The Shale Gas Saga

The Shale Gas Saga
The Indian Economy is traversing a path of long-term growth trends since economic liberalisation in the 1990s. Quite naturally, it has exponentially increased the demand for energy. In the years to come, most of it is expected to be generated through fossil fuels. India’s petroleum consumption has also inflated at a rate of over 7 per cent. Sudhir Vasudeva, CMD, ONGC, in a recent seminar held in Kolkata, enlightened the audience on the future of Shale Gas in the country. India’s long-term energy security is on the edge with economic growth, rise in population, improved standards of living and scarcity in indigenous energy sources. 
According to records, present consumption of petroleum in India is a whopping 3 million barrels per day which is expected to increase to reach around 8 million barrels per day by the year 2030. The consumption of gas also, would be no less. At present, the domestic production of oil and gas is a mere 27 per cent of the total demand. This would, under no circumstances, be able to meet the ever increasing demand of fuel even when the newly discovered resources are put in place.
Vasudeva said, “In recent times, the colossal rise in the demand for energy coupled with shrinking new discoveries and static reserve growth from conventional resources has led to unprecedented emphasis on search for unconventional resources.”
Although Mother Nature has bestowed upon India enough unconventional energy resources, the trick lies in using the best suited technology that would produce energy out of these resources, in a most economic manner. The most popular alternate energy resources that have come into play in the recent past include CBM, Gas hydrates, Tight gas, Oil Shale and Shale Gas. Of these, Shale Gas exploitation and phenomenal growth of Shale Gas in the United States has witnessed unprecedented success due to use of requisite technology. This has attracted the attention of the energy industries across the globe. Moreover, according to the estimates of the EIA, the availability of shale gas resources globally, outside the United States is approximately 22,000 tcf, the recoverable estimates standing at around 6,000 tcf. Thus, shale gas has emerged as an important supplement to traditional sources and has brought along new hopes for the energy deficient countries. 
The concept of Shale Gas was known to exist even before the knowledge of conventional hydrocarbon plays. However, lesser demand for gas, mainly due to hazards in transportation and unattractive prices made them less popular for long. Other alternative energy sources, namely, Oil Shales, UCG etc have either been unsuccessful in optimising their costs of production, or are deprived of feasible technologies of production like gas hydrates. “Shale Gas has attained the status of an economically viable, technologically achievable and widespread resource. This combination has drawn attention of many nations and almost all the major industry players to venture into this foray,” said Vasudeva.
Shale Gas – Feasibility
Shale Gas has brought along a whole new paradigm in the energy portfolio. In the present scenario, when hazards of climate change and carbon dioxide emissions are looming large the world over, shale gas has the capability of acting as the most dependable energy resource in the coming 100 years, with minimum carbon footprints.
But, Shale Gas production involves large spread of gas basins. It brings with it the necessity of high density horizontal wells coupled with hydraulic fracturing required forthe production of economically viable quantities of the gas from a particular reservoir. Inspite of this, shale play has been an attractive alternative across all nations because of less exploration risks and high success rates. The biggest positive of shale play which makes it a lucrative option for players in oil and gas is that once a basin proves to be positive in this energy resource, the total number of successful wells may go up to as much as more than 90 per cent. 
The US Scenario
In USA, Shale Gas accounts for 25 per cent of the total gas produced. In fact, shale gas production has majorly hit the net LNG business in the United States. The energy sector of the US has therefore witnessed a shift from being an import oriented country, to an export oriented one, in recent times. Vasudeva cited, “Technically recoverable US Shale gas resources are now estimated at 862 tcf, amounting to 34 per cent of its total natural gas resource base of 2,543 tcf.”
Increase in activities in the realm of shale plays in the country, has stepped up the production of shale gas in the US from 0.39 tcf in the year 2000 to as much as 5 tcf, in 2012. This makes US the largest contributor in the projected rise in production of the gas. The US has drilled approximately 40,000 wells across different Shales.Oil players have deployed around 1500 rigs exclusively for the production of shale gas. A well-knit network of pipelines of length 600,000 kilometres has been laid down for reaching the gas to the market.
Major oil players from different countries across the globe have taken the example of the US and are engaging themselves in anextensive hunt for shale gas sources the world over.“All the European Countries, China and Australia are in different stages of exploration and production,” said he. Despite the fact that it has started late, China plays to ramp up shale gas production to 10 per cent of the total gas production in the region by the year 2020. 
