India is technologically ready for shale gas, but higher environmental risks and land acquisition issues pose major concerns. SV Rao, Director (Exploration), Oil and Natural Gas Corporation Limited (ONGC), explains to Sudheer Vathiyath how they can be offset.
How viable is shale gas exploration in India?
As per the study carried out by Energy International Agency, USA (EIA), India holds significant potential of shale gas. The petroliferous basins of India-Cambay, Damodar, Krishna-Godavari and Cauvery-contain conÂsiderable thickness and extent of shales, which are conÂsidered prospective for shale gas. As per EIA studies, the total shale gas resource in these basins is expected to be about 290 trillion cubic feet (tcf), of which the techÂnically recoverable reserves are about 63 tcf.
ONGC has taken up an R&D pilot project for shale gas exploration in the Damodar basin and on hydroÂfracturing of one of the wells, flowed shale gas on surface. While the final results are awaited, preliminary results indicate the Damodar basin has good potential.
What are the environmental issues involved and how can they be overcome or offset?
Shale gas exploration requires high density of wells with implementation of massive hydrofracturing to allÂow commercial quantities of gas to flow into the wellbore. This has the potential of after-effects at surÂface.
Generally, the productive shale formations are suffiÂciently deep and there is no evidence of contamination of the water aquifers tapped for groundwater. The flow-back water used can be recÂyÂcled with suitable effluent treatÂment processes, and the land can be reclaimed after activities are completed to miniÂmise the imprints at surface.
The extensive land use and large scale operations are also likely to impact community activities and their livelÂihood. Mechanisms for effective social welfare meaÂsures need to be in place by the operators and regulator.
Replenishing the water used for hydrofracturing is a most important aspect and requires proper planning for harvesting rainwater and using seawater.
Research activities in the United States are on to minÂimise surface and subsurface footprints of shale gas actÂiÂÂvities; alternatives measures for hydrofracturing are also being worked out.
What role can technology play to overcome the challenges in shale gas exploration?
The techniques used for exploration and exploitation of shale gas can be broadly classified as (a) surface orienÂted and (b) integrated studies of subsurface. Technology is intrinsic to the efforts at both the levels.
Surface-oriented technologies are horizontal pad driÂlling and multi-stage hydrofacturing. Large scale advanceÂments have taken place to provide effectiveness of the operation, maximise the output and reduce footprints.
Reservoir and completion quality analysis are carried out in state-of-the-art laboratories, involving geochÂemical, petrophysical and geo-mechanical studies to ideÂntify the fairways of shale gas and plan for effective stimulation. Precise studies coupled with 3D/3C seismic provides sweet spots for placing horizontal wells, hydroÂfracture zones and other stimulation techniques. Micro-seismic techniques are employed to monitor the efficacy of hydrofracturing, which is the most important part of the whole process.
How far are Indian companies equipped with shale gas exploration?
Most Indian E&P companies have extensive experÂience related to conventional hydrocarbons. The same expÂÂeÂrÂiÂence will be able to supplement the efforts in shale gas exploration. However, requirement of techÂnological and infrastructure resources for exploraÂtion of shale gas is enormous. This handicap can be overcome by technÂological collaboration with estaÂblished players and servÂice providers in the internatioÂnal market.
India is still on its way to workout its course in arriÂving at commercial production of shale gas. Presently the central government has embarked on establishing a framework policy on shale gas as well as amendment to Petroleum and Natural Gas (P&NG) Rule prior to floaÂting of first round of shale gas blocks. As a first step, Government of India has entered into an MoU with USGS for evaluation of shale gas prospectivity of Indian on-land sedimentary basins, and shale gas resource estimation. However, there is also a need for a special environmental regulatory framework for shale gas expÂloration and exploitation.
Requirement of large scale infrastructure including rigs, hydrofacturing and pumping equipment, frac cheÂmicals and proppants, water transportation and moveÂment of resources in addition to technical skills can be overcome in due course. The companies are gearing up for this challenge by taking up advanced studies of the basins for estimation of the resources.
What policy changes may be required to include shale gas in our energy spectrum?
The scale of activities and economics involved in the shale gas exploration and exploitation has less in common with the conventional hydrocarbon activities. Shale gas involves high capex but the returns are spread over longer periods. The requirement of inputs is altoÂgether different from the conventional exploration.
This warrants for a separate policy on shale gas. At present there is no fiscal regime for shale gas exploration and GoI is in the process to frame the policy on shale gas as well as an amendment to P&NG Rule prior to floating of first round of shale gas blocks. There could also be an acreage sharing mechanism of simultaneous use for conventional, CBM and shale gas usages.
There is also a need for special environmental reguÂlatory framework for shale gas exploration and exploÂitation as large scale shale gas exploitation has revealed some environmental effect.
What policy initiatives are needed to tackle the difficulties in shale gas exploration?
The following may require consideration of GoI for introducing bidding for shale gas blocks:
- Clearly defining the shale gas parameters to distiÂnguish it from conventional hydrocarbon in case of occurrence in the same field
- No cost recovery and government take in the form of Production Linked Payment (PLP)
- Special terms like no state stake, assignment of inteÂrest, custom duty exemption, landowner's stake, etc
- The E&P cycle should be preferably in two phases: Phase I (Exploration) of five years and Phase II (DevÂeÂlopment and Production) of 25-30 years
- Providing tax incentives to partially offset the higher and prolonged capex with well drilling, either by treÂating capex as operating cost or allowing acceÂleraÂted depreciation similar to renewable and gas generÂation
- Subsidising exploration for the less explored basins
- Requirement of harvesting water mandatory
- GoI needs to underwrite the development of gas evacuation infrastructure to bring gas to market as individual gas operators may lack the scale to estaÂblish their own pipeline infrastructure.
What is the progress of MoU signed between GoI and the US government in 2010?
In an attempt to ascertain potential of shale gas and estimate the shale gas resources in Indian basins, the Ministry of Petroleum and Natural Gas (MoPNG) has taken initiatives in seeking cooperation from United States Geological Survey (USGS) for shale gas resource estimation of potential basin of India, including study of impact on environment. An MoU was signed in NoveÂmber 2010 during the US president's India visit.
For the purpose of coordination and association with USGS during the work, MoPNG has formed a Multi Organisation Team in September 2010, comprising memÂbers from DGH, ONGC, OIL and GAIL. The team scrutinised the existing data of different basins and identified five prospective basins namely Damodar, Cambay, K-G, Cauvery and Ganga, to be given to USGS for detailed study for prospectivity and resource estimation. The study by USGS is in advanced stage, and the report is likely to be available early this year.
What lessons can be learnt from the recent US experience in shale gas?
The US has commercialised shale gas and become the lead player in the market. Their experience of drilÂling about 40,000 wells suggests that sub-surface undersÂtanding and identification of sweet spots is critical to shale gas exploration, as no two shales are similar.
The whole gamut of shale gas viability is driven by volumes. The volumes make it imperative for high capex, which can be reined through competition, innoÂvations, professional efficiency and economies of scale.
The huge infrastructure available in the US for conventional HC also helps reduce capex and opex by pooling the resources. The scale in India is smaller, and so the infra gap needs to be filled for viability.
In the US, land availability and local regulations provide stake to the landowner on the subsurface mineral rights. In India, a business model can be evolved in which the landowner has stake in the business.
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