Printer Friendly

Shale energy seen triggering Guar bean rush in India.

IN INDIA'S northern desert states, farmers are scrambling to harvest as much as they can of a bean with the power to lift them out of poverty. In the US, the multi-billion dollar shale energy industry is banking on their success.

US companies drilling for oil and gas in shale formations have developed a voracious appetite for the powder-like gum made from the seeds of guar, or cluster bean, and the boom in their business has created a bonanza for thousands of small-scale farmers in India who produce 80 per cent of the world's beans.

"Guar has changed my life," says Shivlal, a guar farmer who made Rs 300,000 ($5,400) -- five times more than his average seasonal income -- from selling the beans he planted on five acres (two hectares) of sandy soil in Rajasthan state.

"Now, I have a concrete house and a colour TV. Next season I will even try to grow guar on the roof."

Guar gum, which is also used to make sauces and ice cream, is a main ingredient of the hydraulic fracturing, or fracking, process used to extract oil and gas from oil shale.

Fracking has been called the technology that will change the geopolitics of energy, boosting domestic North American gas supplies to such an extent that experts predict the net importing region will soon turn into a significant gas exporter.

It has also turned guar into a precious commodity farmers now call "black gold". In the Rajasthani city of Jodhpur, under the shadow of an ancient fort, traders buy guar seed at Rs 305 ($5.5) a kg, a 10-fold increase from a year ago.

"The whole world got caught not ever thinking they would need as much guar as they do now," says Wade Cowan, co-owner of West Texas Guar Inc., a Brownfield, Texas, company that supplies the powder to US energy companies.

India, on average, produces more than 1 million tonnes of guar beans annually, the biggest crop in the world. It exported more than 400,000 tonnes of guar products, including gum, in the fiscal year that ended in March 2011. Exporting beans is prohibited.

US energy firms, however, will need nearly 300,000 tonnes of guar gum this year, energy investment banking firm Simmons & Company International says in a February report. Last year, the guar shortfall forced some US firms to halt fracking, it says.

"There is a shortage of seeds. Last year, good quality seeds were available at around Rs 60 a kilo but now, traders are demanding over Rs 500 per kilo for the same seed," says Shyam Lal, a farmer based in the Churu district of Rajasthan.

Guar gum is used to increase the viscosity of proppants, materials which are forced into shale fractures to enlarge them so that the oil and gas can be extracted. It also helps reduce friction, which in turn decreases the energy consumed.

In March, the United States bought 33,800 metric tonnes of guar gum from India, the highest amount ever. Last year, US firms bought an average 22,000 metric tonnes from India a month.

About nine tonnes of guar gum are used per well. Some companies are also fracking wells several times to squeeze out as much as possible, which means using even more guar.

As a result, guar prices in India has risen rapidly, so fast that the local commodity exchanges halted trading in guar futures in late March amid a ministerial inquiry.

David Lesar, CEO at market leader Halliburton, recently says the cost of the guar gel now accounted for up to 30 per cent of fracking costs to customers in some basins.

"The problem with guar is it is probably the fastest-moving commodity price that I have ever seen," Lesar says.

Copyright 2012

Copyright 2012 Al Hilal Publishing & Marketing Group

Provided by an company
COPYRIGHT 2012 Al Bawaba (Middle East) Ltd.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2012 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Oil & Gas News
Geographic Code:9INDI
Date:Jun 5, 2012
Previous Article:Dopet and Emerson launch new service facility in RLIC.
Next Article:CVR Energy starts sale process.

Terms of use | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters