In demand for fracking, supplies of the Asian beans are thin on the ground
The new “black gold” isn’t oil, but guar, a bean whose seeds are made into a gum used to thicken sauces, ice cream, yogurts – and now “proppants,” the materials that are forced into fractured shale to release oil and gas in hydraulic fracturing, or fracking.
Reuters reports that US energy firms will need some 300,000 metric tons of guar gum this year. Good news for the farmers in India who raise about 80% of the world’s supply of guar beans and are profiting from a ten-fold increase in prices. (Although shortages of guarseed are feared for the July-August planting season.) But bad news for companies like Halliburton, which says the cost of guar gel now accounts for up to 30% of fracking costs.
Indeed, Halliburton announced last week that its North American margins in second quarter would be 300 basis points lower (for a total impact of 500-550 points) than first quarter because of the run on guar. Our Datamyne Profiles summary of trading activity for Halliburton Energy Services shows the company imported six TEUs of guar gum in December 2011-January 2012.
Halliburton says it will be exploring synthetic substitutes. It may be tough, though, to find one as environmentally friendly as guar gum. Supplier Frac-Chem touts its green line of fracking products composed of food-grade and biodegradable materials such as guar.
Also in the market for guar gum substitutes – natural and synthetic – is the food industry. Reformulating a product to incorporate tara gum, for instance, to extend or replace guar gum represents a major investment for manufacturers, however. So far, few have made wholesale changes.
Datamyne’s import data shows 85,288 metric tons of guar gum shipped to the US by more than 60 sources in first quarter 2012. Here are the top five shippers: