SHALE GAS Perils And Prospects

Prof. V.P. Gupta,Director, Rau’s IAS Study Circle, New Delhi – Jaipur – Bengaluru

The exploration of shale gas is considered as “the biggest energy innovation of the decade”. The increase in the shale gas production in the US has revolutionised the energy market. Natural gas has emerged as the largest source of electricity generation in the United States wherein it accounts for 33% of the energy produced in the country. Further, by 2030, shale gas is projected to account for around 46% of USA’s total gas production.

This change in the energy-mix in the US electricity generation has brought about economic, environmental and geo-political changes not only in the US, but also across the world. Other countries such as Canada and Argentina have begun to explore the shale resources.

This provides a unique opportunity for India to tap into its vast shale gas resources which could have multi-faceted benefits. The exploration of shale gas in India would reduce its import dependence on fossil fuel and ensure its energy security. Further, it would also help India in reducing its emission intensity in order to fulfil its INDC targets under the Paris Accord. In this context, the Union Cabinet has recently approved the policy to permit exploration and exploitation of unconventional hydrocarbons such as shale oil/gas, coal-bed methane (CBM) etc.

However, the exploration of shale gas poses environmental and technological challenges.

This article analyses the prospects, benefits and challenges associated with the Shale Gas Exploration in India.

What is Shale Gas?

Sedimentary rocks are types of rocks that are formed by the deposition and subsequent cementation of mineral or organic particles on the floor of oceans or water bodies. The sedimentary rocks cover almost 73% of the earth’s surface. These rocks are considered to be important sources of natural resources like fossil fuels, coal etc.

Some of the examples of Sedimentary rocks are limestone, coal, lignite, shale, sandstone etc.

Shale gas refers to the natural gas which is found trapped within the shale formation inside the earth’s surface.

Why is it difficult to exploit Natural Gas?

Natural gas (mainly methane) is generally classified under two heads: (a) conventional gas, and (b) unconventional gas. Most of the natural gas comes under the category of conventional gas where, after drilling in a sedimentary basin that is rich in gas, the gas migrates through porous rocks into reservoirs and flows freely to the surface where it is collected.

Shale gas, on the other hand, is located in rocks of very low permeability and does not easily flow to the surface. It remains trapped within the impermeable rocks. Therefore, the technique for recovery of shale gas is quite different from that of conventional gas.

Technology behind Shale Gas Exploration

Extraction is done through horizontal drilling through the shale reservoir followed by hydraulic fracturing or fracking. Fracking involves injection of water, sand and chemicals at high pressure which leads to the cracks in the reservoir which in turn allows the gas to flow out to surface.

Further, one interesting aspect of this technology is the use of Guar Gum. It is mainly used in improving the viscosity and flow of water in the fracking process. India is one of the largest producers of Guar Gum. The gum is extracted from guar ki phalli, grown mainly by farmers in arid lands in Rajasthan and Haryana.

Shale Gas Revolution in USA

With the spectacular rise in its natural gas production the US has reduced the country’s reliance on imported liquefied natural gas (LNG). Further, the US has overtaken Russia as the world’s largest natural gas producer. It has contributed to the growth of US economy by ensuring its energy security along with creation of jobs and enhanced revenue growth.

According to the US Energy Information Administration (EIA), the shale gas is expected to provide for 46% of total gas production in the US by 2030. The US is likely to emerge as a key exporter of shale gas in future. This success of shale gas in the US has in turn spurred other countries to map their shale gas resources and put in appropriate policy framework for its exploitation.

In a 2013 report, the US Energy Information Administration estimated the quantity of technically recoverable shale gas for 41 countries. North America leads the worldwide production of shale gas, with the US and Canada having significant levels. Beyond the US and Canada, shale gas is so far produced on a commercial scale only in Argentina and China.

Impact of Shale Gas revolution on Global Energy Market

The shale gas revolution in the US had a profound impact not only on the US, but also on the Global Energy Market. A significant increase in shale gas production in the US not only allowed the United States to reduce its oil import dependence but also influenced international oil prices. The increase in the shale gas production in the US led to lower demand for the crude oil leading to the decrease in their prices between 2014 and 2016.

The Organisation of Petroleum Exporting Countries (OPEC) sought to stem the decline in the crude oil prices by cutting down on their production. Thus, it has been recently highlighted that there has to be a greater coordination between the US and OPEC in order to counter volatility in the prices in Global Energy Market.

Shale Gas Prospects in India

The Ministry of Petroleum and Natural Gas (MoPNG) has identified six basins as potentially shale gas bearing. These are Cambay, Assam-Arakan, Gondwana, Krishna-Godavari, Kaveri and the Indo-Gangetic plain.

In a study conducted by the United States Geological Survey (USGS), recoverable resources of 6.1 trillion cubic feet (TCF) have been estimated in India. Some of other estimates have put the total reserves to be around 100 TCF, which is sufficient to meet India’s gas demand at the current level for about 25 years.

Let us examine the benefits that would accrue to India by exploitation of shale gas.

