Concho Resources Inc. (NYSE: CXO) has faced delays of several hours to get sand for fracking in the Permian Basin, as a drilling boom in West Texas has driven up demand and created logistical problems for delivering the material, Bloomberg reported Aug. 7.
Talk of a sand shortage is most prominent in the Delaware Basin region of the play, Joe Wright, COO of the Midland, Texas-based company, said on its earnings conference call Aug. 7. The Permian Basin accounts for 30% of the 1,889 active U.S. drilling rigs, according to Baker Hughes Inc. (NYSE: BHI).
“There has been a lot of chatter around sand shortages,” Wright said. “It’s really more of a transportation of sand, or distribution of sand” issue, he said. Wright expects the delays to persist during the next 30 days.
The use of sand for fracking in the U.S. and Canada is expected to increase 17% a year, reaching 130 billion pounds in 2016 from 80 billion last year, according to a June 13 report by Houston-based PacWest Consulting Partners. The Permian, Marcellus and Utica Shale regions account for the majority of frack sand demand growth in the U.S., according to the report.
Sand is one of the ingredients used in hydraulic fracturing, which involves pumping a mixture that also includes water and chemicals underground into rocks to release oil. Sand helps to hold open fractures in the rock, allowing the oil to flow more easily.
Concho has relied on deliveries from oilfield service companies like Halliburton Co. (NYSE: HAL) and Baker Hughes, which have managed the demand for sand without major delays.
“We’re certainly using more sand across the board,” Wright said. “The industry itself is using more sand out here.”
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