A sudden demand for an obscure substance with an odd name – guar gum – has companies whose products range from vanilla ice cream to black gold checking Indian weather reports and their own bottom lines.
Guar is a plant grown mainly in northern India, where its seeds are harvested and then developed into a gummy substance that long has been an ingredient in a host of foods, cosmetics, drugs, explosives, fire retardant and paper.
The big bump in demand now, however, stems from guar gum’s role in the shale boom. It is a key component in the mix of sand, water and chemicals used in hydraulic fracturing – the process for extracting hydrocarbons from tight formations that has revolutionized oil and gas production.
Halliburton, the world’s largest provider of hydraulic fracturing services, says prices for some varieties of guar gum have surged more than 800 percent since January 2011.
Brenham-based Blue Bell Creameries has experienced a twofold increase in the cost of the guar gum it uses to prevent ice crystals in its products.
“When you’re in ice cream manufacturing, it’s one of the main products that you use,” said Mark Patranella, a purchasing manager for Blue Bell Creameries.
Prices slam industry
And Arefa Baksh, a purchasing manager of ingredients for Nestle USA, now monitors the progress of the monsoon season in India because conditions there affect the guar crop – derivatives of which Nestle uses for yogurts, dressings, fruit bars and other products.
“Because this is a big issue, I know a lot more than I probably need to,” she said.
The soaring use of hydraulic fracturing for oil has consumed enormous amounts of guar gum over the last two years.
Halliburton, an oil field services company with headquarters in Houston and Dubai, United Arab Emirates, said this month that its second-quarter margins will be down as much as 5.5 percentage points from the first three months of the year because of rising guar prices.
Guar now accounts for as much as 30 percent of fracturing costs, according to research from RBC Capital Markets.
The price for guar powder, which is used to make guar gum, has skyrocketed from about $1 a pound two years ago to $12 a pound, according to RBC.
The gum performs similar, critical functions in hydraulic fracturing and salad dressing: It’s a thickener, keeping different components suspended and evenly distributed. That keeps certain ingredients – notably sand, in the case of fracturing – from settling.
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The gum “developed viscosity much more easily in cold water, and wasn’t as sensitive to bacterial degradation as starch,” said Mark Kinsey, President of Benchmark Performance Group, a subsidiary of oil field services supplier Rockwater Energy Solutions.
Industry advocates have pointed to guar gum in response to complaints that hydraulic fracturing could harm the environment and contaminate water, noting that it is present in foods. A study published in the American Journal of Clinical Nutrition showed that it is safe when incorporated into diets. Fracturing opponents don’t dispute that, but say other substances used in the process are more toxic.
Halliburton says no other substance, either synthetic or natural, has offered a cost-effective substitute for guar’s water-holding and thickening properties. And it’s not because no one’s looked.
“They’ve tried long and hard for substitutes that they could mix instead of the guar, but they’ve not been able to come up with anything,” said Calvin Trostle, an associate professor and agronomist for Texas A&M University’s AgriLife Research & Extension Center.
The gum grown in India is most in demand because it develops specific properties during bursts of rain in the monsoon season.
While growers in Texas and other parts of the world have attempted to grow guar, it has not proved of comparable quality for use in fracturing, Kinsey said. That could change, he said.
“The higher guar prices get, and the longer they stay up, the sooner an alternative to guar will be found, and the more likely it is to be more economical,” Kinsey said.
Trostle, the A&M professor, said a typical fracturing job requires 20,000 pounds of guar, the yield from about 80 acres of the crop – enough to cover the area of downtown Houston containing Minute Maid Park, Discovery Green and the George R. Brown Convention Center.
Halliburton said some wells can require guar from hundreds of acres. The oil field services sector in 2011 consumed the guar from about 3 billion pounds of seed, the company said. That demand has driven up guar prices in all industries, even as farmers in South Asia have planted much more of the crop. India a key producer India’s guar crop is expected to be 10 million acres this year, up from 8.5 million acres a year ago, Texas A&M’s Trostle said.
“The market cannot meet demand,” said David Steinberg, a board director for the Independent Cosmetic Manufacturers and Distributors, which includes companies that use guar-derived chemicals as thickeners in hair conditioners.
Guar farmers probably will continue to grow more in response to increased oil field demand in the United States and other countries as shale drilling spreads worldwide, said Baksh, of Nestle.
And that’s a good thing.
“Because this is a crop, I wouldn’t say there’s going to be a shortage,” she said. “If farmers know there is demand, they’re going to be planting.”