Shale Revolution Fuels Agricultural Boom in Parts of India

One of the multiplier effects of the ongoing Shale gas boom has been to promote a special agricultural product, a bean grown in India, required for horizontal fracking.

From the Wall Street Journal (hat tip Professor Mark Perry)

From its place on humble Indian tables, a little-known Indian bean called “guar” is making the fortunes of poor farmers.

The demand for guar has soared since gum made from guar seeds started being used to extract shale gas late last year.

Mostly grown in the heart of India’s desert lands, the price of the vegetable has jumped from about 40 rupees ($0.7) a kilogram at the time of the September-October harvest to around 300 rupees ($5.4) per kilogram today.

As a result, barefoot farmers who until recently struggled to make a living are now riding cars and motorbikes and carefully locking the seeds away, according to B.D Aggarwal, managing director of Vikas WSP, an exporter of guar gum.

“There was very strong demand from the overseas oil industry because of a new technology – that is horizontal fracking – for shale gas extraction. There is no alternate to guar for this technology,” said Mr. Aggarwal.

Shale gas, natural gas trapped within shale formations, has become an increasingly important source of natural gas in the United Stated over the past decade, with some analysts expecting its supply to surge to around half of the natural gas production there by 2020.

Horizontal fracking, which requires the use of guar gum as a gelling agent, is considered safer for the environment than the other alternative – a technology known as “hydraulic fracking.”

Guar gum has other uses as well, including for oil drilling and in the textile and paper industries.

Mr. Aggarwal estimates that around 80% of the 1.2 million tons of guar that were harvested last season were snapped up for oil and gas drilling.

For investors such opportunity is what one would call a "pick and shovel play" (Investopedia.com) or a strategy where investments are made in companies that are providers of necessary equipment for an industry, rather than in the industry's end product.