The government's plan for bidding out the shale gas blocks for exploration has been postponed till 2013, and it seems India is in the dilemma of how to take its shale gas initiatives forward in policy. The delay points to a debate on the environmental hazards.Given the greater likelihood of groundwater contamination, will shale gas be a reality in the near future? Sudheer Vathiyath explores.
Amidst the concerns of depleting output from the existing resources, shale gas has emerged as an alternative to meeting the ever-growing energy needs of the country. The unprecedented growth in shale gas in the US has generated new hopes for all the energy-deficient countries.
Following the footsteps, other countries including India are examining the shale gas alternative.Characteristically Indian optimism and excitement has grown, and the government even announced that shale gas blocks would be auctioned this year. But an unexpected roadblock has put the brakes on. Is it a speedbreaker or a dead end?
The shale tale Shale gas is contained in adsorbed form in the micro-pores and micro-fractures of shale, a sedimentary rock. Shale has low perÂmeability and there is little movement of gas through this rock. In order to release the gas, especially in commercial quantities, the shale must either have natural fractures, or fractures must be created in the rocks to provide suitable permeÂability. However, a new drilling technology emerged in the 1990s wheÂreby a tight shale deposit could be cracked open by injecting water mixed with sand into the wells under high pressure. The sand keeps the cracks partially open when water injection is stopped, increasing the permeability and gas flow.
Shale deposits have limited depth but cover a large region. Vertical drilling could only capture a zone of 20-30 m and therefore only a small amount of gas could be produced per well. Over the past couple of decades, the drilling techniques evolved and horizontal drilling is possible today. This makes posÂsible horiÂzontal wells running hundreds of metres long through shale strata, increasing the production zone of each well.
The US revolution
Horizontal drilling and sand cracking have revolutionised the use of shale gas in the US and transformed it into a developing industry. The US has now made significant headway in shale gas and is responsible for technological and economical advantages in the shale gas production today. This shale gas revolution has turned the US from a gas importing country to a gas exporting country. As much as 90 percent of the global shale gas is currently produced by the US. Shale gas now makes up a quarter of the total US natural gas production and the Energy Information. Administration forecasts this proportion to double by 2035. No wonder that shale gas is seen as the next gamechanger in the gas energy sector.
The success of shale gas in the US can be attributed to favourable geology, large resources play, and persistent R&D supported by the US. Department of Energy to help improve recovery techniques. Also, factors such as, deregulated natural gas price, well developed pipeline infrastructure, a well developed gas market, a stable fiscal regime, easy leasing framework, and tax credits, took the shale gas industry to new heights.
SHALE-RICH India
India's gas demand is likely to rise from 290 mmscmd in 2012-13 to 470 mmscmd in 2016-17. Against this, domestic supply will increase from 124 mmscmd to 220-230 mmscmd only. India now needs increased gas output to feed its new projects in the sectors of power, fertiliser, etc.Industry estimates show that shale gas reserves in India have the potential to move the country's gas market into a balanced one. Surveys conducted by various agencies in India have estimated the country's shale gas reserves at 300-2,100 trillion cubic feet (tcf).
In India, six basins are reported to have good potential for shale gas—Cambay in Gujarat, Assam-Arakan in the North East, Gondwana in Central India, Krishna-Godavari onshore (in Andhra Pradesh), Cauvery onshore and the Indo-Gangetic basins. As per the study carried out by Energy. International Agency, USA (EIA), India holds significant potential of shale gas. As per EIA studies, the total shale gas resource in these basins are expected to be about 290 tcf of which the technically recoverable reserves are about 63 tcf.
ONGC discovered the country's first shale gas reserve at Durgapur in Burdwan district of West Bengal on 25 January 2011. ONGC plans to drill three more in Damodar in 2012.
The studies carried out by GSPC on the Cambay basin show that there is good potential for shale gas. “We would like to try and further explore this play type, however, all depends on the methodology adopted by the Government of India for awarding such blocks and policy guidelines formulated by them,” says RN Pandey, General Manager (R&D), Gujarat State Petroleum Corporation (GSPC).
Policy matters
Shale gas is an unconventional source of gas. According to the current policy, the oil companies in India are allowed to produce only conventional oil and gas from their exploration blocks. A separate bidding round is required for the unconventional sources. Oil companies have hit thick seams of coal and shale while drilling for oil, but are not allowed to conduct testing. “The policy initiatives can be taken only after careful study of existing data along with understanding the industry best practices in the perspective of our country,” Pandey observes. The government plans to come out with its policy statement on the segment by the end of 2013.
