Developing guar gum alternatives

The blog is still working on a post about Ovation Biotech as well as updates on biobased adipic acid developments. Meanwhile, let’s visit the guar gum market as I’ve been hearing about how tight this market has become since last year because of its increased use in hydraulic fracturing (“fracking”), the process where hard-to-get natural gas is extracted from shale.

Guar beans

Guar gum, an extract from guar beans principally grown in India and Pakistan, acts as a food and water store and therefore is considered one of those hydrocolloids (a substance that forms a gel in the presence of water). I used to cover some of this market back when I wrote articles for Chemical Market Reporter (the predecessor of ICIS Chemical Business) about hydrocolloids such as gelatin, xanthan, carrageenan, pectin, alginates, functional starches and of course guar gum.

According to market research firm Pike Research, India produces over 1m tonnes of guar beans and exports nearly half a million tonnes annually. The drought-resistant guar bean can be eaten as a green bean, fed to cattle or used in green manure while the guar seeds are dehusked, milled and screened to obtain the guar gum. The product is mostly used in food as texturizer and thickener, as pharmaceutical additives and in oil and gas extraction.

Recently, however, increased fracking activities has made guar gum an economic alternative to other gelling agents, which keep cracks open as water and natural gas are pumped back out. Guar gum is also more environment friendly and therefore over the past two years, demand for guar gum rose from 250,000 tonnes to 480,000 tonnes per year worldwide, according to Pike Research.

Between December 2011 and April 2012, guar prices almost quadrupled forcing the Forward Markets Commission (FMC) of India to close physical guar contracts for that season to drastically reduce exports. In May 2012, prices rose as high as $25,000 per metric ton, according to US-based PacWest Consulting. This caused inflation in food prices especially in parts of India where guar is used as a primary protein source.

Since the FMC’s intervention, price of guar seeds has fallen 7% and the price of guar gum went down 6%.  As of December 2012, guar price fell to as low as $3,000/tonne. The FMC has already reopen the guar market again, but consumers of guar gum have been spooked with the volatility in prices and unstable supply that companies are now exploring alternative gelling options such as natural polymers and other carboxymethyl cellulose (CMC)- and xanthan-based formulations.

In the oilfield sector, North American oilfield service (OFS) companies, which are primary buyers of guar these days, such as Halliburton and Schlumberger announced last year their extreme concerns about the guar market and future possibility of guar seed shortages. Although they are still working on their stockpiles of guar purchased in March/April, and that guar harvest this year is expected to be 30% larger, according to PacWest, a repeat of the 2012 seedstock hoarding could still potentially drive up seed and powder prices.

Guar demand is also expected to increase in the next 3-5 years as international shale exploration and development activities will contribute to new guar demand increases. Over the next 1-3 years, guar demand is expected to be small to moderate as North American fracking activity has leveled out according to PacWest.

Last year, Halliburton, the single largest consumer of guar, announced that it has deployed its alternative to guar-based fracturing systems called PermStim. The new fracking fluid is based on a derivatized natural polymer that reportedly exhibited 94% regained permeability compared to derivatized guar fluid that exhibited 70% and only 40% for the native guar-based fluid.

The PermStim fluid system is said to have been successfully used in over 40 wells at temperatures up to 300 degree Fahrenheit last year.

Pike Research noted other companies experimenting with guar substitutes such as OFS companies Baker Hughes, Nabors Industries, and Trican Well Service as well as specialty chemical firm Ashland. The latter has already been marketing guar substitutes for food application such as its cellulose gums under the trademarks Aquacel and Aquasorb for beverage, bakery and dairy products.

Food ingredient firm TIC Gums have also introduced its Ticaloid Guar Replacement (GR) last year as a 100% replacement for guar gum in certain applications such as edible films, health food and beverages.

Another specialty chemical company, Solvay, has instead decided to expand its production of derivatized guar products by 40% in China and the USA. The company recently its expanded Vernon, Texas, US derivatized guar facility will serve customers in the North American oil and gas market, while increased capacity at Solvay’s Zhangjiagang, CHina will help its home and personal care customers meet growing demand for high-end hair care products in the region.

Solvay said it has a 50-year joint venture partnership with an Indian-based leader in guar gum and guar extracts that helps the company secure its raw material supply.

According to PacWest, one of the biggest obstacles in deploying alternative formulations was “the difficulty of developing crosslinkers and breakers that would work in combination with those formulations.”

“There has been significant progress in developing zirconium-based crosslinkers that enable CMC-based substitutes, as well as chemical and enzymatic breakers that are far more effective in cleaning out wellbores post-frac.” – PacWest

Enzyme company Verenium responded to that problem with the commercial launch this month of its Pyrolase HT cellulase, which is used as a biocatalyst to break down guar-based gel, and even carboxymethyl cellulose used in hydraulic fracturing.

Verenium estimates the addressable market in the U.S. for guar breakers in hydraulic fracturing is up to $250m, of which currently marketed enzyme products address approximately 10% or $25m. The Company believes its Pyrolase® HT can expand the share of this market addressable by enzymes beyond the current estimated ten percent.

PacWest estimates that guar substitutes in hydraulic fracturing will not capture much more than 20%, likely around 10%, share from guar especially if guar prices stay below $8,000-$10,000 per tonne.

“The substitutes do have the effect of providing a new ceiling on guar pricing, the point at which it becomes more economic to switch if guar prices escalate dramatically. With prices where they are today, the incentives for significant new investments on guar substitutes have fallen off, but several players will continue to fund their programs as a hedge against future price shocks.” – PacWest