Doe & Ingalls

Redefining your chemical supply chain

Fracking and its Impact on Specialty Chemicals

Lately, the Specialty Chemicals Market has been experiencing tightness in supply on a few key raw materials. Some of this tightness is due to the slump in the auto and construction industries, but recently, we have seen shortages caused by increased demand from the Oil & Gas market, specifically those materials that are used in hydraulic fracturing (fracking).

Overview of Fracking

Fracking is a process that forces liquids through the ground at high pressures to create small fractures in a rock formation, ultimately releasing oil and/or gas for collection. Fracking is not a new process, and its recent resurgence is expected to generate considerable growth in natural gas production. But with this growth comes increased demand for more raw materials.

Materials Used in Fracking

Approximately 99.5% of the materials used in fracking are water (90%) and sand (9.5%). When you consider that fracked wells use about 1,000,000 gallons of water per well - times 500,000 or so active wells - that remaining 0.5% of “other materials” can have a sizeable impact on our market.

As part of our MOR™ (Management of Risk) program, we have researched the materials used in fracking and the specialty chemicals market to determine which products could be at risk (see the table below). Keep in mind that many fracking materials are proprietary making exact information difficult to obtain; however, we will continue to research this market and further refine the product list and associated risk.

Overlapping Products Used in Fracking & Specialty Chemical Industries
Acetic Acid Ethylene Glycol Potassium Chloride2
Ammonium Persulfate Formic Acid Potassium Hydroxide2
Borate Salts Glutaraldehyde Quaternary Ammonium Chloride5
Boric Acid1 Guar Gum4, 3 Sodium Carbonate
2-Butoxyethanol Hydrochloric Acid4 Sodium Chloride
Calcium Chloride Isopropanol Sodium Erythorbate
Choline Chloride Methanol Sodium Hydroxide
Citric Acid2, 3 Polysaccharide Blend3 Tetrakis Hydroxymethyl-Phosphonium Sulfate5
Ethanol2 Potassium Carbonate2 Tetramethyl Ammonium Chloride

1Materials used in nuclear cleanup: tight market due to Japan disaster.

2Materials also influenced by fertilizer demand.

3Market tightness due to weak sugar crop in Brazil.

4Current market tightness due to fracking demand.

5Materials used in various cleaning chemistries as a biocide.


Risk Mitigation

In November, D&I released a MOR™ notification to MOR™ participating customers concerning tightness in the hydrochloric acid market caused by reduced supply in the market and increased demand by Oil & Gas. In the last few weeks, guar gum has also been impacted. Because of these impacts, we are now monitoring the overlapping materials used in the Oil & Gas and Specialty Chemicals market.


Next Steps

MOR™ Participants: Should conditions deteriorate on any of these materials, D&I will notify you with suggested risk mitigation steps prior to any public communication.

Non-MOR™ Participants: Consider subscribing to our blog where we will post updates on developing market conditions.


For More Information

For more information on Doe & Ingalls' MOR™ program, sign-up for our free webinar where we will explain how the program works. To learn how you can register as a participant of the MOR™ program, contact your sales rep, or email us.


References

http://www.energyfromshale.org/hydraulic-fracturing-fluid

http://fracfocus.org/water-protection/drilling-usage

http://www.eia.gov/forecasts/aeo/MT_liquidfuels.cfm#biofuels