Oilfield Minerals Forum goes down a storm in Houston

Main picture: Baramin’s La Huiche mine, Mexico (Courtesy Mario Trevino); Inset top: Al Wilson, President, Cimbar tests the barytes panel; Inset bottom: delegates unwind on the Houston Port Dinner Tour

IMFORMED’s inaugural Oilfield Minerals & Markets Forum weathered Houston’s record rainstorms and flash floods to pass out as a most successful and enjoyable conference for all those in attendance.

Following a most convivial Welcome Reception sponsored by Excalibar Minerals LLC and Anglo Pacific Minerals Ltd, a programme of 22 high level presentations delivered by leading experts in the industry provided an excellent platform for discussion, knowledge acquisition, and networking among an international gathering of the oilfield mineral sector’s key players.

“This was by far the best organised and well represented event of its kind in the US I’ve attended in 20 years” John Newcaster, VP Distribution & Logistics, Baker Hughes Inc., USA (more feedback)

Here are just a few of the highlights and takeaways:

Oilfield market – the big picture

The scene was set by two fine overviews: the first, a step-back-and-take-stock focus on oil price trends, and the second, on how a large industrial minerals group is reacting to the oilfield mineral supply market.

Oil and gas expert Steven Ilkay, Managing Director, Angle Capital explained his take on the oilfield market with a series of forensic examinations of oil price trends illustrated by charts employing several analytical variations.

He distilled his analysis in plain speaking: “Overall it’s relatively bullish for the outlook, but there will be a long drawn out recovery, and at $65-70/bbl for at least a good 1-2 years. The odds of a sudden return to $80/bbl are limited, with many hurdles to overcome”.

In “Oilfield minerals: supplying the market”, Dave Frattaroli, Chief Commercial Officer, Unimin Energy Solutions, reviewed the structure and challenges of the oilfield sector from the viewpoint of a multinational, multi-mineral supply group.

He posed: “Are we transitioning to a new normal?” and went on to outline perceived upsides and downsides for minerals in drilling, cementing, stimulation, and production. He also used a simple but sweet chart illustrating the evolution of unconventional resource development and where certain countries stood at present – no surprise to see the USA ahead of the pack, but interesting to note the UK, Mexico, Argentina, Australia, and China bridging the “De-risking” and “Commercial pilot” categories.

On challenges, Frattaroli said: “The oil and gas downturn may be ‘global’, but its ‘local impacts’ are profoundly different.” These he considered to be cost-to-serve, speed, scale, supply chain, and quality – for which he provided examples.

In summary, Frattaroli extolled: “Location, location, location – the industry is global, but our business is local. Geographic diversity is a plus, especially in down markets, and while the flight away from quality happens, it is very short-lived. Overall, the scope, depth, and diversity of your product portfolio makes for a richer conversation and a better relationship – and relationships still matter!”.

Delegates enjoying the Anaconda Barite reception among the exhibitors

 Barytes – all you need to know

A respectable-sized volume of proceedings could be published on this session alone, based on what many considered to be the best presentation and panel discussion on barytes they had witnessed in recent times. In essence, if one may parody Wood Allen, it was a case of “Everything you always wanted to know about barytes* (*But were afraid to ask).”

Kicking off was Peter Huxtable, Director, The Barytes Association, with “Global barytes industry overview”. World barytes production in 2014 was reported at 9.72m tonnes of which 7.46m tonnes (76.8%) was consumed in drilling muds, the remainder used in fillers (10.6%) and chemicals (12.1%).

The main regions of barytes consumption were North America (3.8m tonnes, 40%), China (1.4m tonnes, 15%), and “other Asia” (1.2m tonnes, 12%).

Huxtable pointed out that over the last two decades, while global annual oil and gas drilling footage had increased, specific barytes consumption per foot drilled had declined. In 1998, some 350m ft of drilling consumed 5.3m tonnes barytes (approx. 66ft/tonne barytes), compared to 620m ft drilled in 2010 consuming about 6.1m tonnes barytes (approx. 100ft/tonne barytes).

