A reputed manufacturer of sand based proppants in India approached ANS MarketPro to help them understand the global ceramic based Proppant market before they build a factory in India to supply to the most promising market.
Proppant is a solid material, typically sand, treated sand or man-made ceramic materials, designed to keep an induced hydraulic fracture open, during or following a fracturing treatment especially in Shale oil and gas formations.
Currently the manufacturer of the Proppant was producing sand based proppants from his factory in East India for supply in Indian markets. The client wanted to expand to producing of ceramic proppants for shale oil and gas markets globally.
The scope of work for the assignment was following:
- Assessment of current and future global demand for ceramic proppants
- Assessment of global capacity and supply for ceramic proppants: existing, expansion, and greenfield
- Pricing of ceramic proppants for different regions
- Prices of proppants in different regions with break-up of each cost component and profit margins
- Major Influencers for use of ceramic proppants
- Distribution channels in different regions
- List of producers of ceramic proppants
- Technology advancement in production of ceramic proppants
- Recommendation of ideal capacity that client can exploit
Approach and Methodology
Bottom-up approach was utilized for assessment of global demand, supply, and capacity addition. Time horizon for Forecast of variables was 2015-2020. For assessment of technology, prices and pricing of ceramic Proppant data was collected from both primary and secondary sources (international databases).
The primary sources of data were global Proppant manufacturers, oilfield services companies, technology experts, chemists and industry experts.
A mathematical model was used to produce forecasts. The major variables of the model were future oil and gas wells that would be fractured in Asia, Europe, Africa, US, and Middle East in each country in these regions where shale oil and gas activity is at full swing.
Further, country specific CAPEX plans and proposed policy were analysed for assessment of requirement of ceramic proppants. A per fracture and per well average proppant use were used along with project completion timelines that are followed by oilfields services companies.
Analysis and observations
The demand forecast of the ceramic proppants showed that countries in The Americas and Europe especially Russia were more inclined to use ceramic proppants given the motivation of use of advanced technology and efficiency of these proppants.
As per our study, the oilfield services companies recommended the project proponents on the use of type of proppants for a particular oil and gas block and they were the major influencers for selection of type of proppants.
As per our estimates the distribution of ceramic proppants was a major issue and transportation costs were in the range of 40 to 50 percent as proportion of total delivered costs as the proppants factories were located at a substantial distance from the oil and gas block.
ANS MarketPro, on the basis of analysis using our proprietary models SurveyIntel Pro ©, EcoAnlayticsPro © and MarketIntel Pro ©, proposed that an initial capacity of 60,000 Metric Tonne shall be built. The capacity shall be built in the region which minimizes the cost of delivery of ceramic proppants as price is the major determinant, apart from efficiency, for customers to switch to these proppants.
The timing of build-up of capacity was based on crude oil prices as the oil and gas players CAPEX plan are dependent on crude oil prices. We forecast the crude oil prices to increase in 2018 to the levels that will warrant additional CAPEX in developing oil and gas blocks and hence use of costlier ceramic proppants.
Key benefit derived by client
We saved the client from investing in the ceramic proppant plant which involves substantial CAPEX before the actual pick-up of the demand for ceramic proppants, as well as helped in finding a suitable location for siting of the plant to increase attractiveness of its product in term of aggressive pricing.