July 27, 2017

The Value of Resin-Coated Proppant in Today’s Market

Taso Melisaris, Ph.D., Product Director

Well Challenges

Resin-coated proppants (RCP’s) continue to support operators’ well objective of increased net present value by both: a) reducing their operating costs for sand flowback mitigation and b) enhancing the well EUR based on the RCP enhanced conductivity, reduced fines generation, and prevention of embedment. In this discussion with Fairmount Santrol’s Dr. Taso Melisaris, Product Director, we look at all of the trends influencing completions.

Proppant Flowback 

Question: We understand operators are continuing to include resin in their completions to produce better wells. Is that correct?

Dr. Melisaris: Yes, that’s correct. RCP’s have been a mainstay of stimulation treatments for more than 40 years, and our continuing research indicates this will not change anytime soon because operators understand the significant value they realize by using RCP’s with proppant flowback prevention being one of the most critical. Back in 2014, when oil prices ranged above $100/bbl, RCP volumes were at all-time high. However, in 2015 and first half of 2016, due to the depressed oil prices some operators wanted to reduce their well completions costs and either reduced the percent resin tail in vs. the 2014 high resin tail in levels, or eliminated completely the use of RCP, and pumped 100% raw sand instead. Interestingly enough, in the second half of 2016 and continuing in 2017, we have noticed a large increase in RCP volumes. Based on our Voice of the Customer research in the Permian, we have found out that those operators that either had completely eliminated RCP’s from their wells in 2015 and in early 2016 or had substantially reduced the resin tail in percentage levels they started having major sand flowback problems, and, thus increasing RCP use again.

Question: What about new proppant trends and well designs in this oil market of oil prices between $40 and $50/BOE?

Dr. Melisaris: Certainly, we have witnessed changes in proppant trends and well designs in the past few years. Some of the major trends are: 1) Increase in number of stages and proppant intensity. As an example, in the Permian few years ago, 25-30 stages were common. Nowadays, we see operators completing wells up to 55 stages. In the Permian Basin, in 2016, the average proppant intensity was about 1200-1500 lb/lateral ft but in summer 2017 is about 2200 lb/foot. Additionally, few operators are currently experimenting with new well designs by pumping higher proppant intensity above 3000 lb per lateral ft. 

We are also seeing greater demand for finer mesh proppants. 100-mesh sand is now in high demand, as is 4070-sand and also 40/70-mesh RCP’s, which are widely used in the Permian and other basins. This trend is in contrast with the high demand of coarser proppants in 2013 and 2014 where 2040-proppants were the top grade sellers. The explanation about the industry shift to finer Mesh sizes also has to do with the fundamental changes in well designs during the past few years since well designs shifted from crosslinked or linear gel to slickwater designs. Finer Mesh proppants are required if you want to have good placement of the proppant into the fracture if you are to use slickwater.

Finally, we also see some preliminary demand for brown sand from regional TX mines. It will take few years before the industry can conclude whether regional brown sand might partially substitute Northern White sand although several operators insist they will continue to pump high quality Northern White sand in the future.

Question: Please explain what can go wrong during proppant flowback?

Dr. Melisaris: First, an operator loses a portion of the proppant investment, which is significant considering proppant can be a large percentage of the overall hydraulic fracturing expense. Second, when frac sand flows back up the wellbore, the sand grains damage downhole equipment, including the electrical submersible pump, and surface equipment. An additional challenge that may have been overlooked is that when a well has sand flowback problems, then there are concerns that due to loss of proppant this can locally reduce fracture width that could “locally choke” the flow of oil in the fracture, which in turn will negatively impact the well EUR. Overall, our market research in the Permian shows proppant flowback mitigation saves $175,000 to $400,000 in incremental operating expenses during the first two years of a horizontal well.

Question: But, can an operator quickly recover the resin investment?

Dr. Melisaris: No question. Reservoir engineers we speak to during customer visits continue to tell us the investment justifies a 25-30% resin tail-in. Also, based on our own calculations, the payback period for pumping 25-30% resin tail-in can be only 2-4 months. This payback period is calculated as NPV based on the mitigation of the proppant flowback costs and also the incremental enhancement of hydrocarbon production by pumping RCPs.

Question: What are the other value drivers besides proppant flowback prevention and increased conductivity with a resin tail-in?

Dr. Melisaris: Fewer fines, which are crushed sand grains, especially with lower-quality frac sand. Frac sand crushes under mid to high closure stress levels into tiny fines, and as the natural flow of oil carries them toward the wellbore these fines will plug pore spaces, reducing conductivity near-wellbore and choke production. Curable and Precured RCPs reduce fines generation, keeping an open production flow path to the wellbore. And, there’s also the issue of frac sand embedding into soft formations. Curable RCP’s prevent embedment also.

Question: Does resin-coated sand have a role in the ongoing discussion about dust suppression?

Dr. Melisaris: Yes, this is another value driver of RCPs. The resin coating around each sand grain results in less dust being generated compared with frac sand. The industry continues to invent chemical or mechanical solutions to reduce frac sand dust. And, Fairmount Santrol, which has a well-known history of meeting/exceeding environmental regulations, will be soon commercializing a new dust suppression technology.

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