Huxtable noted that FOB barytes prices had risen from $40-60/tonne in 2007 to around $115-140/tonne in 2015, with the steepest rise occurring during 2010-12.

John Allen, Managing Director, Anglo Pacific Minerals Ltd, dissected key trends and challenges in his talk “Barytes sourcing and marketing”. Since 2012, the barytes industry has been impacted by several factors on which he provided details, these included: the emergence of Mexico, fracking, new grinding capacity, the rise of the Middle East market, the fall in Chinese barite market share, the increase in Moroccan barytes exports, a lowering of freight rates, the decline of Indian exports, increased reliance on Nevada barytes, and the introduction of 4.10 and 4.00 SG barytes.

Allen considered the USA as having excess grinding capacity, with some 7.2m tonnes hosted mostly in Louisiana, Nevada, and Texas. With the pending Halliburton/Baker Hughes merger, he expressed doubt over the future of the Baker Hughes plants in Corpus Christi and Morgan City.

Challenges facing the business include the increased presence of online sellers, a proliferation of Chinese sellers, availability of material, impact of weather systems and national holidays, currency fluctuations, freight availability and fluctuations, port congestion, the price of diesel in China, quality control, and local taxes.

John Newcaster, VP Distribution & Logistics, Baker Hughes Inc., answers one of several questions during a lively panel session on barytes.

A focus on Mexican barytes was provided by Mario Trevino, VP Marketing, Baramin SA de CV, in “Mexico as a reliable source of barytes”. In a well illustrated presentation, Trevino demonstrated how Mexican barytes exports had increased from 24,600 tonnes in 2010 to 402,000 tonnes in 2014, mostly destined for the USA (83%), but also to Columbia and Venezuela.

The strategic and logistical advantages of Mexico serving the Gulf, Caribbean, and South American markets were highlighted along with a description of Baramin’s 60 year experience in the barytes supply market.

Baramin operates two mines: La Huiche mine, Galeana, Nuevo Leon, and in 2013 opened a new underground mine, the Grecia mine, Aramberri, Nuevo Leon. Production in 2015 is forecast to be 180,000 tonnes and 150,000 tonnes, respectively.

The Linares milling plant (16,000 tpm) supplies barytes to the north-east of Mexico and exports to the USA, Caribbean countries and South America. The Nanchital milling plant (20,000 tpm) supplies barytes to south-east Mexico.

In his opening remarks for “Application of barytes in drilling fluids: past and present”, John Newcaster, VP Distribution & Logistics, Baker Hughes Inc., made an intriguing comparison between cappuccino and drilling fluids.

He concluded that for each, “The final product is the result of complex multiple global supply chains subject to multiple market cycles all coming together. Cappuccino has gone up in cost, but barite much more so. Why?”

There on in, Newcaster’s frank and thought-provoking presentation covered the recent past, present, and future of barytes in drilling fluids, prompting one impressed delegate to express: “Newcaster blew it out of the park!”.

Among other factors, including China, the dry bulk market, and mining in Nevada, Newcaster considered that the grade shift change in barytes had been one of the most significant factors impacting the market, with 4.20 SG now considered a premium, majority use of 4.10, and sub-4.10 gaining traction leading to the current “fit for purpose” blend of grades in the market today.

Newcaster provided forecasts for barytes supply from China, India, Morocco, and the USA, concluding that operators would continue to wisely balance cost and functionality with blended grades, barytes scarcity will further push the trend, and Chinese producers were becoming more sensitive to market swings.

Yasser Rasheed, VP, RP Minerals, Egypt, engages the panel on drilling fluids.

Picking up on a common theme mentioned in preceding talks, “Worldwide dry cargo shipping” by Jesper Hoppe, Managing Director, Viking Shipping Co. A/S and Morten Petersen, Managing Director, Viking Shipping Co. (Hong Kong) Ltd, gave an excellent synopsis of the status and outlook for the dry bulk shipping market, an important factor for the barytes supply sector.

