7/30/2019 Focus Shale Gas

http://slidepdf.com/reader/full/focus-shale-gas 1/4

58 Infrastructure Today June 2011 www.InfrastructureToday.co.in

Focus

N atural gas production rom hydro-carbon rich shale ormations, kno-wn as “shale gas,” is one o the

most rapidly expanding trends in onshoredomestic oil and gas exploration and pro-duction today.

Based on advances in horizontal dril-ling and hydraulic racturing technologies,shale gas has transormed the UnitedStates rom a growing importer o Liqueed Natural Gas (LNG) to sel-suciency

in natural gas, with even the possibilityo export.

With an amazing success over the lastdecade, increasing its share o shale gasrom 2 per cent to 17 per cent o totalnatural gas production between 2000 and2010 (Fig 1), the US has not only addres-sed its energy security concerns but alsorevolutionised this unconventional hydro-carbon or other countries to emulate.While some environmental concernsdo remain or shale gas to become a

sustainable option, it is “simply the mostsignicant energy innovation so ar thiscentury”, as Daniel Yergin, Chairman, IHSCERA, says.

As India looks to develop its own ene-rgy security by reducing dependence on or-eign oil and gas (with the increasing supplyand price volatility associated with impo-rts) it should make all eorts towards sus-tainable development o its unconventionalhydrocarbon resources.

The energy landscape in india

is seT To change1. It is evident rom the past ew

T w k t   k While we have made good progress with CBM, shale gas presents an opportunity

we cannot afford to neglect when looking at a viable option for our energy sufciency.

The government will soon come out with a policy on what is acclaimed as the newfound 

energy saviour. Amitabh Kumar 

provides pointers to policymakers and practitioners.

shale gas

Fig 1 Usa: naTUral gas prodUcTion (mmscmd)

Source: U.S Energy Information Administration (EIA)

Fig 2a primary energy deFiciT in india (mmToe)

Source: Integrated Energy Policy (IEP 2006), Govt of India

7/30/2019 Focus Shale Gas

http://slidepdf.com/reader/full/focus-shale-gas 2/4

June 2011 Infrastructure Today 59www.InfrastructureToday.co.in

Focus

years that India is on a high growth tra-jectory with GDP expanding at 8-9 per

cent per annum. Sustaining this growthwill require huge energy supply rom bothdomestic resources and imports. The dem-and or India’s primary energy (includingoil, natural gas, coal, nuclear energy andhydro-electric; coal, oil and natural gasremain the major energy sources in the pri-mary energy mix or the period) in 2011-12 at 496 million tonne oil equivalent(mmtoe) is expected to grow about threeold at a CAGR o six per cent, to 1,651mmtoe by 2031-32, as against projected

domestic supply o 434 mmtoe. The dem-and-supply gap over this period, at a

CAGR o 11 per cent reaches 1,217 mmtoein 2031-32. This is almost 7.5 times the

163 mmtoe DD-SS Gap in 2011-12 (Fig2a). I we look at the statistics or naturalgas (Fig 2b) and crude oil (Fig 2c), a similarpicture emerges – domestic supply is notable to meet growing demand.

With a growing dependence on imports(India currently imports more than 80 percent o its crude oil requirement and 20 percent o its natural gas requirement, mainlyrom the Middle East and Arican coun-tries), geo-political issues in the Gul andArican countries and oil price volatility in

the world oil markets pose major challengesto India’s energy security and suciency.

Hence, there is a clear case or developingour domestic resources--conventional andunconventional or energy suciency.

Given our limited choices, developingshale gas into a sustainable alternative is achallenge we cannot ignore.

developing shale gas in india

In order to develop shale gas as a viableoption or India’s energy sel-suciencythe ollowing issues need to be addressed:1. Experience with technologies or shale

gas extraction i.e. horizontal drillingand hydraulic racturing

2. A avourable and investor-riendlyenvironment or shale gas develop-

ment, like policy support rom thegovernment and other such actors

3. Environmental and water managementaspects o shale gas development.

how is shale gas prodUced?

Two major drilling techniques are usedto produce shale gas. Horizontal drilling isused to provide greater access to the gastrapped deep in the shale ormation. First,a vertical well is drilled to the targetedshale ormation. At the desired depth,the drill bit is turned to bore a wellthat stretches through the reservoir hori-zontally, exposing the well to more o theproducing shale.

Hydraulic racturing (commonly called“racking” or “hydroracking”) is a techni-que in which water, chemicals, and sandare pumped into the well to unlock thehydrocarbons trapped in shale ormationsby opening cracks (ractures) in the rockand allowing natural gas to fow rom theshale into the well. When used in conjun-

ction with horizontal drilling, hydraulicracturing enables gas producers to extract

Fig 2b india’s demand vs domesTic sUpply For naTUral gas (mmscmd)

Source: Demand: Mercados Natural Gas Study, Jan 2010; Supply: DGH

Fig 2c domesTic prodUcTion vs. ToTal consUmpTion oF crUde oil (mmTpa)

Source: Petroleum Planning and Analysis Cell (PPAC)

Refnement o cost-

eective horizontal

drilling and hydraulic

racturing technologies

are yet to be proven in

the Indian context.

