Not all sand is created equal.
As the oil and gas industry increases its usage of frac sand due to the employment of horizontal drilling combined with multi-stage fracturing in its extraction operations, many frac sand providers have claimed to have the sand that does the job. But Hanson Lake Sands Corp. (HLSC) has scientific proof that it has some of the best sand available.
“A frac sand deposit has to have the specific requirements that the industry is looking for,” President Kyle Holmes says. “It has got to be nearly pure quartz, round, spherical and have high compressive strengths, among others.
“These specific requirements are typically found in older deposits as the sand has been sufficiently worked by the geological processes over time, leading to a lot of the impurities and weaker sand grains being removed and the remaining high-strength sand grains being rounded over time,” Holmes adds. “Sand deposits that meet all these specifications are very hard to find and are many magnitudes harder to get developed once found.”
The Hanson Lake area of Saskatchewan is one of three main areas in North America where American Petroleum Institute-grade sand can be found. Along with parts of Texas and regions of Minnesota and Wisconsin, the Hanson Lake area’s sand has the rare qualities that the API deems worthy of its official sanctioning.
Oil in the Blood
HLSC has a distinct advantage over other companies attempting to compete in the frac sand industry because its principals have experience in the oil and gas industry. Chairman Donald Gillen – Chief Executive Officer Steven Gillen’s father – has more than 20 years of experience in the Western Canadian oil and gas market. Both Steven Gillen and Holmes grew up around the oil and gas industry, as well, with their families earning a living in the oil and gas production and service sectors.
This experience in the industry is the reason HLSC is in its enviable position with its Hanson Lake assets. Holmes says Donald Gillen looked into acquiring the existing frac sand operation in the Hanson Lake area about 10 years ago while it was in receivership and had always kept the area in mind as a possible opportunity in the future.
“We saw the demand that was coming from the end-users for frac sand because of our background in and connection with the oil and gas industry,” Holmes says. “It just made sense to us that, with these low-permeability oil and gas resource plays, that large amounts of high-quality frac sand would be needed, so we started looking for a high-quality sand resource to supply this growing need.”
Due to their past experiences, they knew where they could find a frac sand deposit that fit this description. Holmes and partners Donald and Steven Gillen founded HLSC in 2012 and acquired the acreage holding the sand. HLSC now has more than 20,000 acres of quarry permits overlying a large tonnage resource of high-quality coarse-grained frac sand in the Hanson Lake area.
Ramping Up Production
HLSC plans to be in production by the end of 2014 with a state-of-the-art facility that will allow it to produce a very high-quality product for its customers. “Our plan is to build a state-of-the-art facility as this will give us an added benefit over our competitors on the quality side of the spectrum.” Holmes says.
It also helps that HLSC is not the first company to break into this industry with sand from the Hanson Lake region. Holmes says that the company borders an existing frac sand mine that has been in operation for many years, which has helped HLSC with its market acceptance as the region is already a trusted source of supply for its end-users.
“There have been no issues with market reception to date,” Holmes says. “The end-users, in fact, have been very open to us as they expect their sand requirements to grow significantly over the next couple years.”
According to Holmes, demand has the potential to surprise a lot of people as hydraulic fracturing will continue to play a substantive role in unlocking otherwise economically unobtainable oil and gas reserves. This means that frac sand demand has been fundamentally changed forever.
“The demand is here, and the demand is here to stay,” Holmes says. “Not only do we see overall demand growing by leaps and bounds over time but we expect to see the non-API sand being replaced by other higher-quality sand options over time, as well.”