It was a sobering rain-check. The duet did not hold back on describing the somewhat gloomy realism of the current shipping market with growth in the global fleet still outstripping cargo volumes. If scrapping continues to outpace ship deliveries, then the market may start to rebalance itself in 2016. Otherwise, as Hoppe said: “2015 remains set to be a hard year for ship owners.”

Clays & Abrasives

The other great workhorse oilfield mineral is bentonite. Sue Shaw, Senior Analyst, Roskill Information Services Ltd, presented “Bentonite supply and demand in drilling”, reporting that global demand for bentonite in drilling in 2014 was around 2.26m tonnes of bentonite and an additional 0.08m tonnes of fullers’ earth, representing bentonite’s fourth largest market after foundry, pet litter, and iron ore pelletising.

Shaw noted that bentonite demand from drilling muds increased by 3-4% per year over the last decade, but that demand varied widely between regions. Demand from the drilling market is largest in North America, where drilling consistently accounted for just over 20% of US bentonite consumption until recent increases lifted its share to over 30%. However, this is expected to fall in the future owing to the drop in drilling activity.

Looking ahead, China is expected to become the largest producer of bentonite worldwide, overtaking the USA, while consumption of bentonite in drilling will increase in Asia and South America.

Frank Wright, President, Hectatone Inc., introduced a new commercially developed source of the special clay hectorite in “Hectorite for oilfield drilling fluids: a bright future”. He compared hectorite with bentonite in drilling mud functionality and described Hectatone’s development of its large hectorite deposit in Humboldt county, Nevada.

Wright went on to explain that: “Hectorite clay has emerged as the enabling mineral with thermal stability superior to bentonite clays to perform in challenging environments known as high pressure and high temperature (HPHT).”

Unlike currently available hectorite products manufactured using a cost intensive “wet process” to remove impurities where material recovery rates are < 50%, Wright explained that Hectatone uses a dry process that incorporates 90% purity clays to manufacture cost effective products with unique and superior performance characteristics.

Randy Rapple, President, Barton International, extols on the performance of garnet blasting abrasives in surface preparation for the oilfield market – with apparently some humour for the panel.

To another important, but often overlooked sector of the oilfield market: abrasives for surface preparation and cleaning. Randy Rapple, President, Barton International, presented “Reducing turnaround time and cost with the use of garnet abrasives”.

Rapple reviewed the benefits of using garnet: faster surface preparation, reduced abrasive usage, consistent anchor profile, superior surface finish, superior cleanliness, ultra-low dust.

Although garnet is more expensive than some other abrasives, such as slag ($0.25/lb v $0.10/lb), less volumes are required, and Rapple demonstrated that taking into account abrasive and labour costs, garnet can reduce total costs by as much as 21%.

Processing & Bulk Handling

In his presentation, “Optimisation for barite processing”, Jean-Francois Maréchal, Managing Director, Poitemill, took the audience through the keys to success in a process engineering company, raw material and product characterisation, and grinding and classifying technologies at the Poitemill pilot plant.

Maréchal provided more detail on grinding principles, the company’s innovative loop process, selection of classifying equipment, and the utilisation of computational tools.

Joe Roettle, Global Sales Manager, Ecutec Barcelona SL, makes a point on grinding techniques

Doug Spisak, Director of Proposals & Technical Sales, Heyl & Patterson Inc., presented “Frac sand drying” and proceeded to discuss the drying of frac sand and the parameters that effect the selection of drying equipment.

The main drying methods, by fluid bed or rotary dryers, were reviewed and compared in detail, as were static versus vibrating dryers.

Rotary dryers are very forgiving regarding feed material properties such as moisture and particle size, the controls are somewhat simpler, and less electricity is typically consumed. They may be commissioned more swiftly as well.
Fluid bed dryers are more thermally efficient, particle size can be more readily classified with a fluid bed system, there is lower capital cost, a smaller footprint, and emission control equipment is smaller in size and lower in cost.

