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Global Market Demand for Proppant
Base Market as Oil & Gas Drilling
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AGENDA
AGENDA
Proppant - Product Overview
Overview of Oil & Gas Industry
Market Outlook for Proppant
Summary
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Role of Proppant in Drilling Program
Proppants are an integral part of hydraulic fracturing, the process by which unconventional oil and gas
resources are extracted.
Sized particles mixed with fracturing fluid to hold fractures open after a hydraulic fracturing treatment.
Typically treated sand or man-made ceramic materials
Each Proppant type has its own
advantages and disadvantages,
and reservoir engineers decide on
the type to be used depending on
Geology, Availability and Prices.
Silica Sand or Frac Sand
3 Main Types of
Proppants used
in Oil & Gas
Industry
Resin Coated Proppants (RCP)
Ceramic Proppants.
Market Demand for
these types is discussed
in preceding slides
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Proppants: By Volume & Value
In 2011 the world consumed ~60bln lbs Proppants and the value estimated was ~$3.7bn
By Volume type, Silica Sand is dominating the fracturing market with 75% of the total demand, most of
the oil & gas producers prefer silica sand due to its cost advantage over the other two
However in terms of value, the market is highly dominated by the ceramic Proppant, users prefer
ceramic proppant mainly because of its high quality and ease of operation
Proppant market share
by value - 2011
Proppant market share by
volume - 2011
Ceramic
proppant
10%
Resin
coated
proppant
15%
Silica
sand 75%
Silica
Sand
45%
Resin
coated
proppant
6%
Ceramic
Proppant
s
49%
The major application of Proppant is for Hydraulic fracturing in Oil & Gas Drilling program. The outlook
for unconventional oil and gas development is the primary determinant of proppant market.
Source: Internal Projection, based on the market news
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AGENDA
AGENDA
Proppant - Product Overview
Overview of Oil & Gas Industry
Market Outlook for Proppant
Summary
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World Oil Reserves and Production
Currently, oil production is
dominated by 3 regions i.e. North
America, Eurasia and Arab
Countries
The above mentioned regions, all
together have ~70% market share
Reserves by Region - 2012 Production by Region - 2012
S
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:

E
n
e
r
g
y

a
n
d

A
r
a
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E
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o
m
i
c

D
e
v
e
l
o
p
m
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,

2
0
1
2

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Global Gas Reserves & Trade Flow In 2020
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:

G
E

G
l
o
b
a
l

S
t
r
a
t
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g
y

a
n
d

A
n
a
l
y
t
i
c
s
,

2
0
1
3

Europe
and
Eurasia
38%
Middle
East
38%
Africa
7%
Asia
Pacific
8%
North
America
5%
S & C
America
4%
Europe
and
Eurasia
32%
Middle
East
16%
Africa
6%
Asia
Pacific
15%
North
America
26%
S & C
America
5%
Production
Global natural gas production was
3,276 billion Cubic meters
Reserves
Global natural gas reserves were
208,400 billion Cubic meters
Currently, major Gas production
is in the 2 regions viz. Europe &
Eurasia and Middle East
Keeping together both have a
market share of ~75%
Source : BP Statistical review of world energy 2012
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Regional Oil & Gas Reserves (1/2)
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:

I
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A

-

J
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1
0
,

B
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k

C & S
America
89
185
Oil
23
50
Gas
Europe
35
140
Oil
22
16
Gas
North
America
50
397
Oil
45
92
Gas
Middle
East
68
5
89
9
Oil
116
23
Gas
Proven Resource
Proven vs. Unconventional Oil resources in Trillion Barrels | Conventional & Unconventional Natural Gas in Billion m
3

Conventional Unconventional Unconventional Resources
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Regional Oil & Gas Reserves (2/2)
Proven vs. Unconventional Oil resources in Trillion Barrels | Conventional & Unconventional Natural Gas in Billion m
3

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:

I
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-

J
a
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-
1
0
,

B
P

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l
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k

E. Europe
& Eurasia
65
28
0
Oil
136
94
Gas
Asia &
Pacific
40
170
Oil
33
83
Gas
Africa
77
170
Oil
28
38
Gas
Proven Resource Conventional Unconventional Unconventional Resources
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88.9
91.6
96.3
100.7
104.6
108.5
2012 2015 2020 2025 2030 2035
Demand is forecasted to increases by close
to 20 mb/d over the period 20122035,
reaching 108.5 mb/d by 2035, up from 88.9
mb/d
Which is 22% growth from the existing
demand
World oil demand outlook mb/d
Source: World Oil Outlook 2013, OPEC
World Demand for Oil & Gas
Global LNG demand by 2035 is expected to
rise from 111 tcf in 2008 to 169 tcf
The growth would be ~65% from 2008 to 2035
Demand is highly driven by the emerging
markets like India and China and the rising
concern over the CO2 emission from other
sources of energy
111
123
133
144
157
169
2008 2015 2020 2025 2030 2035
World Natural Gas Demand in tcf
Source: Global LNG - EY
Huge oil & gas reserves across the world can meet the energy demand for ~250 years
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AGENDA
AGENDA
Proppant - Product Overview
Overview of Oil & Gas Industry
Market Outlook for Proppant
Summary
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Unconventional Oil Market in bpd Unconventional Gas Market in tcf
In 2009 unconventional oil supply was
doubled to 4.1m bpd compared to 2003
Unconventional supply is projected to grow
by over 650% from 2003 to 2035
By 2035 unconventional liquids will be
responsible for 12.2% of global supply

