Nantoo Banerjee
Shale gas, a new energy solution, is being billed as the next best thing to conventional energy. And, it is believed to be available aplenty in several parts of the world, including India. The world is going crazy about this new source of energy which may challenge the domination of West Asia, Russia, Nigeria and Venezuela over oil and gas market in the next two to three decades. The USA is most hyper about shale gas changing its global energy equation and trade if not its geo-political considerations. Although Indian energy companies are keen to share the excitement through global co-operative ventures, the country as such is yet to take strong policy measures to find and tap its own shale gas reserves.
Last year, the Energy Information Administration (EIA) of the US Department of Energy released for the first time a report which estimated recoverable world shale gas reserves at 187 trillion cubic metre (m3). The reserves in US is said to be around 24.4 trillion m3 (accounting for about 13 percent) and in China up to 36 trillion m3 (accounting for about 20 percent). Following the US report, China’s ministry of land and resources released earlier this year its own research data that listed the potential of shale gas geological resources is 134.42 trillion m3 in the land territory of China, of which 25.08 trillion m3 can be recovered (excluding the shale gas in Qinghai-Tibet area).
No one in the government of India, including the department of petroleum and natural gas, really knows about the country’s geological reserves except for the fact that the country’s No.1 oil explorer and producer, ONGC Limited, has made a discovery of shale gas in the Durgapur-Raniganj coal belt. The ONGC find seem to have failed to raise the official activity level to acquire a reliable nationwide data of shale gas resources to formulate a comprehensive policy on commercial recovery.
Even before public sector ONGC Limited discovered in January last year the existence of shale gas at Ichchapur village, near Durgapur in West Bengal, western geological intelligence researchers and China ‘knew’ about the presence of shale gas in several parts of India. Over 22 months passed, India appears to be still groping in the dark about the estimated geological and commercial reserves of the newfound fuel. There has been no news about the mapping of India’s shale gas resources and if the government has awarded the task to any particular agency for the benefit of the whole nation. Nor has the government taken a policy decision on the exploration and exploitation of shale gas, terms and conditions for allocation of blocks and pricing.
Shale gas is a form of unconventional natural gas trapped predominantly within shale formations. It is found mainly in countries having large coal and hydrocarbon deposits. According to EIA, there are 48 shale gas basins in 38 countries. Western experts hope that shale gas will greatly expand worldwide energy supply. It is predicted that by 2035, nearly 46 per cent of the US natural gas supply will come from shale gas. The identified areas in India are the Damodar basin, Assam-Arakan belt in the northeastern region, Cambay (Gujarat) and Krishna-Godavari-Cauveri basins along the southeastern coast.
It is to the credit of the Gujarat government, known for its quick decision making ability on important economic issues, that the state is in the process of setting up a shale gas laboratory in Gandhinagar, even as the union government is said to be preparing itself with its first auction of shale gas block by the beginning of 2014. A laboratory is being set up by the Gujarat Energy Research and Management Institute (GERMI). It will explore and analyse the regions having shale gas reserves trapped in sedimentary rocks. The institute is in talks with the Oil Industry Development Board for funds. Initially, it will require only Rs. 8 crore.
On the other hand, the ONGC’s pilot project involving drilling of four wells in Damodar Basin – two at Raniganj and the others in North Karanpura in Jharkhand – has been operationalised with the help of French technology giant Schlumberger. The French firm has been given an integrated time-bound contract for drilling, assessing and carrying out the relevant operations including hydro-fracturing in view of their expertise in the US. The project is estimated to cost around Rs 168 cr and is to be completed within 18 months.
The countries such as China and the US, the world’s top two energy consumers, as well as Canada have already made sizeable progress with regard to the mapping of their shale gas resources. In the USA, shale gas contributes to nearly 17 per cent of the total gas production. The US has been working on it for the last 12 years. China too has made a steady progress in shale gas production. Recently, China launched a second round of shale gas auctions and is targeting 6.5 billion m3 of annual production by 2015, from close to none this year.
On the positive side, Indian companies have already gained some exposure to the business through investments outside the country. Recently, Oil India and Indian Oil Corporation together bought a 30 per cent stake in Houston-based Carrizo Oil & Gas’ Niobrara shale gas asset in Colorado for $85.2 million. GAIL had, last September, acquired a 20 per cent stake at Carrizo’s Eagle Ford shale acreage in south Texas for $95 million (Rs 490 crore). The acquisition was GAIL’s first shale gas asset in the US.
The Mukesh Ambani-led Reliance Industries holds 45 per cent in Eagle Ford and 60 per cent in a Marcellus shale gas field through a joint venture with Carrizo. RIL’s shale gas business in the US comprises three upstream joint ventures, with Chevron, Pioneer Natural Resource & Carrizo Oil & Gas, and a midstream joint venture with Pioneer.
China, too, is pushing exploration of shale gas by forming partnerships with foreign oil and gas companies such as British Petroleum and Chevron. Chinese state energy firms had over the last two years struck multi-billion-dollar shale gas deals in the US. The US firms in collaborative ventures with China include Chesapeake Energy and Devon Energy Corp. These ventures gave Chinese firms an opportunity to learn about shale technology from those leading US operators. Earlier this year, China had set a shale gas production target of 6.5 billion cubic metre (m3) by 2015. This may be stepped up to 100 billion m3 by 2020 with massive financial inducements given for the purpose.
India, almost 80 per cent import dependent to meet its oil and gas needs, must act fast to map its shale gas resources and prepare plans to utilize these resources for better energy security. It should be a matter of some concern that India’s import of liquefied natural gas (LNG) has increased over five-fold since 2004-05, when the UPA government first came to power. The country’s oil import last year leaped 40 per cent to a record $14 billion. It also imported about 100 million tonnes of thermal coal. Shale gas may provide a great opportunity to partly bridge the country’s growing energy deficit. (IPA)
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