Why the U.S. Fracking Industry Worries About the Weather in India Amit Dave / Reuters A vendor sells guar at a vegetable marcket in the western Indian city of Ahmedabad on April 16, 2012. Workers in America's oil patch pay little heed to the weather. They know for a certainty that down in the South Texas Eagle Ford Shale fields the metal rigs will turn red hot in triple digit summer temperatures, while up north in the Bakken Shale, winter will come with a fury to North Dakota. But these days they do have an eye on the weather forecast 8,500 miles away on the other side of the world in Rajasthan, India, home to a little green bean that is proving vital to the oil and gas industry in the U.S. Once utilized as cow fodder and for poor man's curry, the guar bean is now a key element in the chemical cocktail used to frack wells, the technology that has prompted the oil and gas boom sweeping across North America, and is set to spur a worldwide boost in oil and gas recovery. India produces some 80% of the world's guar gum, a hydrocolloid - a substance that forms a gel when mixed with water. The powdered gum is produced from the endosperm of the guar or cluster bean, much of it grown in one of the driest and poorest regions of the subcontinent, the northern state of Rajasthan. Neighboring areas of Pakistan also produce a significant export harvest. Demand for guar in the energy industry is running up prices, driving up costs and cutting into profits for the exploration companies, but making Indian subsistence farmers a little less poor in the process. Guar gum is used in a wide variety of industries including textiles, paper, pharmaceuticals, cosmetics, even as a fire retardant. For ordinary consumers, it is the ingredient that makes ice cream silky, salad dressings thick and creamy, and helps maintain the flavor of a beverage in the mouth after that initial gulp. But while a gallon of ice cream calls for just a smidgen of guar gum, to frack a well in a shale formation may take 20,000 pounds of guar beans. At a recent New York capital markets conference, one of the major exploration companies reported using 1,700 tons a month resulting in a first quarter cost of some $40 million. Given that level of demand, prices for guar have jumped from $4 a kilo (about 2.2 pounds) to $30 a kilo in the last 18 months. The rising price of the gummy gold was blamed by Halliburton late last month for a decrease in profits so far this year. The price of guar gum has inflated more rapidly than previously expected due to concerns over the potential for shortages for the commodity later in 2012. As such, the costs have impacted the company's second quarter North America margins more than anticipated," the company asserted in its earnings statement. In order to extract gas trapped some 6,000 to 10,000 feet beneath the surface, exploration companies use hydraulic fracturing, dubbed fracking, according to NaturalGas.org, an industry educational website, to "make hard shale rock more porous." Large amounts of water, typically three to five million gallons, are mixed with small amounts of chemical additives, injected deep into the earth, forcing cracks in the rocks, allowing the gas to escape into the wellbore. Guar gum has several important qualities key to that process, according to Donald Seisun, head of IMR International, a San Diego-based hydrocolloid consulting company. "It's a very good suspending agent and it is easy to break," he says, meaning that when the liquids are withdrawn from the wellbore, the gum helps separate the chemicals from the water. One side benefit, Seisun says, is it's usefulness in the debate with environmentalists over fracking - "The companies can say: "We are using stuff they put in ice cream!" " Seisun spent December visiting Jodphur, Rajasthan, in the heart of guar bean growing country. There, guar bean merchants tell tales of massive buys by U.S. exploration companies, offers to buy thousands of pounds of powdered gum to be air-freighted to well sites in Pennsylvania or Texas, or South Dakota. That has prompted a huge run-up in prices and created "turbulence in the marketplace," Seisun says. Indian regulators shut down guar futures trading on the commodities market last year, markets that are closed to foreigners, and punished several brokerage companies. Speculation had driven prices up. Nidhi Nath Srinivas, a columnist for India's Economic Times, reported in May that American companies were distributing seed to farmers, while the regulators pondered allowing the re-listing of guar futures on the exchange after the size and scope of this year's crop emerges. Late July is the usual time of year to plant the guar bean seeds so the shrubby plant can get a boost from the monsoon rains. But this year, the monsoon is late and forecasters predict it may produce less rain than normal. Guar is "a poor man's crop," according to Calvin Trostle, an agronomist with Texas A&M University's agricultural programs. It is sown by hand by subsistence farmers on small landholdings and is ideally suited to the poor, dusty soils of northern India. The fresh pods, Trostle says, have a lettuce-like, tart flavor and are eaten whole, stirred into a curry or fried with spices. The guar gum is made by removing the beans inside the pod, splitting them and then extracting the endosperm from the seed. For the last 50 years, Seisun says, the guar gum market was dominated by food manufacturers who called the shots on prices. "The small farmer was basically out of the picture," Seisun says. How much they got for the crop was how much the food industry offered. That changed with the oil boys. The food industry press started sounding the alarm bells about rising prices and shortages in the summer of 2011. By January, the concern had spread to the pharmaceutical industry. There are substitutes available to the complaining industries, including xanthum and tara gums, Seisun says, but switching ingredients poses problems. "The food industry is very conservative," Seisun says. Once they have found a formula and got behind it with a brand name and image, they don't like to change. Changes also mean jumping through additional regulatory hoops, not to mention re-packaging and re-labeling costs. Energy exploration companies also are looking at guar alternatives (existing ones for the food industry are either not available in large amounts or are unsuitable). Both Halliburton and Schlumberger are exploring synthetic hydrocolloids. "They have all got something, but nothing works as well as guar," Seisun says. Trostle adds: "It is widely known that after all these years that guar gum is still the best at improving the viscosity, or flowability, of the drilling fluid and helping suspend the sand that is needed deep underground, a mile or more away from the surface, to help prop the rock formation open when it is fractured under high pressure. You know, there are a lot of smart people in chemical engineering and petroleum engineering departments on our nation's campuses, but nobody has come up with something synthetic that works as well. And so the exploration companies are encouraging more production in India where 10.5 million acres of guar are set to be planted this year, two million more than 2011, Trostle says. Energy companies have invested in Texas research efforts aimed at developing new seed varieties for U.S. production. There is at least one guar production plant in Texas, Trostle says, and guar is being grown by a few farmers in West Texas where it is suited to the "marginal" soils and dry climate. Trostle expects guar gum farming to grow in similar areas in other states, including Arizona, if the price point remains high. Despite the debate over fracking in the U.S. and Europe and the calls for a shutdown, it is unlikely that will stop the new technology from being utilized in the so-called BRIC countries (Brazil, Russia, India and China), Seisun says. China, for example, is getting a front row look at how fracking works. In November of 2010, the China National Offshore Oil Corporation (CNOOC) paid $1 billion for a 33% stake in Chesapeake Energy's leases in the Eagle Ford Shale project in South Texas. Estimates of China's shale gas reserves range from 26 trillion to 36.1 trillion cubic meters of shale gas, about 50% higher than those estimated in the U.S., according to the Asia Times. The debate over fracking aside, Trostle says it is "gratifying" to see India's poor subsistence farmers find gold in those gummy beans.