HAL.L Share News (HAL)

By John Benny

March 8 (Reuters) - Oil producers in the Permian basin couldsave 40-50 percent on frack sand costs by sourcing it from localbasins, market research consultancy Energent said on Thursday.

Sand, used to hold open tiny cracks in shale rocks in orderto allow oil and gas to escape, is the most widely used proppantfor hydraulic fracking.

So far, the industry has relied upon frack sand hauled over1,200 miles from Wisconsin at a cost of $110 per ton, Energent,which is a part of market research firm Westwood Global EnergyGroup, said.

By the end of 2018, Energent expects over seven million tonsof premium frack sand to be mined inside the Permian Basin everyquarter.

That can result in potential savings of $500,000 per well,and cut back dependency on sand-by-rail by 800,000 tons in thefourth quarter of 2018, compared to the first quarter,Houston-based Energent said.

Last year, sand miners including Unimin Corp, U.S. SilicaHoldings Inc and Hi Crush Partners LP spenthundreds of millions of dollars on new mines to address a surgein demand from the Permian.

"It (local sourcing) will also focus attention on logisticswithin the basin itself ... which will also drive welleconomics," Energent founder Todd Bush said.

Apart from costs, hauling sand over large distances bringother logistical challenges. A severe winter has disrupted raillines in recent quarters, delaying deliveries of sand from theU.S. Mid West and Canada.

No.3 U.S. oilfield services provider Halliburton Coand sand miner Fairmount Santrol Holdings have saidthey expect rail delays of sand deliveries to affect theirquarterly results.(Reporting by John Benny in Bengaluru; Editing by ShounakDasgupta)