While the oil price decline is hitting US E&P firms and their suppliers, according to Brilliant sands the current market climate is ideal for bringing 2.5m tonne frac sand capacity online as Canadian drilling companies look to source cheaper domestic proppants.

Silica (frac) sand exploration company Brilliant Sands Inc. has appointed engineering firm Morton Jogodich Inc. (MJI) to assist with the exploration and development of its sand projects in Canada.

US-listed Brilliant Sands owns three deposits, the McClelland and Alberta projects in Alberta, and the Washow property in Manitoba, north of Winnipeg.

Working with MJI will enable the company to quickly and efficiently refine its three projects into a first-class mining operation to begin frac sand production, which Brilliant Sands’ CEO, Marc Andrews, said is scheduled for Q4 2016 or Q1 2017.

“What we’re looking at is the Alberta project – the one that we haven’t revealed the exact location of – which falls rights in the middle of the three Alberta basins, so it makes sense to build the processing plant there,” he told IM.

Though the company’s main focus will initially be on the Alberta project, field work for all three properties was initiated last month and, based on the company’s initial reports, a resource report is expected on each project by the third quarter of this year, with a preliminary economic assessment planned for Q1 2016.

According to Andrews, the company’s deposits are strategically located in and around the Alberta Basins, enabling it to respond quickly to demand with lower logistics costs than producers in other locations such as Wisconsin, US, which produces a large amount of frac sand for the oil and gas industry.

The Alberta plant, Andrews told IM, will begin production at a rate of 1m tpa sand, with plans to scale up to more than double the capacity within two years to become what the company hopes will be the largest producer of frac sand in Canada.

“With the processing plant in Alberta we will be initially producing and selling sand from the Alberta project, with 1m tpa out of the gate, and then when we scale up to 2.5m we’ll bring in sand from our other locations,” Andrews said.

Ideal timing

Given the current weak state of oil prices, which are half of what they were in June 2014, the timing of Brilliant Sands’ decision to forward the development of its sand projects.

“We started the process of exploration in the fall – is this a good time for frac sand exploration, considering what is going on in the industry? That is the million dollar question. What I normally say when people ask is that we’re two years out from production, and no one expects oil to be in the same place in two years’ time,” Andrews told IM.

Andrews said the decline in Canadian frac sand usage hasn’t been as pronounced as it has been in the US.

“Canada needs more sand per well, so while demand has been flat, usage has been up by 25%,” he said.

exploration and production (E&P) companies have looked for ways to cut costs as revenue from selling oil and gas has declined. While in the US this has resulted in a decline in drilling activity and, for some companies, a switch from more expensive ceramic proppants – usually manufactured using kaolin and baxite – to cheaper frac sand, in Canada, companies that previously imported frac sand from the US have turned to domestic supply options.

“There was previously no need to look for domestic sand and Canadian companies we tried to talk to before were happy with their US frac sand suppliers,” Andrews told IM. “Now, we’re having companies call us to cut costs as they are realising that our sand works just as well as Wisconsin sand. So the longer oil stays in this range the better – the drop in oil price is the best scenario for us.”

With 6m tonnes of sand consumed by Canada last year and 5.6m tonnes of that coming from Wisconsin, Andrews added that there is a large market share up for grabs.

“In terms of an oil recovery, we expect something in the range of $65-70/barrel (bbl) in 2016, and the $80/bbl range in 2017. However, we’re not too concerned about that as we’re looking to gain market share,” Andrews said.

The company is having to race nearby frac sand exploration company Athabasca to the finish line, which is hoping to produce 300,848 tpa frac sand starting in 2016 from its Firebag Project in Alberta.

Andrews told IM that though Athabasca began exploration earlier than Brilliant Sands, he believes that work at his company’s projects has progressed rapidly enough to make it to the market first.

While the focus of the company’s projects is on supplying the Canadian oil and gas industry, Andrews added that the company has already had some interest from E&P firms over the border in North Dakota.

“Of course it’s just a straight shot down to North Dakota and we’re still closer than Wisconsin, so obviously we’re not going to turn away the business,” he said.

Brilliant Sands is also carrying out exploratory work for frac sand in Mexico, in anticipation of additional fracking activity in the region from 2017.

Frac sand specifications

Existing testing has shown that the Alberta project is likely to contain the most commonly used sand grades in the basin.

Brilliant Sands expects to produce 20/40, 40/70 and 70/100 grades – accounting for around 80% of the sand at the project – while 20/40 and 40/70 account for 60-65% of the sand at the project.

The Washow project meanwhile comprises a St Peter sandstone formation, which will enable it to produce Northern White Tier 1 sand.

“We’ve already spoken to two oilfield serves companies that have already said they want the entire capacity from that project,” Andrews told IM. “We’ve been meeting with oilfield services companies and E&P companies and from those meetings we could be pre-selling sand a year in advance.”