Tuesday, October 30, 2012

31/10/2012 STOCKS NEWS

PARSADAM

VIKASSAMWATSARE@yahoo.com

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How a Little Indian Bean Impacts US Fracking!!!!!

A little bean called guar, which in Hindi means “cow food,” has the world’s largest oil and gas producers fretting over profit margins.

The reason is simple. In gum form, guar is the thickening agent used to push fluids sideways in the hydraulic fracturing or “fracking” process.

Currently the commodity is in high demand and short supply — making it expensive for frackers, but life-alteringly lucrative for once dirt-poor Indian farmers who produce about 85 percent of the world’s guar.

“Farmers can earn 100,000 rupees [$1,875 USD] per hectare, which can yield 20 bags of guar beans,” said Dr. Sanjay Pareek, vice president of Vikas WSP, a manufacturer and exporter of guar gum powder based in Rajasthan, India. “For lentils, which is the second biggest crop in this area, farmers get only 50,000 rupees per hectare.”
In 2011, guar emerged as India’s largest agricultural export to the United States, with sales of $915 million, according to a recent USDA Foreign Agricultural Service report.

Since then, Vikas WSP has distributed 3,000 metric tons of guar seed to 200,000 Indian farmers of Rajasthan and Punjab, now busy trading in their cotton or lentil crops for a more fracking-friendly harvest.

“This sudden growth can be attributed to expanding shale gas drilling [a.k.a fracking] activity. Currently 90 percent of guar demand is soaked up by the oil and gas industry,” said Dominic Schnider, head of the commodity research group for UBS.

While noting that in terms of volume and value, total Indian guar exports have grown 175 percent, or 13 times since 2009.

Commodity investors, however, aren’t jumping in just yet because there is no futures market in India.

“We don’t expect a futures market to develop in the short run, because there are no government rules and regulations for production, distribution, marketing and export,” added Schnider.

Additionally, spot guar bean prices have recently turned volatile, spiking to a high of 320,000 rupees ($6,000 USD) per metric ton in May 2012. By early October, prices had dropped to120,000 rupees ($2,250 USD) per metric ton.

The question now on the minds of frackers and farmers on opposite sides of the globe is: Will prices increase? There is a concerted effort going on in the U.S. for the answer to be "no."

U.S. Aims to Compete!!!!!

U.S. energy players are already scrambling to either spur American guar growth or to create an alternative, cheaper substance. The viability of either option has drawn skeptics.

“Production in the U.S., should it grow, must be managed carefully. There are too many ‘wannabes’ inquiring about guar,” said Dr. Calvin Trostle, agronomist with Texas A&M University’s agricultural program. “Most have no practical knowledge of the crop or what to do with it.”

But the stakes may be high enough to get producers and farmers on board.Halliburton for example, saw last quarter’s operating income drop 19 percent compared to the second quarter of 2011, “due to increased costs, particularly for guar gum,” according to the company statement.

There are currently about 30,000 acres of guar crops in the U.S., according to Trostle. Almost all of these acres are found in Texas, where the hot, dry climate accommodates the desert plant. The problem is, Texas isn’t yielding near enough guar to meet the needs of the U.S. fracking industry.

Take Texas-based FTS (Frack Tech Services) International, for example. The company has reported using 1,700 tons of guar gum each month. The current acreage of U.S. guar would only keep them going for about 3 months. So, they buy Indian guar.

“Oilfield service companies would like to propel acreage far higher, well above 100,000 acres,” according to Texas A&M’s recent industry report. The major proponents include.

Even if U.S. guar does become commercially viable, it’s not happening fast enough for frackers, who are moving on to "Plan B."

“With the guar shortage, there has been a renewed research and development focus on developing newer alternatives,” said Jennifer Miskimins, professor of petroleum engineering at the Colorado School of Mines.

This September, Halliburton announced test results for ‘PermStim’ fluid, which it claims is a viable alternative to guar gum. The product has some competition. Schlumberger, for example, is developing ‘HiWay' — which also promises to reduce reliance on guar gum.

Neither product, however, is developed enough to reverse the industry's reliance on Indian guar gum.

The Future of Fracking!!!!

While the U.S. hosts the world’s most robust fracking industry, the Indian guar market is also benefiting from international demand for its use in the oil drilling method.

“Other areas seeing an increase in fracking projects include China, Russia, Canada and Argentina,” added Miskimins.

In particular, China and Russia are thought to have even larger shale resources than the U.S. An increase in their demand is expected to support high guar prices.

In America, however, the pace of the fracking boom has slowed somewhat this year due to very low natural gas prices, which make gas projects too expensive.

“The ultimate determinant for fracking trends is the price of gas and oil, and natural gas prices are very low at the moment. So companies are moving out of shale gas and moving into shale oil plays (the geologic formation containing shale oil & gas) because the price of the extracted oil is quite high,” said Elena Nikolova, former energy analyst in Washington, DC, providing policy analysis to oil and gas companies.

In short, experts say oil prices are high enough to keep fracking lucrative. This is good news for Indian farmers, because guar gum is being used in fracking fluids, whether oil or gas is being extracted.

And the demand for fracking fluids looks like it’s here to stay. The U.S. Energy Information Administration projects U.S. natural gas production via hydraulic fracturing to increase from 21.6 trillion cubic feet in 2010 to 27.9 trillion cubic feet in 2035, a 29 percent increase.

Big picture? On the world stage, the fight for control of gas resourcesbetween the U.S., China, and Russia is heating up. And as long as this continues, India will likely see the benefits.

So! Where Guar Price is Heading????

Can Guar Price Touch New All Time High???

Full Research Report Very Soon!!!!

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Foreign institutional investors poured in over Rs 10,000 crore in the stock market this month so far enthused by reforms initiatives taken by the government to boost economic growth and investor sentiment.

During October 1-12, overseas investors were gross buyers of shares worth Rs 30,605 crore, while they sold equities amounting to Rs 20,223 crore -- translating into net inflow of Rs 10,382 crore (USD 2 billion), as per data available with market regulator Sebi.

Foreign Institutional Investors' (FIIs) investment in the country's equity market has reached Rs 92,713 crore (USD 17.84 billion) so far this year.