Shale gas india by Abhishek Pande


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Scope of Shale Gas exploration ion India

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Shale gas india by Abhishek Pande

  1. 1. STRATEGIC FRAMEWORK FOR SHALE GAS EXPLORATION WITH REFERENCE TO INDIAN SUBCONTINENT Author : Abhishek Pande Institute : Orange School of Business Contact :9890375870ABSTRACTShale gas currently contributes nearly 20%,turning the worlds attention to this energysource which could play a critical role in meeting worlds future energy requirements.Shalegas is being increasingly tapped across the world as conventional energy sources like oil andcoal turn scarce and expensive.Analysts point out that access to shale gas reserves can boostIndia’s energy security as its augmented supplies can reduce international prices and lowerconsuming nations dependence on natural gas producers.Keywords – drilling,fossil fuel,fracturingLITERATURE REVIEWIndia is worlds fourth largest consumer of primary energy and accounts for nearly 4.6percent of worlds energy consumption after China, US and Russia.During 2011-12, the consumption of petroleum products was about 148 million metric tonne(MMT) showing an import dependence of more than 75 percent.Natural gas sector constitutesabout 9.8 percent of primary energy consumption which is likely to grow up to 20 percent by2025 as per indian hydrocarbon vision1. About 65 percent of natural gas consumption isconsumed by power and fertilizer sectors. Coal currently accounts for 53 percent of thecountrys energy needs. However, the huge rising gap between demand and supply of coal,coal import price of coal and environmental concerns will limit its use.There are plenty of shale gas formations in Europe, mostly in France, Poland and Denmark1 The India Hydrocarbon Vision has identified natural gas as the fuel for the future.
  2. 2. The recent Montelimar exploration permit in southern France is covering initial gas in placereserves of up to 85 trillion cubic feet equivalent to about 650 billion dollars at today’sEuropean gas prices.Shale formations existence and location in Europe were known fordecades but only recently, following the increase of energy prices, has exploration startedagain. Moreover the technology and equipment to extract them are now commerciallyavailable and new well stimulation technology could improve gas production by 50%.DEFINE SHALE GASShale gas is natural gas produced from shale formations. Gas shales are organic-rich shaleformations. In terms of its chemical makeup, shale gas is typically a dry gas primarilycomposed of methane. It’s mainly methane gas like the one we use for cooking or heating.However, this gas is tightly trapped in rock formations hundreds of meters down the earth.The primary differences between modern shale gas development and conventional natural gasdevelopment are the extensive uses of horizontal drilling and high-volume hydraulicfracturing. According to a recent department of energy report, the use of horizontal drillinghas not introduced any new environmental problems.While unconventional gas sources likegas shales reserves are plentiful, cost to produce is more than the conventional gasproductions.Shale gas has become an increasingly important source of natural gas in the over the pastdecade, and interest has spread to potential gas shales in the rest of the world. One analystexpects shale gas to supply as much as half the natural gas production in North America by2020.Some analysts expect that shale gas will greatly expand worldwide energy supply.Theshale gas is a fossil fuel,so shale gahe advantages and disadvantages of fossil fuels.SHALE GAS EXTRACTION PROCESSShale gas is gas that is produced from shale formations. These formations have low flowcapacity, so the rock must be broken (fractured) before gas can flow. Generally water ispumped into the wells at high rates to open spaces (fractures) in the rock. Sand or ceramic
  3. 3. proppantis2 used to keep the fractures open. Gas exploration companies drill boreholes downinto the gas-bearing shales, thousands of metres below the surface drilling may also continuehorizontally.The borehole is lined with a steel and concrete casing.A perforating gun islowered into the borehole to make small holes in the concrete casing at the depth of the shaletarget.A mixture of water, chemicals and sand is pumped — at very high pressure — alongthe borehole and through the perforations which fracture the shale.The water opens up cracksin the rock, and the sand grains lodge into the spaces and keep them open, allowing thereleased gas to flow out of the rocks and to travel back up the borehole casing.2 A proppantis is a material that will keep an induced hydraulic fracture open, during orfollowing a fracturing treatment.
