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North American demand to grow over 8% annually
Demand for proppants in North America is forecast to increase over eight percent annually through 2019 to 152 billion pounds, with growth remaining healthy despite the current and expected low oil price environment. The emergence of the Permian Basin as a major tight oil play and a shift toward significantly higher volumes of water and proppant in hydraulic fracturing have been the main drivers of rapid change in the market over the past few years. While growth going forward will remain substantial, it is expected to slow through 2019, as low oil and gas prices hold back completion activity and proppant loading trends begin to stabilize.
Lower oil & gas prices will prevent growth in drilling
A period of high and relatively stable oil prices between 2011 and 2014 led to growth in well completion and hydraulic fracturing activity in the US and Canada, supporting gains in proppant demand. Among the most rapidly growing areas was the Permian Basin in Texas, with other areas of strong growth including the Niobrara in Colorado and the Utica in Ohio. Oil prices have fallen substantially since mid-2014, however, and are not expected to recover fully until after 2019. As a result, drilling activity in liquidsrich unconventional plays is projected to remain lower through 2019 than in 2014. Although export opportunities for natural gas should spur some increased drilling activity targeting gas, overall drilling and completion are expected to remain nearly flat.
Colorado, Oklahoma, Canada to offer best opportunities
While overall completion activity will be held back by the low oil and gas price environment, there remain several unconventional resource plays with significant room for future growth in well completions, creating above average opportunities for proppants. Among the largest proppant markets in the US, Colorado and Oklahoma are expected to hold the best short term prospects for growth, while Texas and Pennsylvania are forecast to grow more slowly. In large part, this will result from the relative maturity of the Eagle Ford shale in Texas and the Marcellus shale in Pennsylvania when compared to the less developed unconventional plays in the former states. Canada is expected to see very strong growth, as the country holds a large volume of tight oil and shale gas resources yet lags the US in their development, having focused investment more heavily on oil sands resources to date.
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