Compatibility between Energy Security and Development Needs

India is the third-largest energy consumer in the world after China and the United States. With a rapidly growing economy, India’s energy production will need to increase in order to meet our development needs.

Thus, the challenge for India is to ensure harmony between its development needs and Energy Security. The exploration of shale gas would accommodate its energy needs while at the same time ensure continued economic growth in India.

Reduce Import Dependence: Almost 68% of the energy production in India is accounted by fossil fuels, which are mainly imported from the West Asian countries. Additionally, India imports about 30% of its natural gas consumption as Liquefied Natural Gas (LNG) at a very high price.

Hence, in order to meet its energy requirements at affordable prices, the Indian Government has sought to pursue gas-based economy by increasing its use of natural gas from 6.5% at present to 15%. At present, India is looking at other options such as TAPI or import of LNG from Gulf countries.

The exploration of shale gas would thus, enable India to reduce its import of fossil fuels and pursue a gas-based economy. The reduced import dependence would in turn help in forex savings and improve the current account deficit in India.

Cleaner Environment: As part of its INDC target under the Paris Accord, India has committed to reduce its emission intensity of GDP by 33-35% below 2005 by 2030. This would entail reduction in emission of GHGs in India without compromising on our GDP growth rate.

The shale gas emits 50% less CO2 than coal and thus would help us in achieving a much cleaner and safer environment.

Policy Initiatives: Having realised the importance of exploration of shale gas in India, the government has taken certain policy measures to make optimum use of this opportunity. Some of these initiatives are:

MoU between India and US: A Memorandum of Understanding (MoU) was signed between the Department of State (DOS), United States of America and the Ministry of Petroleum & Natural Gas in 2010 for “Exchange of knowledge and expertise in the areas concerning shale gas resource characterisation and assessment in India’’.

Hydrocarbon Exploration and Licensing Policy (HELP): The government has approved a new Hydrocarbon Exploration and Licensing Policy (HELP) which replaced the earlier New Exploration Licencing Policy (NELP). Under the new policy, companies can explore and produce all kinds of hydrocarbons including shale oil/gas, CBM & gas hydrate, etc. under single licence.

Earlier, there were separate policies and licences for different hydrocarbons. This fragmented policy framework
led to inefficiencies in exploiting natural resources. For example, while exploring for one type of hydrocarbon, if a different one is found, it needed separate licensing, adding to cost.

Jambusar Shale block: ONGC has started exploration of shale gas in Jambusar, country’s first shale block in Cambay basin in Gujarat. ONGC plans to follow this pilot project in Cambay Basin with similar drilling programmes in other basins.

Challenges in the exploration of Shale Gas

As discussed, shale gas has indeed proved to be a game changer in the US and hence India has placed high hopes on this gas. But, the question that needs to be asked is : will it work for India too? Does India have the technological expertise to tap this unconventional fuel? What challenges would India face?

In this context, The Energy and Resources Institute (TERI) has raised certain concerns related to exploration of shale gas in its report titled “Look before you leap”. Let us understand the concerns and challenges.

Water Scarcity in India: The exploration of shale gas requires huge amount of water. In the US, 70 to 140 billion gallons of water is used by this industry annually. This is approximately equal to the annual water consumption of 80 cities with a population of 50,000. The question which arises is, would India be able to use such a huge quantity of water, particularly when it is facing the worst water crisis in its history?

This can be further supported by the report of ‘Indiawaterportal’ which points out that in the next 12-15 years, while the consumption of water will increase by over 50 percent, the supply will increase by only 5 to 10 percent, leading to a water scarcity situation.

Environmental Concerns: The pumping of deadly hydrochloric acid and carcinogens into the shale formations to release the gas would pollute the groundwater, which is already under huge environmental stress.

Drilling for shale gas has been blamed for environmental problems in Britain and taking note of this problem, France and Netherlands have already banned drilling.

Land Acquisition: The exploration of shale gas would entail the acquisition of huge tracts of land, which is considered to be a daunting task in India. This would pose not only legal challenges but would also lead to displacement of a large number of people.

Other potential problems that could arise due to shale gas exploration include:

•  Lack of clarity on the actual shale gas resources in India

•  Storage and transportation of shale gas

•  Higher cost of production of shale gas

•  Higher noise level

•  Worsening air quality

•  Seismic concerns

•  Impact on biodiversity and nature

Way Forward

Thus, the shale gas can provide answers to some of the most pressing questions in India related to Energy security and need for cleaner environment. It would also help the government in its transition towards gas-based economy, thus reducing its import dependence on fossil fuel.

However, as discussed, exploration of shale gas is fraught with multi-dimensional challenges. Can India afford to use so much water for shale exploration, particularly when it is confronted with water crisis? Given the
utter disregard for the norms, rules and regulations in India, the shale gas exploration would accentuate the existing environmental problems including groundwater pollution.

But at the same time, India should not let go of this opportunity. There is a need to invest in R&D to develop alternate technologies that use less water and are more environment-friendly. At the same time, the government should lay down sufficient safeguards in order to ensure environmental protection.

Finally, the government and all stakeholders should ensure the implementation of the rules and regulations in letter and spirit.

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