Q. 179. Guar Gum and Shale Gas
Ans. What is Guar Gum?
Guar Gum Powder is extracted from the Guar Seed after a multistage industrial process. The most important property of Guar Gum is its ability to hydrate rapidly in cold water to attain uniform and very high viscosity at relatively low concentrations. Guar Gum, either modified or unmodified is a very versatile and efficient natural polymer covering a number of applications in various industries like food, beverages, pharmaceuticals, cosmetics, paper, textile, construction, oil & gas well drilling, mining etc, due to its cost effective emulsifying and thickening properties.
Functions: It is widely used in oil and gas well drilling due to its multi-function such as fluid and water loss control, lubrication and cooling of drill bits, shale inhibitor and solids carrier. It has excellent solution rheology, stability, solubility and compatibility with other auxiliaries used in oil well drilling.
Over the last three years, guar has slowly lost its lustre due to oversupply, reduced demand on account of oil price crash, and emergence of substitutes that further reduced its demand. Guar products enjoyed their dream run for two successive years, 2011-12 and 2012-13, becoming India’s largest agricultural export item, surpassing the famed basmati rice. India accounts for 80 per cent of the world’s production of guar. Rajasthan is the leading producer, contributing 70 per cent of India’s production. Over 80 per cent of India’s guar products are exported, mainly to the US, Germany and China. The top consuming industry is oil & gas, accounting for 60-65 per cent, followed by food (25-30 per cent) and the rest by pharma. The textile printing industry is the major consumer of guar domestically.
Guar gum started to play a key role in the extraction of shale oil and gas through the fracking process, post-2009. It helped the US to increase shale gas production to almost nine times from that in 2005. The shale revolution and speculation of drought in India, together with expectation of production shortfall, led to panic stocking by the US. As a result, the US became the top importer of guar, accounting for 73 per cent of global imports in 2012.
An unprecedented rise in prices, especially after 2009, saw Indian farmers preferring guar over competing kharif crops, such as cotton, moong, soyabean and bajra. As a result, India’s guar production has risen. New guar processing facilities were built in Rajasthan. Cultivation was extended to non-guar producing States. However, sharp rise in the prices of guar products prompted importing countries, such as China and Australia, to encourage indigenous guar cultivation and processing. Also, the food industry’s demand for guar gum was adversely impacted by extreme volatility and sharp rise in prices. Higher prices also prompted guar consuming industries to explore and shift to cheaper substitutes. All these developments substantially reduced the demand for gaur with implications for prices.
Crude oil price holds the key to demand for guar products. Crude oil prices seem to have bottomed out now. However, Iran seeking to capture its old market share may cause a further fall in crude prices. If that happens, it may pressurise guar.
Guar price shocks in the past have prompted international buyers to look for cheaper alternatives, such as tara gum, locust bean gum and xanthan gum, which are being used in the food industry. Synthetic polymers are used in the shale oil and gas industry. But nothing has come out as effective as guar. Nevertheless, guar substitutes will keep guar prices from shooting up unreasonably.