Ground truths about shale gas

The emergence of shale gas has converted the US from a net importer to an exporter of gas. China auctioned its first batch of shale assets two years ago and is aiming to meet 10 per cent of the total demand for gas through this unconventional source, in 2020. India, too, has brought out a draft policy and is aiming to kick-start shale gas exploration in end this year.

The enthusiasm is palpable. Indian industry has already started referring to it as a ‘game-changer’. It is expected that the new energy source will have a lasting impact on the country’s energy scene, as it did in the US.

While India is yet to assess its shale gas potential, there are questions galore on whether the ground realities in India are conducive to large-scale extraction of such resources, if available.

Shale is a common sedimentary rock and extensively found across different sedimentary basins in the country.

Though the world always knew about its potential to produce fuel, shale gas became popular in the last decade. This was after the introduction of new technologies – such as hydraulic fracturing and horizontal drilling – by American companies, and the rise in natural gas prices which made such extraction viable.

Gas is trapped in little bubbles in the near-impermeable thick shale formations, running over miles.

The new technology uses a lot of water – mixed with sand and large number of chemical additives – at high pressure, to fracture the hard rock and free the gas bubbles.

No clarity on reserves

In terms of exploration techniques and the nature of reserves, shale gas is similar to coal-bed-methane (CBM). Both are onshore activities; methane is trapped inside coal seams. However, there are some marked differences in the case of shale gas exploration.

First, fracturing a rock is considered more difficult than breaking open a coal seam. The relative hardness of shale limits its exploration potential essentially to mature sedimentary formations, which are relatively brittle. It means the potential reserves in the country may not be recoverable.

The lack of clarity on recoverable reserves is evident in the contradictory claims by two different US agencies.

The US Energy Information Administration (EIA) pegs the recoverable shale reserves in India at nearly 63 trillion cubic ft (tcf) or, nearly 30 times the 2P (proved and probable) reserves in Reliance’s D6 assets.

This is more or less in line with the projections of the US-based exploration service provider Schlumberger, which was roped in by State-owned ONGC to carry out a pilot project in the Damodar Valley region in eastern India.

However, a parallel study by US Geological Survey (USGS) in three basins estimated the recoverable reserves at a mere 6 tcf.

While USGS has been roped in to carry out a detailed survey on shale gas potential. A realistic assessment of reserves is important to ensure that current enthusiasm on shale gas potential does not meet the same fate as CBM.

Although India claims to have 92 tcf coal seam methane, India’s CBM production has not even reached 0.5 million standard cubic metres – just enough to meet the demand of a small town with a middle class population of 30,000-40,000 – even after a decade of exploration.

Pressure on water

Extraction of shale gas is highly dependent on large-scale harnessing of another natural resource – possibly the most precious – groundwater.

According to an expert in a foreign company engaged in unconventional gas exploration across the world, drilling a shale gas well requires 10-20 times more water than a CBM well.

And, to add to the complexity, shale gas exploration requires drilling double or triple the number of wells, that too in quick succession, when compared to CBM.

Conventional oil and gas assets require an even lesser number of wells.

Leaving environmental concerns aside, in a country where per capita water availability is falling (Census 2011) and, close to nine-tenth (86 per cent) of available resources are used in agriculture, such high water requirements may clearly put shale gas explorers in conflict with the local population.

The US is better off, because not even half its water resources are used in agriculture. And, unlike in India, American women are not expected to walk miles to collect potable water.

For a country where two-third of the population is dependent on land, population-density is 10 times that of US and 2.5 times China’s, and the share of arable land (to total land mass) is three times higher than either in US or China, India may offer a completely different set of challenges for shale gas exploration and production, cautions S. Vasudeva, ONGC Chairman.

Shale gas extraction not only requires a higher density of wells, but also needs two-three times more land (compared to a CBM well) to drill every hole on earth. The higher land requirement is attributed to its relatively complex drilling operations.

A rule of thumb estimate suggests a CBM operator needs 300 acres to drill an approximately identical number of wells. Shale gas production from the same field may require 1,200-2,700 acres of land.

To cut a long story short, shale gas will require more land acquisition, which has already proved to be a major cause of concern for Indian industry. While politics is trying to strike a solution by enhancing the compensation for land acquisition, the experience of Coal India proves that such measures alone are not sufficient.

Even while rolling out one of the finest compensation packages in 2011, the miner could hardly make any headway in land acquisition in the last two years. The problem may particularly dog shale gas exploration initiatives. Some of the best resources in the country are reportedly located in the Damodar Valley region, comprising West Bengal and Jharkhand, in eastern India, where the pressure of population is highest.

West Bengal is three times more densely populated than the national average and, has a much higher share of arable land than the rest of the country. Add to this, the lack of political will to strike a solution and the results are already telling on the long list of stalled infrastructure projects in this part of the country.

The problem has not spared CBM operators, including ONGC, reporting slow progress in drilling activities in the region. And, at least one such company, engaged in CBM exploration in Bengal, was in the news recently for all the wrong reasons. Vasudeva has no hesitation in pointing out that mere adoption of American expertise will not help India, due to the marked differences in ground realities.

But he is hopeful that both the Indian regulator as well as E&P companies will overcome these challenges to help develop a nascent yet, highly potential source. ONGC, he promises, will do its bit by shopping for shale gas assets in the inaugural bidding round, scheduled later this year.

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