From The Australian:
A shortage of guar gum used in fracking has caused prices to surge
IT is India's driest state, but now farmers in the poverty-stricken deserts of Rajasthan are reaping an unexpected bonanza - surging demand for guar beans from American oil companies that need them to produce shale gas.
The multibillion-dollar industry in the United States relies heavily on guar gum powder - a thickener also found in ice cream, toothpaste, pet food and sausage skin - using it to make specialist hydraulic drilling fluids that are pumped underground at high pressure during fracking, the process used to extract natural gas from subterranean rocks.
And the rapid growth of the industry has caused demand for the beans to soar. "It's very good news for the farmers," Bajrang Das Agarwal, the managing director of Vikas WSP, the world's biggest maker of guar gum powder, said.
The rising price of guar powder, which has climbed from $US4 to $US5 per kilo to $US30 within 18 months, had enriched small-scale farmers, enabling them to build new homes and buy tractors, motorcycles and televisions, he added.
India is the world's biggest guar gum producer, with an average annual output of a million tonnes. This year, the American oil industry is expected to import 300,000 tonnes of guar gum - 75 per cent of the India's export total.
But the dramatic rise in prices and a limited supply of beans is creating a headache for the oil industry. Last week shares in Halliburton plunged by 5.5 per cent after the US oil services giant warned that rising guar prices had dented its profit margins. It said that guar gum now represented as much as 30 per cent of the cost of fracking, or hydraulic fracturing. About nine tonnes of the material is needed per well.
Several American oil companies have been forced to halt drilling because of guar shortages. The oil services group Baker Hughes said that prices were now "horrific".
Satish Chandra, of the Indian Society of Agribusiness Professionals, said that India's farmers were responding by planting new areas with guar (which translates roughly as "cow feed" in Hindi).
Other parts of India are also starting to produce the beans, which traditionally have been viewed as a low-margin crop grown on poor-quality land. Guar grows in desert-like conditions, but, crucially, relies on short bursts of very heavy monsoon rainfall during the growing season to produce a good harvest - one reason why efforts to grow the plant commercially in other countries, such as the US, have been unsuccessful. Pakistan is the only other significant producer of guar.
Venkateswara Rao, deputy director of the agriculture department in India's eastern state of Andhra Pradesh, said that about 200 farmers were planting the crop on 500 acres of land in an area called Anantapur.
Purushottam Hissaria, the managing director of Sunita Hydrocolloids and president of the All India Guar Gum Growers' Association, said that farmers in at least three other states were studying guar. "They plan to sow the crop for the next season that begins in July," he said....MOREIn a turnabout-is-fair-play move, Ashland Inc., formerly known as Ashland Refining, is introducing cellulosic fiber replacements to the ice cream industry, taking some of the pressure off the guar market.
*April 20, 2012: "Commodities: Guar Trades at Record Prices, Frackers Halliburton, Baker Hughes, Schlumberger Suffer (HAL; BHI; SLB)"