In “Bulk handling systems for minerals and aggregates: strategies for a ‘down market’”, Neal Levine, Business Development Manager, Arrows Up Inc., introduced a new innovative handling system for frac sand and other minerals.

In listening to the “Voice of the Customer” and prompted by questions of “How can you maximize product transport and storage capacity while lowering the cost per cubic foot? How can you reduce rail and trucking bottlenecks? How can you reduce touches (handling costs)?, and How can you forward position product?”, the company developed the Jumbo Bin System.

The Jumbo Bin is a lightweight, fully portable, galvanised steel and fibre glass vessel measuring 10ft x 8ft 6in x 8ft 6in, which can hold 55,900-60,400 lbs material, and can stack up to three units high.

Levine demonstrated by video clips how the Jumbo Bin can discharge rapidly kaolin and wood pellets. Levine said: “The Jumbo Bin can discharge 25 tonnes of sand or cement in 12-24 minutes, depending on conveyor speed. Complete gravity discharge in 1.5 minutes.”

Proppant overview

Day 2 focused on the proppant market. Leading off was Samir Nangia, Director of Consulting, IHS Energy Insight, with “North America proppant outlook”.

After explaining the methodology of investigating and compiling data for the proppant industry, Nangia broke down the structure and size of the North American proppant market and commented on the supply, demand, and pricing of the sector.

By volume, frac sand remains the main proppant category at 93%, followed by resin coated sand (RCS), 4%, ceramic proppants, 3%. Nangia said: “North American proppant demand is forecast to decline by 15% in 2015, and recover through 2017 in line with oil prices.”

North American proppant consumption is expected to decrease from 108.3bn lbs to 106.6bn lbs between 2014 and 2017, representing a decline of 1% per annum. Nangia noted that the decline for ceramic and RCS is higher than frac sand owing to lower frac activity in the Bakken and Canada. Proppant consumption is forecast to decrease in most plays except for the Haynesville.

With oversupply and low demand, a weak pricing environment is to dominate 2015, with Northern White Sand prices forecast to decline 20% over 2014 levels. Regarding ceramic proppants, Nangia said: “For higher-end ceramic proppant products, we expect prices to increase due to significant proppant product innovations, however adoption rates will be slower in this low oil price environment.”

Anyone hoping to doze in a quiet morning session following Anaconda Barite’s reception the previous evening was brought to attention by the engaging New York patois of Mark Zdunczyk’s delivery of “Exploration and evaluation of frac sand”.

In an entertaining presentation ripe with amusing anecdotes and frank opinion infused with many years experience in frac sand evaluation, Zdunczyk gave delegates a reality check with his back-to-basics exposé of how companies are and should be exploring for frac sand.

Mark Zdunczyk’s entertaining alternative take on “indicators” identifying the USA’s key source rocks for frac sand exploration. Courtesy Mark Zdunczyk.

He emphasised the need for basic geological desk studies to identify the key source rocks for frac sand (“It’s all out there”), the undertaking of elementary field work, selection of appropriate drilling equipment, and the use of a well-equipped and professionally run laboratory for sample testing.

More than a few delegates were surprised with his revelation of continuing lamentable practice of the above by many players in the industry, but in the boom days of demand few cared, he said. “With the market down, now is the time to properly explore and evaluate.” said Zdunczyk. And with his own order book full, it is clear that many are doing just that.

Zdunczyk concluded with his now famous “10 Facts of Frac”, and an interesting variation of identifying the USA’s key frac sand host rocks – not as a stratigraphic column, but by allocating formation member units with their equivalent local beers! Perhaps a more memorable aid for certain delegates.

Ceramic Proppants

Brazil’s Groupo Curimbaba has a long pedigree in industrial minerals, particularly in bauxite and fused minerals. Rafael Curimbaba Ferreira, Director Business Development, Grupo Curimbaba, provided an overview of the group’s activities with a focus on its development of ceramic proppants in “The Curimbaba Group past, present & future.”