Technology first
Technology has an important role to play in the exploitation of shale gas considering the risk factors in terms of environmental impacts, extensive use of water and the kind of drilling involved. The companies that would eventually win rights to explore shale gas in the country also need access to technology that reduces demand for water and controls effluents.”Technology is the key driver and the exploitation of shale gas has been possible only with the help of multi-stage hydrofracturing operations. Innovative methods in application of indigenously manufactured proppant can also help cost reduction. Similar methodology can be used for design of mud system and completion fluid,” says Pandey.
Indian gas giants GAIL and Reliance Industries have acquired stakes in US shale gas assets. Reliance has outlined plans to spend $4-4.5 billion by 2014 on three US shale gas joint ventures it entered into last year.GAIL aims to invest $1 billion in one year's time in shale gas assets, particularly in the US and Canada. Acquiring overseas assets for exploring the shale gas reserve will help the Indian companies gaining the technical know-how and the skills required to operate the business.
Not an easy task
According to preliminary estimates, India's shale gas reserves may be larger than the conventional gas deposit. Recovering shale gas from such massive reserves may not be that easy. The viability of exploiting shale gas in India will depend on the feasibility study and possible involvement of suitable technology. Pandey says that the viability of shale gas in India can only be ascertained by a systematic analysis of the existing data along with geo-scientific operations which are needed to ascertain commerciality.
Water problem: Requirement of water in large quaÂntities for hydraulic fracturing process is a major challenge to tackle with in the exploration of shale gas. Pandey suggests, “Availability of water is a serious problem which can be tackled by innovative methods. We have already contacted certain service providers in this regard who have assured us their timely input. A few of them are already working in reduction of quantity of using water for carrying out multi-stage hydrofracturing operations.”
In the process of hydrofracturing, there is a signiÂficantly higher risk factor existing. Contamination fears: Exploration of shale gas requires horizontal drilling and uses a lot of chemicals, which could lead to contaÂmination of the groundwater. According to Pandey, the recycled use of mud system can help in removing the environmental impact. Disposal of formation water can also be done by systematic planning. SV Rao, Director (Exploration), ONGC, says, “Requirement of large scale infraÂstructure including rigs, hydro-fracturing and pumping equipment, frac chemicals and proppants, water transÂportation and movement of resources in adÂdition 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.”
Land blues return: Land acquisition would be a challenge as land is a precious resource in India now. Unlike conventional oil exploration, shale gas expÂloration is continuously mobile and moves from one spot to another, requiring more land for exploration. “The issue of land can be handled by systematic planning as most of the operators have oil and gas fields with them which can come handy for such purposes. In few states, which have progressed at a faster pace than others, the issue of land would need to be addressed in a careful manner for such purposes,” says Pandey. “The surface developments can also pose problems however the same can be assessed only after the detailed studies have been carried out,” he adds.
A vague outlook
Though the US has made significant headway in shale gas exploration, other major countries, including the developed countries are shying away from acting quickly on it. These countries are largely concerned about the impact of the horizontal drilling and hydraulic fracturing of shale rocks on ground water contamination and the environment. France has banned the practice of hydraulic fracturing, which is used to exploit shale gas.
Compared to the new discoveries, the depleting oil fields are on the rise. In such a grim outlook, shale gas can be the future of natural gas as it is going to be one of the major sources of supply in India. For a possible shale gas revolution, India needs a major overhaul in its energy policies and approaches. However, the government's plan for a policy and bidding process for shale gas exploration is getting delayed. Originally planned to take off in 2011, the bidding process is expected to happen by the end of the financial year 2013.
Considering the current issues of land acquisition, environmental impacts and the high risk factor invÂolved, the future of shale gas exploration seems to be uncertain at best. The government has still to work out a clear picture on the bidding process and policy. There are two possibilities in the current situation. One is the government can give exploration licences only to public sector players like ONGC, GAIL, OIL, GSPC etc, who can outsource the exploration work to more experienced and technologically advanced foreign players. The second option is that the bids may be open to all including the private players and the risk factors should be borne by the bidders. If things are not working out as per the plan, a third possibility of heading towards a natural death of shale gas exploration, cannot be written off.
France bans shale gas exploration
France has become the first country in the world to ban the practice of hydraulic fracturing, used to mine for shale gas and oil. Senators voted in favour of a ban. The law had already been approved by the National Assembly in May. The draft legislation had originally banned shale gas exploration completely, but the government is keen to leave other mining options open. Local politicians and environmentalists have been campaigning against the technique since March 2010 after a number of drilling licences were awarded in the south of France and around Paris.
All firms who currently hold shale gas exploration licences in France will need to produce a report within two months showing that their mining technique is not hydraulic fracturing. If hydraulic fracturing is used, or no report is produced, the drilling permits will be revoked.
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