  4. 4. LOCATION OF SHALE GAS RESERVES IN INDIAIn National Geophysical Research Institute (NGRI) at Hyderabad scientists have identified 28sedimentary basins of shale gas (natural gas found trapped in shale formations under theground), including ten potential producing basins, across India.These have been classifiedaccording to their hydrocarbon potential, and hold an estimated 527 trillion cubic feet (tcf) ofreserves.India, which is staring at a grave energy deficit, as per expert projections,natural gascompanies have also begun identifying potential domestic shale gas reserves. Under theNational Shale Gas Programme, Oil and Natural Gas Corporation has started studyingpotential reserves in the country. But, commercial drilling may take a few years. India isbelieved to have reserves in Cambay, KG onland, Cauvery onland, Assam-Arakan and Indo-Gangetic basins.INDIAN STORYSo far India’s relentless efforts during the last 25 years to build pipelines to bring gas fromTurkmenistan, Iran, Qatar, Bangladesh and Myanmar have remained pipe dreams. Renewableenergy sources like ethanol and bio diesel, wind and solar are high on the national agenda.Because of Indo-US nuclear pact, India may succeed in increasing the contribution of nuclearenergy.But a recent phenomenon of shale gas — which has brought about seismic changes inthe natural gas scene — has not been given the importance it deserves. Energy economists allover the world have started to admire with awe the great achievement of oil companies in theUS in developing shale gas resources on a large scale during the last decade.In India we are also familiar with this development and the government of india has to bringabout policy changes to promote shale gas. In India, shale deposits are found across theGangetic plain, Assam, Rajasthan and many coastal areas, but neither the government nor thecorporate sector has carried out any exploration or estimation. Recently, ONGC announcedplans to start a pilot project in 2011 when most oil companies in Europe and the US areracing to master the technology of shale gas from those companies who have alreadysucceeded.In reality India’s gas demand is limited by its access to gas supplies based on domesticproduction and imports availability. If India can produce more gas then it can reduce its coalimports which is environmentally more unfriendly, its gasoline consumption through the use
  5. 5. of compressed natural gas, and its demand for LPG through piped natural gas to meetresidential cooking and heating requirements.Unfortunately, Indian government has not been able to implement the right kind of gaspolicies even after the recommendations given by several high powered commissions.Today we have three kinds of gas prices in India:1. Gas prices based on Administered Pricing Mechanism (APM) for those gas reservesbefore new exploration and licensing policy. This is around $2.50/mmbtu.32. Import prices paid to LNG imports which depend on international prices which were ashigh as $16/mmbtu last year.3.The so called arms length price based on market for those gas reserves discovered afterNELP4. For Krishna Godavari basin the government has fixed gas price at a level of$4.20/mmbtu on an arbitrary basis when the market based price would be above$6.50/mmbtu.LESSONS FROM THE WESTAs recently as three years back conventional wisdom was that US will have a huge gas deficitand it has to import increasing quantity of LNG. In less than two years, the US supply haschanged from one of deficit to surplus. The sudden and unexpected development of shale gashas been a game changer. World renowned energy economist Daniel Yergin, chairman ofCambridge Consulting Group has referred to shale gas development as “the biggest energyinnovation of the decade”.Three factors have contributed to its rapid development of US gas shales :i) Advances in horizontal drilling.ii) Advances in hydraulic fracturingiii) Rapid increases in natural gas prices in the last several years across the globe.3 MMBTU is an acronym for Million Metric British Thermal Units.4 New Exploration Licensing Policy (NELP) was conceptualised by the Government of India.
  6. 6. The potential shale gas production in Europe will have huge geopolitical importance. Sincegas prices are often higher in Europe than in the US, oil companies are keen on drilling forshale gas prospects even though profits at this stage are only speculative. Europe is todaydependent on Russia for its gas supplies to the extent of about 31 per cent. Future shale gasproduction may reduce this dependence on Russian gas suppliers for Europe and they mayimprove their own energy security needs.ADVANTAGES OF SHALE GASFossil fuels are a dependable source. No other source of energy can provide the same powerto our cars and power plants. Frequently, fossil fuels provide the most economical source ofpower.Natural gas is considered by many to be a cleaner burning fuel than oil and coal as it emitsless carbon dioxide when burned.The shale gas is a fossil fuel, so shale gas has all theadvantages of fossil fuels.
