Who knew a bean could be a make or break factor when it comes to oil and gas profit margins.
A little bean named guar has producers distressed when it comes to making money.
In gum form, guar is the thickening agent used to push fluids sideways in the process of hydraulic fracturing. Right now guar is in high demand and short supply. Simply put … this is making fracking expensive.
One group not agonizing over the supply/demand scenario of guar is the farmers. The poorest Indian farmers produce about 85 percent of the world’s guar, and they are facing a life-changing, profitable boom. Until about a year ago, guar was a minor crop grown primarily for camel and cattle feed and as a nitrogen-fixing legume to improve soil fertility. Now, guar is India’s largest agricultural export to the United States with sales of $915 million. Guar gum demand in the U.S. has caused guar bean prices to spike to a high of $6,000 per ton in May 2012 before leveling at $2,250 per ton.
The U.S. energy companies are brainstorming ideas to creative an alternative, cheaper substance or to increase American guar growth—both have garnered skeptics.
Right now, there about 30,000 acres of guar crops in the U.S. Almost all of these acres are located in Texas. Although Texas has the perfect hot, dry climate necessary for successful growth of the plant, the state isn’t yielding enough guar fast enough to satisfy the needs of the U.S. fracking industry.
Some companies are researching alternatives. For example, Halliburton tested a substance called “PermStim” fluid. The company claims is a viable alternative to guar gum. Also, Schlumberger is developing “HiWay.”
These products won’t take over the reliance on guar gum anytime soon, though.
The forecast for Indian farmers is looking good. Currently, oil prices are high enough to keep fracking a booming business. The U.S. Energy Information Administration projects U.S. natural gas production via hydraulic fracturing to increase from 21.6 trillion cubic feet in 2010 to 27.9 trillion cubic feet in 2035, a 29 percent increase.
About the Guar Bean:
Guar Bean is a desert crop grown in areas with sandy soils and limited rainfall. It is normally planted in arid zones in July—it can be planted through the end of August for late November harvest. Guar is harvested after about 90 days. Guar in Hindi means “cow food.”