2.3%
4.9%
6.0%
7.3%
8.4%
9.5%
12.2%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
-
20
40
60
80
100
120
2003 2009 2015 2020 2025 2030 2035
Demand for Proppant (1/3)
Natural Gas is going to be a major energy
driver in coming years
Demand growth will be at ~65% from the
2010 volume
Unconventional share of production is
expected to raise from 50% (2010) to 65%-70%
(2035)
Source: Internal Projection, based on the market news
Source: EIA Projection 2035
40%
54%
58%
62%
66%
70%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
20
40
60
80
100
120
140
2010 2015 2020 2025 2030 2035
Conventional Unconventional
% Unconventional Share
Conventional Unconventional
% Unconventional Share
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Though technology improvement played a major role in early 2000s for the proppant market, however,
the established market of hydraulic fracturing is driving the demand for proppant now
Demand for Proppants is directly proportional to the number of frac job carried out in a year
Frac jobs saw a growth of ~24% and proppant witnessed 60% growth across the world in 2007
Similarly in 2011, frac jobs growth stood at ~37% and the proppant market grew at 75%
-
20
40
60
80
100
120
2006 2007 2008 2009 2010 2011
T
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USA Rest of the World Canada
Numbers of Frac jobs per year in nos
0
10
20
30
40
50
60
70
2006 2007 2008 2009 2010 2011
Demand for Proppants per year in bn lbs
Source: Proppant Prospects for Bauxite Mike ODriscoll
Source: Hydraulic Fracturing by Robin Beckwith
Proppant Demand is directly proportional to number of frac jobs per year
Demand for Proppant (2/3)
Effect of Decrease in
the frac jobs in 2009
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Demand for Proppant (3/3)
0.3 0.4 0.5 0.5 0.6 0.6
0.3
0.4
0.5 0.6
0.7
0.9
0.2
0.3
0.4
0.5
0.6
0.7
0.2
0.5
0.8
1.1
1.5
1.7
0.2
0.3
0.3
0.5
0.6
0.9
1.1
0.6
1.4
2.1
2.6
3.2
3.9
5
0.8
0.8
1
1.2
1.3
1.4
1.5
0.1
0.1
0.3
0.4
0.8
1.1
1.5
0.6
0.7
0.8
1.2
1.4
1.7
2.1
0
2
4
6
8
10
12
14
16
2011 2012 2013 2014 2015 2016 2017
Other MENA Mexico Argentina Poland
China Offshore Australia Russia
International Frac Capacity (MM HHP)
2011 2012 2013E 2014E 2015E 2016E 2017E
3.1 4.4 6 8 10 12.3 15.1
As a result of increase in the contribution by the unconventional oil & Gas market the frac capacity
is expected to increase in coming year
Country wise
Increase in Frac
capacity 5 years
growth of 243%
US Proppant market contributes to ~75%
and ROW accounts for about 25% of the
global production
US market is expected to grow at a CAGR
of 10.75% from 2013 to 2017
Proppant production in ROW is expected
to grow at a higher CAGR of 15.8%
40
60
80
100
2013 2014 2015 2016 2017
Estimated Demand for Proppants in bn lbs
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Source: Internal Projection, based on the market news
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AGENDA
AGENDA
Proppant - Product Overview
Overview of Oil & Gas Industry
Market Outlook for Proppant
Summary
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Summary
World oil & gas demand is growing
Oil market demand is expected to be 22% higher in 2035 than that of 2012 consumption
Natural Gas market demand is expected to be 63% higher in 2035 than that of 2010 consumption
Unconventional oil & gas resources will play a major role in meeting the demand
Unconventional liquids will be responsible for 12.2% of global supply in 2035 from existing ~2%
Tight & Shale gas will contribute to 65-75% in 2035 as compared to ~54% at present
The Interstate Oil and Gas Commission - US, reports that 90% of oil and gas wells in the United
States have undergone fracturing to stimulate production
So fracturing process will soon witness it as a part of all oil & gas drilling program to extract
maximum value
Hence there will be a huge demand for proppant market
In line with this, experts in the market like PacWest have indicated that the global
proppant market will grow at a CAGR of 10.75% over the next five years
Proppant market value will be $7 billion by 2017
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Downside Risk with the Process Which uses the Product
There are a number of environmental concerns related to hydraulic fracturing. These
include:
1. Fractures produced in the well might extend directly into shallow rock units that are used for
drinking water supplies. Or, fractures produced in the well might communicate with natural
fractures that extend into shallow rock units that are used for drinking water supplies
2. The casing of a well might fail and allow fluids to escape into shallow rock units used for
drinking water supplies
3. Accidental spills of hydraulic fracturing fluids or fluids expelled during a fracturing job might
seep into the ground or contaminate surface water
Due to these environmental concerns several countries have banned the fracturing
process
France, Bulgaria banned hydraulic fracturing in January 2013, Romania proposed a moratorium
on fracking after a petition was signed by 50,000 people, Germany stopped plans in 2012 to use
fracking, the Czech Republic imposed a ban in 2012 for two years, Luxembourg suspended
drilling for shale gas and established a moratorium in November 2012, Northern Ireland banned
fracking in late 2011, in Spain theres a fracking ban in the region of Cantabria, in Switzerland the
Canton of Fribourg bans fracking
However the recent studies carried out in US by EPA claims that there is no co-relation
between fracturing and ground water contamination
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Thank You