At Poços de Caldas, Minas Gerais, Brazil, Curimbaba produces some 300,000 tpa of a full range of ceramic proppants sourced from a >300m tonne reserve of bauxite, ranging 45-95% Al2O3.

The company has developed a special “Lock Proppant” grade for flowback control, comprising a special mix of spherical and angular particles which impart mechanical blocking of particle movement in the fracture zone.

In “Chinese ceramic proppant and oilfield chemicals: recent development, current status and outlook”, Gene Kim, Chief Executive Officer, AM2F Energy Inc., reviewed the ceramic proppant market situation before reporting on Chinese developments in proppants and oilfield chemicals.

Of interest was Kim’s observations of the supply market’s reaction to the US downturn in pursuing new proppant markets in Latin America, Africa, South East Asia, Middle East, and Australia, but also in creating new market outlets with their products, such as grinding media (CarboGrind) and foundry sand (CarboAccucast).

Producers are also adding value to existing products and developing new products, such as ultra-high strength proppant, lightweight proppant, electrically conductive proppant, and cylindrical proppant.

While admitting lost ground in the USA, Chinese proppants are gaining in South America and South East Asia, according to Gene Kim, CEO, AM2F Energy, USA.

Regarding Chinese ceramic proppants, Kim forecasts a “gradual growth potential”. While admitting lost ground in the USA, Chinese proppants are gaining in South America and South East Asia. He expects them to sustain growth with the large domestic demand potential and continuous development of new products and diversified offerings.

Jack Larry, General Manager, Saint-Gobain Proppants, presented “The future of ceramic proppants in the unconventional shale market”. He compared the hydraulic fracturing market today to just ten years ago, highlighting some major contrasts as the industry has evolved.

Today in horizontal drilling, some 8-12m lbs of proppants are used per well, accounting for 10-40% of drilling and completion costs, and using a high number of stages (>20), compared to more vertical drilling, 300,000lbs/well, and a share of just 1-10% of costs ten years ago.

Larry explained the science of proppant placement in fractures, compared proppant performance in monolayers and packs – emphasising that understanding both was important in the “New World Order” – and analysed proppant use in the Bakken.

He emphasised the importance of raw material feedstock selection (Saint-Gobain uses bauxite): “What materials can do depends on what we choose to do with materials.” said Larry. “Just saying ‘Better than sand’ is no longer good enough to justify ceramic use. Only top performing products can survive against the high volume sand completion economics.”

Emerging Proppant Markets

The final session focused on new entrants and growth areas in the proppants business.

“The outlook for Indian proppant market and shale gas industry” by Manan Shah, Director, Ashapura International Ltd, reviewed energy demand, policy, key players, and challenges in India’s energy sector before focusing on ceramic proppant development in the country.

Primary energy demand in India is to increase threefold by 2035 to 1,516m tonnes of oil equivalent from 563m tonnes of oil equivalent in 2012. New policies in coal bed methane and shale gas exploration have been initiated as well as new licensing to encourage investment across the oil and gas sector in India.

Conference Chair, Mike O’Driscoll, Director, IMFORMED, introduces Manan Shah, Director, Ashapura International Ltd, India, who informed delegates that Ashapura is to commission a new ceramic proppants plant in India, in November 2015.

Indian proppant installed capacity is about 10,000 tpa, and demand for ceramic proppant in 2013 was around 7,000 tonnes. An increase in horizontal wells is expected to push ceramic proppant demand to 11,5000 tonnes by 2020.

Shah said: “With a high quality and large volume captive bauxite reserve suitable for proppant application, and expertise in bauxite calcination, Ashapura has seen an opportunity gap for good performance proppants at a reasonable price.”

Ashapura has developed a new high strength proppant, approved for use by ONGC, and is planning to commission a new 60,000 tpa ceramic proppant plant in Kutch, Gujarat, in November 2015.

