.quintiq.com/blog/internet-of-things-iot-is-changing-mining-supply-chains/
Transforming Businesses with Digital and Automation | Innovation | Strategy | Tactics - Views expressed here are my own
8 年This is not last mile delivery logistics problem, as LML is all about unpredictable demand combined with unpredictable delivery locations (thanks to multi-channel). The supply chain optimization problem Joseph Triepke is talking about has been solved in mining through another unusual puzzle: handling of coal tailings (non coal leftovers) which have to be sent by trucks to a layered pile of which stability depends of how much water+rock remains in dunped tailings. Give us a call call Joseph to discuss how the demand-supply puzzle in fracking sand-for-extract needs to be solved. Warning: this is not kid's play; it is truly complex. #quintiq
Retired CEO of CN Rail, Board Member, Strategic Advisor, CEO coach.
8 年In 2017, more sand will be pumped in the average fracking job than before. The sand business in North America is growing and will see more of these large receiving rail yard than before to receive premium Wisconsin sand.
Financial and Accounting Senior Consultant
8 年Interesting
Outside Sales Representative specializing in oil and gas industry sales
8 年I remember back in the 90's I went to work for a beverage company "Pepsi/Dr. Pepper." The manager Jodi saw that I wanted the job pretty bad but knew I didn't have a CDL let alone any experience driving a large diesel tractor trailer. He did, however, come up with a plan. He asked me to study up on my DMV paper back manual, take my test to get the permit and ride with another driver until I could take my final test. I did all that and within six weeks had my Class A CDL. I went on to drive a tractor trailer and became the largest route driver they had at the depot. That was almost twenty years ago. Today, I don't have the permit let alone the Class A CDL. I am not going to go pay $4000 at a college to learn how to do something I already know how to do. I believe that people just have to give people the way and the means to do it. If you have a veteran driver, for example, then offer them some sort of plan like Jody did me. People want to work, people need to work and if people will help people make the transition then it can happen. There can't be anything better than getting paid while training.