Reuters reports Shale energy triggers bean rush in India.
Gum from a bean called guar is a key ingredient in hydraulic fracturing. It makes the mixture of sand and water that is injected into a well more fluid and easier flowing. Here is a more detailed explanation from Reuters:
Guar gum is used to increase the viscosity of proppants, materials which are forced into shale fractures to enlarge them so that the oil and gas can be extracted. It also helps reduce friction, which in turn decreases the energy consumed.
How much do you need to frack a well? The Reuters article says nine metric tons per well.
Demand for guar gum has exploded. Prices have increased by a factor of about 10 in the last year.
The world’s largest producer of guar gum is India. The high demand and concentration of production in India is creating a windfall for local farmers.
Listen to what this farmer said:
“Guar has changed my life,” said Shivlal, a guar farmer who made 300,000 rupees ($5,400) – five times more than his average seasonal income – from selling the beans he planted on five acres (two hectares) of sandy soil in Rajasthan state.
“Now, I have a concrete house and a color TV. Next season I will even try to grow guar on the roof.”
Did you hear that? His income has increased by a factor of five. He now has a concrete house and TV. Cool.
So the oil boom in shale here in the U.S. is lifting people out of poverty in northern India. Very cool.
Don’t you love pricing signals?
About 1/6th of the article is talking about searches for substitutes. The very high price and tight supplies of guar gum has created an intense search for substitutes. The high price will encourage farmers to expand production.
That means there will be more guar gum and there will be viable alternatives on the market that will allow fracking to continue. Not because any government or central authority told companies to find a substitute or farmers to produce more. The pricing signal sent that message.
The shale boom isn’t stopping anytime soon.
The Reuters article says:
With the North American shale boom expanding to China, South America and Eastern Europe, oil field services firms around the world are poised to gobble up guar. U.S. industry researchers reckon the global fracking business will grow to $37 billion in 2012, up $6 billion from a year earlier.
Here is Walter Russell Mead’s observation:
We don’t want to jump the gun, but the shale gas industry has racked up quite an impressive record. It’s driving our country’s utility industry to switch from coal to natural gas, it’s convincing long-haul trucking companies to begin to buy natural-gas fueled trucks, and it’s also putting solid roofs over the heads of thousands of farmers in northern India. Not bad, so far.
Check out the full article. It’s great.
Hat tip: Via Meadia.