Until recently, the sands of the Permian Basin were considered near-worthless. That was until oil companies found that the more sand they pumped into the well, the higher the production. The Permian Basin’s horizontal wells and other nearby formations are now estimated to consume 200,000 pounds more per well than in 2017.
Amid skyrocketing demand and rising prices for the key hydraulic fracturing ingredient, several major frac sand suppliers plan mining operations expansions in the region. Texas regulators already issued at least 15 permits for new frac sand mine startups in 2018, with annual projected supply expected to reach 40 million tons, according to analysts. Several Permian sand suppliers reported securing long term customer commitments of more than 1 million tons of sand per year.
In September, Houston-based WildHorse Resources started construction of its $70 million frac sand mine the eastern end of the Eagle Ford Shale. The company plans to build a wet plant, a dry plant and sand excavation infrastructure on 727 acres in Burleson County, Texas.
With all this activity comes power challenges. Limited access to interconnected power grids adds more time and money to a new frac sand mine and on-site processing facilities. So, what happens when mines are ready before a permanent power grid is set up?
The Power To Rent
It can take anywhere from 12 to 24 months for a utility company to set up the infrastructure to power a frac sand mine, primarily because mines are built in remote locations. After $100 million in new mine investments, a frac sand supplier cannot hold production until power is available. That’s when temporary natural gas can bridge the power gap.
Natural gas-powered generators allow sand suppliers to cost effectively scale up to start operations before the utility company sets up permanent power. Several Permian sand mine companies are using temporary natural gas generators to produce up to 83 MW of power and gain a competitive advantage. Rental power companies, owners’ and contractors’ electrical engineers work closely to develop a sophisticated, cost-effective and environmental- conscious power plan for each mine.
Natural gas requires a lower investment than alternative fuel sources that allow mine operators to allocate capital to other areas.
Natural gas generators cost 40 to 45 percent less than diesel, despite the initial up-front expenses for natural gas power. However, the costs associated with natural gas generation installation and operations, as well as the required maintenance of these complex installations, is less than the cost to hold production until permanent power is available, which can take years.
Also, once a grid connection is installed, surplus gas-generated power capacity could be exported to the local grid and sold on the electricity market to generate additional revenue for the frac sand mine operator (under agreement with the network operator).
Reduce Environmental Footprint
Over the years, many local governments and authorities have raised concerns about the long-term continuous use of diesel generation because of NOx pollutants. Tighter regulation means sand mine developers are expected to explore alternative options to minimize energy waste, greenhouse gas emissions and improve air quality.
Mine operators find natural gas to be an attractive option for not only economic reasons but also for the environmental benefits. Natural gas emits less carbon dioxide than diesel fuel by roughly 30%, according to U.S. Energy Information Administration.
With the emergence of lean-burn engine technology, natural gas power generators meet the U.S. Environmental Protection Agency emissions regulations, and if electrically grounded properly, natural gas generators meet Mine Safety and Health Administration’s requirements.
Flexibility and Redundancy
Temporary power generation can be configured to scale up over the lifecycle of the frac sand mine. For example, a frac sand mind might only need an initial 20 MW of power, then 5 MW installed every two months as the construction progresses.
While every project is different and often various generator configurations used to achieve a site’s required redundancy level, gas-powered generation can install a redundancy of 2N+1 to achieve 100% uptime. This type of redundancy is necessary because every 30 days a generator needs to be serviced for maintenance. A sand mine operator certainly doesn’t want to shut down or reduce production due to routine maintenance on a generator.
In conclusion, natural gas provides cost-effective, sustainable, flexible and dependable power for frac sand mines waiting on permanent power. One mine started up almost a year ahead of schedule at a significantly lower cost and a reduced environmental impact than with diesel thanks to natural gas power rental.
With North American frac sand demand expected to reach an all-time high in 2018, the need for natural gas generators will only increase as it continues to be a logical choice for many mining ventures.
Mike Mayers is a business development manager specializing in the frac sand industry for Aggreko and based in Houston, Texas. Aggreko can be reached at 1-800-AGGREKO (1-800-244-7356) or at www.aggreko.com.