Assessing the Potential Impact of the Expanded Panama Canal on the

Wisconsin Frac Sand Mining Industry

Students: Aleksei Bogdanov ,Andrew Kast, Derek Krivinchuk

Mentor: Dr. Richard Stewart, PhD

Identifying Opportunities

• Massive shale gas and oil deposits exist around the world.

• Hydraulic fracturing requires special types of sand.

• Frac sand of extremely high quality is mined in Wisconsin.

• Global demand for the sand will require effective supply chain solutions

Wisconsinwatch.org

Global Energy Demand• Energy

consumption to increase by 36% by 2030

• Gas and Oil demand continues to grow

• Emerging markets account for 70% energy increase by 2040

Energy Supply & Demand in China

China has a rapidly growing economy.

China imported in 2013: 58% of Oil and 28% of Gas.

Policy to become self-sufficient with aggressive strategies for shale fracking.

By 2050, China’s energy demand will account for 50% of the growth in global energy demand.

Identifying and Mappping the Supply Chain

• Point of Origin- Barron Wi

• Point of Destination: Two ports in China

• Travel by truck, rail, or potentially barge to gateway ports.

• Gateway Ports– South through Gulf Coast

and Panama Canal– North through Pacific

Northwest

• Identify constraints, facility capabilities, and duration of routes

Superior Silica Sands

• Have 2 locations in Wisconsin

• Ship products by rail or truck across North America

• Served by CN rail at Barron, WI location

• Volume currently moved• Potential volume: 2.4

million tons per yearhttp://www.sssand.com

Handling Characteristics of Frac Sand

• Handled like other dry bulk commodities

• Chemically inert and non-hazardous

• Precautions used to avoid dust production

www.minnpost.com

Gulf Coast Routes• CN has service to Mobile and

New Orleans• Sand could potentially be

barged down Mississippi River

• Travel via Panama Canal to reach a Chinese market

• Vacuum technology in New Orleans allows shipment in containers

• Multiple handling if barge used

http://portno.com/grain-in-containers

Pacific Northwest Routes• CN serves Prince Rupert and

Vancouver• Prince Rupert has shortest

nautical distance to Chinese market

• Bulk facilities exist, but not currently handling Frac sand

• Rail has larger unit train capacity to Prince Rupert

• Rail transit times are longer to PR

• Container Service is available from Wisconsin to PR

PR The Best Supply Chain

• Shorter Nautical distance • More volume per train• Prince Rupert Port

Authority stated that Frac sand could be handled in the future

• Prince Rupert is capable of handling same size ships as expanded Panama Canal

Total Transit Time in Days

Cons

• A single transit route that can only be accessed by CN Rail.

• Shippers have no price leveraging capabilities.

• Only one company transporting product.

Conclusion

• If Chinese market developed Pacific Northwest (specifically Prince Rupert) would be best option for Wisconsin Frac sand mining companies.

• Due to high-potential for future demand, it is likely that Frac sand will be exported to China in the future.

• Gulf Coast would also be a viable secondary market to export Frac sand.

• As with any supply chain, the cost is a significant factor, and this may be effected by which port could receive more backhaul products.

Thank You

Questions???

References• International Atomic Energy Agency (2012, March). World Energy Demand and Supply. • Retrieved from

http://www.iaea.org/nuclearenergy/nuclearknowledge/schools/NEM-school/2012/AbuDhabi/PDFs/day1/04_Rogner_World_Energy_D%26S.pdf

• Chou, E. (2013, July 11). Shale Gas in China – Development and challenges. Retrieved from • http://blogs.law.harvard.edu/ellachou/files/2013/07/Shale-Gas-in-China-Draft.pdf• Nakano, J., Pumphrey, D., Price, R., Walton, M. (2012, August). Prospects for Shale Gas • Development in Asia. Retrieved from

http://csis.org/files/publication/120824_Nakano_ProspectsShaleGas_Web.pdf• Wisconsin Geological and Natural History Survey (2014). Frac Sand in Wisconsin. Retrieved • from http://wisconsingeologicalsurvey.org/pdfs/frac-sand-factsheet.pdf• Wisconsin Department of Natural Resources (2012, January). Silica Sand Mining in Wisconsin. • Retrieved from http://dnr.wi.gov/topic/mines/documents/silicasandminingfinal.pdf• US Energy Information Administration (2013, July 25). International Energy Outlook 2013. • Retrieved from http://www.eia.gov/forecasts/ieo/more_highlights.cfm • MnDOT (2013, October 13). Transportation and silica (frac) sand mining in Minnesota.

Retrieved January 5, 2014, from http://www.dot.state.mn.us/frac/