7/30/2019 Focus Shale Gas

http://slidepdf.com/reader/full/focus-shale-gas 3/4

60 Infrastructure Today June 2011 www.InfrastructureToday.co.in

Focus

shale gas at reasonable cost. Without thesetechniques, natural gas does not fow tothe well, and commercial quantities cannot

be produced rom shale. (Exhibit 1)Hence a key element in the emergence

track record through production o 226 million standard cubic metres perday (mmscmd) o shale gas in 2009, in

the Indian context they are yet to beproven. To absorb these techniques,Indian oil and gas companies have takencertain initiatives to make shale gas into aviable option.

ONGC has commissioned global tech-nology major Schlumberger to carry outpilot projects in the Damodar basin. Thearea is chosen because ONGC already hasCoal Bed Methane (CBM) operationsthere, the shale is shallow and water isabundant or hydraulic racturing. Theproject entails drilling two wells in the

West Bengal part o the basin and twowells in the Jharkhand part o the basin,the results o which will help establish thereserve estimate and its commerciality.

In recent months, a number o Indianoil and gas companies have attempted toacquire shale gas assets abroad, particularlyin North America. These include OIL,IOCL, GAIL, BPCL and others whichindicates their keenness to better und-erstand and absorb the techniques orshale gas extraction in collaboration with

experienced players. Reliance IndustriesLimited (RIL) has taken the lead andacquired interests in three shale gasdevelopments in the US. In 2010, RILacquired 40 per cent stake in AtlasEnergy’s Marcellus acreage, 45 per centstake in Pioneer Natural ResourcesEagleord Shale core acreage and a 60 percent stake in Carizzo Oil and gas MarcellusShale acreage. Participation in the dev-elopment o shale plays in the US willgive RIL experience in shale gas dev-elopment and extraction.

With these initiatives, Indian oil andgas companies will be better placed totake advantage o shale gas acreages whenoered in India by end 2011. Besides,oileld service companies like Halliburtonand Schlumberger also oer these tech-nologies or shale gas extraction.

FavoUrable environmenT

Starting at the top, the Ministry o Petroleum & Natural Gas is activelypursuing the shale gas agenda. The

Government o India (GoI) signed a MoUwith the US Department o State in

Source: US Energy Information Administration

exhibiT 1

Source: Deloitte

exhibiT 2

o shale gas production has been therenement o cost-eective horizontaldrilling and hydraulic racturing tech-

nologies. While these technologies arewell established in the US with a proven

7/30/2019 Focus Shale Gas

http://slidepdf.com/reader/full/focus-shale-gas 4/4

June 2011 Infrastructure Today 63www.InfrastructureToday.co.in

Focus

 November 2010 or cooperation in the

ollowing areas:• Shale gas resource assessment in India• Technical studies to commence shale

gas exploration in India• Training o Indian personnel

The Directorate General o Hydrocarbons (DGH) is also preparingor the auction o shale blocks towardsthe end o 2011. As the implementationbody or the shale gas MoU signed withthe US, the DGH is well positioned tocomplete technical studies or identiyingprospective basins/areas and estimation o 

shale gas resources in the country, in timeor the auction shale gas blocks.

Shale gas policy ormulation is wellunderway and expected to be complete bymid-2011. Some considerations thatDGH could take into account whenormulating policy are shown in Exhibit2. A dialogue with key stakeholders willalso help to identiy other relevant issuesor developing a avorable environment.

environmenTal aspecTs oF

shale gas developmenTThe phenomenal growth o shale gas

Source: US Environmental Protection Agency

exhibiT 3

production in North America in recent

years has resulted in the emergence o pressing environmental and water man-agement challenges. The amount o waterneeded to drill and racture a horizontalshale gas well generally ranges rom about7.5 million to 15 million litre, dependingon ormation characteristics. With pot-entially hundreds o wells to be drilledeach year as development proceeds, thewater demands can be signicant, posingchallenges or water sourcing, storage, tra-nsport, treatment and disposal that couldstand in the way o progress.

Sourcing and ecologically disposingo large quantities o water used inhydraulic racturing is at the oreront o these challenges and these issues are o increasing concern to stakeholders atevery level, including operators,regulators and the public. Hence, water– both its use in hydraulic racturing andthe disposal and treatment o producedwater – has emerged as the topenvironmental issue.

In developing a viable and sustainable

option to meet India’s energy suciencywe need to consider the water management

challenge very careully. Environmentalpolicy and regulation in this respect hasto be o the highest standard. The US

Environmental Protection Agency (EPA),at the direction o the US congress, is inthe process o commissioning a study tounderstand the environmental impact o water used in hydraulic racturing, romacquisition o water, through the mixingo chemicals and actual racturing, to thepost-racturing stage, including the mana-gement o fowback and produced or usedwater and its ultimate treatment anddisposal (Exhibit 3)

Initial research results and studyndings are expected to be made public

by the end o 2012, with the goal o anadditional report ollowing urther res-earch in 2014. While HSE (Health Saetyand Environment) is at the core o oiland gas industry operations, or asustainable solution nevertheless, Indiashould also enter into dialogue with theUS EPA or eective regulation tominimise the environmental impact o shale gas extraction.

conclUsion

Those ollowing developments inthe shale gas industry know that itcan bring about a change in the energymix by, increasing the share o the clea-nest burning ossil uel – natural gas.The Indian government and industryneed to work together to develop asustainable solution to meet our growingenergy requirements.

India should enter intodialogue with the EPA in

the US or eective

regulation to minimise

the environmental impact

o shale gas extraction.

IT

The author is Senior Manager,

Energy & Resources, DeloitteTouche Tohmatsu India PrivateLimited.