India possesses extensive stretches of basins which when compared with the US basins, pose scopes interesting enough for shale gas explorations. At present, there are seven oil and gas producing basins in India. The hydrocarbons available in these basins come from the mature shales that lie underneath. The deeper the shales formed, the higher is the organic richness and the maturity to gas window levels. These are the ideal spots for shale gas exploration and exploitation. 
Initial studies suggest that shale sequences in some of the well-explored basins seem to be promising. These include Barren Measure in Damodar, Cambay Shale in Cambay, Raghavpuram and Komududem in KG and Andimadam in the Cauvery basins. Few other basins which have huge shale thicknesses and hold promise for future explorations are:
Assam – Arakan Basin
Bengal Basin
Godwana Basins, i.e., Pranhita Godavari, Satpura, Son Mahanadi
Vindhyan Basin
Rajasthan Basin
“The cumulative thickness of these shales is comparable to or more than global best shale plays. The systematic resource estimation of all these plays together has not been carried out so far as no shale specific data is available,” said Vasudeva.“However, as per the EIA estimates based on the available public domain G&G information, these four basins, namely Damodar, KG, Cambay and Cauvery, have shale gas resource of the order of 290 tcf of which 63 tcf is considered technically recoverable,”he continued. Therefore, based on these estimates, it can be said that the availability of shale gas resources in India is sufficient enough to ensure well-planned strategies that are backed by appropriate fiscal and regulatory policies. 
In order to gauge the potential of shale gas in India and to measure the amount of shale gas that is available in the Indian basins, MoPNG has come forward and requested cooperation from USGS to calculate the availability of shale gas resources in the prospective basins of the country and at the same time work on the environmental impacts of the gas as well. These studies are in progress. Initiatives are also being taken up by the Government of India for appointing international multi-task forces to work on shale gas and it is a welcome step ahead. The first round of bid for shale gas blocks are expected to be take place sometime late this year. 
Case Study – ONGC 
ONGC, in an effort to make some contribution in this regard, took up an R&D pilot project in the Damodar basin of West Bengal, based on the data available from the Cambay, KG, Cauvery and Damodar basins. ONGC has its presence in the Damodar basin already, for CBM. This basin was most suitable for carrying out detailed investigations and for testing the potential of shale gas. As part of the pilot project, four wells were drilled, two in the Raniganj belt and the other two in the North Karanpura area. When one of the wells in Raniganj was hydro-fractured, shale gas flowed up to the surface, first ever in the history of Indian basins. According to estimates, risked shale gas resources amounting to 48 tcf are available in the Damodar basin, of which, 10 tcf is technically recoverable. However, corresponding estimates by EIA is approximately 7 tcf.
While the EIA estimates are based on conventional data available at hand from these basins, ONGC estimates are a result of extensive analysis of the shale gas data that have been generated from the four wells drilled for the pilot study in the Damodar basin. Therefore, there remains tremendous scope for upward revision of the approximately 63 tcf of technically recoverable shale gas in India, which is the data provided by EIA. 
Vasudevastated, “After encouraging results from the pilot study, to collapse the learning curve and quickly access the areas, ONGC has gone a step ahead and entered into a MoU with ConocoPhilips, one of the oil majors in US for undertaking further studies in four potential basins and plan for development of shale gas, starting with some more pilots in different basins.” ONGC, under the Perspective Plan 2030, has put special emphasis on explorations of shale gas. ONGC has created the Centre of Delivery for Shale Gas – a centre which is responsible for carrying forward the shale gas crusade in the country. The responsibilities of executing works under the JV with ConocoPhilips havebeen bestowed on the Centre of Delivery for Shale Gas.
Therefore, taking leads from US experiences and comparing the scopes of the Indian basins with that of the US, it can be summarized that India has huge potential for shale gas explorations. However, this is the only area where similarities lie. There are a myriad other features which hugely vary across the two nations and pose threat for shale gas from being a profitable business option in India. These include availability of technology and skills, infrastructure, land and water requirements, environmental considerations, logistics, regulatory framework, and last but not the least, techno-economics. It is necessary therefore to address each of these challenges singularly and to handle them strategically so that shale gas finds a place in the Indian market as a supplement to traditional sources of energy like oil and gas. The manner in which each of the above mentioned issues pose threat to shale gas explorations in India is discussed here.