  7. 7. The advantage to shale gas are numerous. It provides long term employment oppourtnities inmany countries. The gas reserves are in decline, and shale gas is a new source that has greatpotential. As mentioned in this paper, new sources of fossil fuels in the country could help tokeep the OPEC 5countries from creating a monopoly on fuel prices. When burned,methane emits less pollutants than coal or oil. CO2 emissions are lower than today’s globalelectricity mix based principally on coal. So exploiting shale gas seems to improve the energystatus-quo and transition us towards a more environmentally friendly energy mix. Natural gasreserves are mostly in Iran, Qatar and Russia. Being less dependent on imports from this itcould also be an argument for exploiting shale gas at its full potential.DISADVANTAGES OF SHALE GASTheir supply is limited, because they are non-renewable. The burning of fossil fuels causespollution. The price to consumers continues to rise as production becomes more costly.Large quantities of water are pumped in. This can reduce the drinking water supply. It ispossible the fracturing fluids which frequently contain chemicals will be accidentlycontaminate natural aquifers6 that supply drinking water. Small towns are impacted whenlarge fracture trucks go down roads not built to withstand their weight.Shale gas wells do not have high rates of production. Many wells have to be drilled to fullyexploit a shale gas play. This means the contribution of shale gas to annual fossil fuelconsumption is likely to be small for many years.The impact on the environment is controversial. If natural gas is burned instead of coal, thenthere can be less harm to the environment. Methane is more harmful than carbon dioxide inglobal warming.A potential problem in India could be that shales are mostly found about 2,000 metres deepon shore, in areas of human habitation, unlike oil drilling that takes place offshore. Speciallydesigned water borewells may be needed in such areas to tackle escaping methane gas. Use of5 OPEC (Organization of the Petroleum Exporting Countries) is an intergovernmentalorganization dedicated to stability in and shared control of the petroleum products.6 An aquifer is a body of saturated rock through which water can easily move.
  8. 8. high-power compressors and other equipment could also unsettle local populations, whileshale drilling could affect ground water reserves.Shale gas requires a minimum land holding of about 80-160 acres, but average land holdingsin India are less than an acre. Besides, access for gas gathering stations and huge requirementof water pose additional challenges. Unlike the US, where the owner of a land has the rightover mineral resources below the surface as well, a resident in India has only surficial rightand mineral resources belong to the government.CHALLENGES RELATED TO SHALE GAS PRODUCTION  If the local energy mix is not dominated by coal or oil, the advantage of exploiting shale gas are less obvious. Hydropower, biomass, geothermal, wind, solar and sometimes nuclear are considered much cleaner.  A lot of water is needed for shale gas production,approximately 18 million litres of water is needed to drill and fracture a typical deep shale gas.In addition, when the water is used to fracture the rock several hundred meters below the surface, it is blended with sand and chemicals. Therefore the monitoring of any potential leakages is crucial. After it is used, the water has to be treated and disposed off properly adding pollution issues to the surroundings.  The emissions of gas during operations could add an additional environmental burden to the shale gas sector since the emissions of methane for the moment are not well monitored.  The operations to extract shale gas are very intensive and thousands of drillings and fracturing of the rock have to be performed.The regulations covering these operations are unfortunately not very clear.This could create unregulated and undesired disturbances, including induced seismicity, in the concerned neighborhoods.
  9. 9. RECOMMENDATIONS AND CONCLUSIONChina has now adopted a very useful and effective twin track methodology which Indiashould emulate.There has been an influx of chinese graduate students sponsored by theirgovernment who make themselves available as research and teaching assistants to professorsin the US universities, especially the top institutions in shale gas namely University ofOklahoma, Stanford University.The aim is to develop a pool of chinese scholars withacademic and technical experience in shale gas and other petroleum engineeringtechnologies. Alongside, the Chinese oil and gas companies are also sending industry internsto various US companies.India should also follow this model with US companies in future.The government should consider setting a shale gas mission to make efforts to developIndia’s shale gas reserves on a war footing. In short, we should actively endeavour to developshale gas reserves in India in the shortest time with all the human, geologic and financialresources we can assemble. It would be useful if the existing platforms for cooperation andpartnership with the US dealing with science and technology, higher education andinnovation & entrepreneurship are used for similar opportunities with US universities andindustry with a target to develop talent pool in our energy sector especially in shale gastechnologies. The government should encourage Indian companies —public sector andprivate sector to import gas shale production technology by giving incentives. It may evenfacilitate such transfer of technology through signing of cooperation pact with the USgovernment.BIBLIOGRAPHY[1] Economic Times, 25th Aug, 2010 “Exploit potential of shale gas: US to India and China.”[2] Economic Times, 20th Apr, 2010 “Gas still remains a pipe dream.”[3] The Hindu, 26th Aug, 2010 “India-U.S. shale gas exploration initiatives set to advance.”[4] Energy Information Administration[5] International Energy Agency