Disappointment for Reliance, Cairn India.
By Rajiv Theodore
NEW DELHI: The much awaited shale gas policy was unveiled by the Indian government, but it has come with a big rider –only state-run firms like Oil India Limited (OIL) and Oil and Natural Gas Corporation, (ONGC), would be allowed to prospect in these non-conventional energy blocks and that too without auction.
The policy would prevent participation of private explorers who had been waiting for a clear cut policy on shale gas in India for quite some time now. Companies like Reliance Industries and Cairn India would have surely got disappointed by this cabinet decision.
Obviously it has dampened the mood of the private players as the oil ministry had earlier said that all explorers regardless of being from the public sector or the private would be permitted to explore shale gas resources clubbed with the conventional oil and gas resources. The government then changed track and decided to have a separate policy for shale exploration in blocks awarded to private firms.
The policy also prohibits prospecting for shale oil and gas in 254 blocks awarded to several public and private sector energy firms in nine rounds under the new exploration licensing policy (NELP). Also, blocks awarded before the NELP regime, about 15 years back, have been kept out of its preview.
“We have restricted the scope of the policy after the department of economic affairs questioned extending oil and gas contracts of private companies’ to also exploit shale recourses, without giving equal opportunities to new entrants,” an energy ministry official said.
This means that the two state –run oil and gas explorers could exploit shale resources in the 176 identified exploration zones on land where exploration or production of convention energy resources are already taking place. These areas are: Cambay, Krishna-Godavari onland, Cauvery onland, and Assam-Arakan and Damodar basins.
The ministry of environment and forest had raised serious environmental concerns over the widespread exploration of shale gas and oil although acknowledging huge success for its exploration in the US which now meets about 30% of its domestic gas supplies though shale gas. The shale gas production process should be “viewed with circumspection in many countries in Europe because of perceived environmental problems, with some countries even announcing moratorium on fracking, largely on account of apprehensions of possible seismic effects of fracking”, the green ministry said.
It could even lead to a water crisis in India.
“Each well would require 3-4 million gallons of water. Although the note does not specifically say so, as per the US experience in shale gas exploration and exploitation, the water used for fracking is fresh water,” the ministry said.
As in other countries the exploration of shale gas had hit several green road-blocks. The ministry of environment had raised concerns relating to availability of water, safety of aquifers and ensuring regulatory framework for environmental safety.
But since the demand in energy in India is growing and is expected to hit 7-8 % annually, unconventional resources like shale oil and shale gas have the potential to improve this situation. The US experience with shale gas not only result in more advanced knowledge of the extraction process, but has also allowed a decrease in production costs and drilling time, making it both more feasible and competitive.
Shale gas is found in little bubbles of gas trapped inside shale rocks that stretch for miles inside the earth. The way to extract it is to drill a well that penetrates the shale, then takes a ninety degree turn and makes a channel in the rock .Water (mixed with chemicals and additives) is then blasted at high pressure through the horizontal well to fracture the shale, an activity called “fracking.” Which dislodges the gas bubbles and they finally find their way to the surface through the horizontal well which is then collected.
Unlike conventional gas where drilling that perfect well is critical, shale reserves are easier to find and drill – the name of the game here is operational efficiency: quickly drilling horizontal wells, fracking them, connecting them to pipeline infrastructure, extracting the gas, transporting it and moving to the next tract of land.