As the Forum took place, Australian ceramic proppant developer Coretrack Ltd was undergoing a reverse merger to become LWP Technologies Ltd, and Siegfried Konig, now CEO and Chairman of LWP, outlined the company’s objectives in his presentation “Practical solutions and innovative technology for the oil and gas services industry”.

LWP’s Brisbane 3,000 tpa pilot plant was completed on 20 May 2015, commissioning is underway, and scheduled target date for manufacture is 31 July 2015. Konig described the project as: “Disruptive, game changer technology for the manufacture of strong, lightweight ceramic proppants at low manufacturing costs than comparable proppants made from bauxite and/or kaolin clay.”

Central to enabling low production costs is the utilisation of fly ash as the feedstock raw material in the LWP development. Konig highlighted that US shale oil and gas reserves are often located near coal resources and coal fired power plants, and in overlaying location maps of each he identified the potential feedstock in the USA.

LWP is in discussions with potential licensees and JV partners from the USA, Canada, Europe, India and China, and interestingly, is undertaking due diligence on a “dormant plant” to assess feasibility of changing its feedstock to fly ash and commencing manufacture.

In “Frac sand developments for the Argentinean shale oil/gas market”, Richard Spencer, CEO, South American Silica Corp. outlined the politics and potential of Argentina’s vast shale gas resource and a logistical appreciation of supplying proppants to the region.

Spencer highlighted the strategic importance of the Vaca Muerta shale gas play to Argentina, and the potential for Argentina to become a regional energy powerhouse. There has been sustained, increasing production from the Vaca Muerta, but for its full potential to be realised, Spencer acknowledged that Argentina needs “to get its fiscal house in order”, and this is underway, not least hinging on the impending general election in October 2015.

In comparison with US shale plays, the Vaca Muerta is at a depth of 3,000 metres, some way between the Eagle Ford and Haynesville. Spencer said there is need for very high quality frac sand.

He estimated total proppant requirements in 2017 for Vaca Muerta at around 800,000 tonnes, which could be split 50:50 between frac sand and ceramic proppants. However, Spencer considered: “A 9 or 10K (good quality) frac sand is very likely to substitute for some of the ceramic proppant requirement, increasing the potential market share for sands of exceptional quality.”

The main challenge is clearly transport of proppants to the drill sites. There are no frac sand deposits or ceramic proppant plants near Vaca Muerta. South American Silica is evaluating deposits in Uruguay and Brazil. The nearest port, San Antonio, is 300 miles from Vaca Muerta, and the inland transport infrastructure needs upgrading.

The good news though, as relayed by Spencer: “Argentina needs and wants oil production, and fracking is accepted.” Watch this space!

Finale Harbour Tour

After an intense two days of oilfield networking and knowledge acquisition, delegates finally got to see the sun, hidden by heavy rain clouds for much of the week, and unwound aboard the M/V Sam Houston for an evening dinner tour of the Port of Houston.

Delegates aboard the M/V Houston on the Finale Houston Port Dinner Boat Tour

IMFORMED is delighted with the success and positive feedback from delegates on Oilfield Minerals & Markets Forum Houston 2015, and is already looking forward to planning Oilfield Minerals & Markets Forum Houston 2016 with delegates’ comments and suggestions in mind.

Indeed, we have already begun taking bookings for sponsorships and exhibits, and offers of presentations have been accepted. Please do not hesitate to contact Ismene Clarke for the former, and Mike O’Driscoll for the latter.

A special thank you again to all of our speakers, sponsors, exhibitors, and attendees for making the event such a success. We hope to see you again soon.

For more pictures of Oilfield Minerals & Markets Forum Houston 2015 please go to Gallery

Missed attending Oilfield Minerals & Markets Forum Houston 2015?

For programme, attendees, pictures, and feedback please go to Past Forums.

A set of presentations (as PDF) maybe purchased: Price £500 – please contact:

Ismene Clarke, T: +44 (0)208 224 0425; M: +44 (0)7905 771 494; E: [email protected]

Our next upcoming Forum…register now!