1. Availability of Technology and Skills– Shale gas exploration and exploitation is way different when compared to the conventional sources. These entail special skills (technical and project management). Therefore, for shale gas to be a success necessitates ramping up these skills.
2. Unlike conventional drilling, shale gas exploration requires technical resources and physical inputslike rigs, various services like frac services, specialised drilling etc. Service providers must be attracted with lucrative initiatives to invite cost-competitive services.
3. In terms of land usage, larger number of wells is required to be drilled for shale gas and therefore extensive land usage is involved. While conventional sources of energy like oil and gas can afford even less than one well per square kilometre, the corresponding figures for shale gas is around 2 to 6 wells per square kilometre.
Caveat – While population density in India stands at around 370/sq km, that in the US is as less as 33.7 and that of even China is much less than India at 139.6. On the other hand, the population density figure for West Bengal alone is 1035/sq km, which is thrice the average Indian population density. Again, on the land usage front, arable land in the USA and China are 18 per cent and 14.9 per cent respectively. The drastic difference with India is that total arable land in India is 48.83 per cent. West Bengal has a super fertile plane, 61 per cent of its land being arable. “I am sure this percentage will be even higher for the fertile Burdwan district where Damodar Basin is located,”said Vasudeva.
It is but natural that the local population would be strongly against the usage of their arable lands for the purpose of drilling activities, as it would disrupt their agricultural activities and their means of living. What is necessary is careful strategic planning so that the land owners readily agree to contribute their piece of land for economic development.
4. Water Requirement – The hydro-fractured technology for shale gas exploration needs hundreds of wells to be drilled in any area. This is an arduous task to accomplish in states which suffer from dearth of drinking water or even irrigation water.
Caveat – It is noteworthy, that India is less endowed in terms of renewable sources of water as well, when compared with the US or China. While total renewable water sources in India are around 1908 cu. Km. the corresponding figures for China and USA are 2829 cu. Km. and 3069 cu. Km. respectively. Similarly, the Indian population is heavily dependent an agriculture as a means of living. Therefore, 86 per cent of the total water supply is used for agriculture, while that in China and the US are respectively 68 per cent and 41 per cent. Hence, we can say that we are faced with water scarcity in the industrial front. West Bengal is situated along the Gangetic planes and thus has sufficient ground water. The net annual availability of ground water is around 27.5 BCM as against 399 BCM, which is the annual aggregate for the country as a whole.As Vasudeva put it, “However, considering its pro-agrarian economy, availability of huge water for its shale gas operation is apprehended to be a great challenge for us.”
To overcome the challenge of water scarcity, innovative techniques need be adopted, like harvesting rainwater or carbon dioxide-fractured mechanisms that would enable smoother exploitation of shale gas.
5. Environmental Considerations – According to estimates, almost 70 per cent of the fracture water gets contaminated with harmful chemicals. Thus, the water needs to be properly treated before can be recycled. This further adds to the cost of shale gas. In a recent development, however, it has been heard that two Indian scientists Anurag Bajpayee and Prakash N Govindan working at MIT have come up with a breakthrough in technology. They have shown through a pilot test that the ‘carrier Gas Extraction Technology’ conceived by them is able to turn frac-water into normal palatable water. Once commercially viable, it would be of great help in shale gas extraction. 
6. Network of gas pipelines are also not well laid in India– a mere 15,000 km is laid out. The country requires large scale infrastructure development. 
7. The extent of confusion in the determination of gas prices is most likely to discourage interested parties from investing in this frontier. Enough clarity and the assurance that these projects would be economically viable might boost their confidence at the end of the day.
In spite of all these challenges, proper solutions need to be put in place if shale gas is thought about as a serious alternative to conventional energy sources. E&P operators in the country must work towards developing workable business models that would suit the socio-economic conditions of India. A conducive environment should be created by the Indian regulators so that shale gas can be nurtured as a highly potential source of fuel. The Government if India is eager to take up all round efforts that will encourage the exploration and exploitation of shale gas. Shale gas E&P is different from conventional sources in terms of cost, time required for recovery and development, infrastructural needs, community and environmental pressures etc. the Government has decided therefore to frame separate policy guidelines. Vasudeva said, “I am sure, the policy will address the critical issues that enhances the attractiveness of developing shale gas resources.” He is optimistic that all the players in the energy sector are geared up to cope up with the challenges to be faced while harnessing shale gas as a renewable resource for gaining economic prosperity and bringing about energy security in the country, in years to come.