India will begin licensing the commercial search for domestic shale gas in the five-year economic plan that starts next April.
Indian companies Reliance Industries and Gas Authority of India Ltd (GAIL) have already bought stakes in US shale gas assets to gain exposure to hydraulic fracturing, or “fracking,” and horizontal drilling, the key techniques that have made North American shale reserves commercially viable.
Reliance, India’s most valuable company, is outlaying $2.7 billion for three US shale joint ventures (Atlas Energy/Chevron, Carrizo Oil & Gas, and Pioneer Natural Resources), plus another $1.3 billion in future spending, while state-owned GAIL has committed to a $300 million investment in one venture with Carrizo and said it plans to spend another $1 billion over the next five years on US shale assets.
Within India, state-owned Oil & Natural Gas Corp (ONGC) is the only company to have found shale gas. It began exploratory drilling in the Damodar basin of West Bengal in September 2010, and had its first gas flow at 1700m from the Barren Measure shale reserve there in January this year. At the time, ONGC hailed the find as a “significant breakthrough.” Its initial studies suggest the Damodar basin may have resource potential of about 1 trillion cubic metres of gas.
Like China, India hopes to exploit its shale gas reserves to ease its dependence on imported liquefied natural gas (LNG). But it lacks domestic expertise and there is no comprehensive assessment yet of the country’s shale reserves.
ONGC called in US oilfield services company Schlumberger to provide services and technology for its Barren Measure exploration program in West Bengal. In its latest quarterly results, Schlumberger said it found the Indian shale formation properties were “significantly different to commercial US shale plays.”
India’s gas needs of about 106 billion cubic metres a year are well above its current annual production of about 52 billion cubic metres from conventional gas fields. Imports from Qatar, Australia and Russia make up the shortfall.
With gas demand growing at better than 10 per cent a year, the supply gap will widen unless there are fresh discoveries or increased production from conventional gas fields such as the Krishna Godavari (KG) basin, which extends from Andhra Pradesh into the Bay of Bengal on India’s east coast, or from unconventional sources such as coalbed methane and shale.
While there has been little exploration of shale gas reserves in India so far, at least six sedimentary basins may have commercial potential, based on initial assessments. In addition to the KG basin, these include Cambay in the west, Cauvery in the south, Assam-Arakan in the northeast, Gondawana in central India, and the Gangetic basin, which takes in the Damodar sub-basin of West Bengal.
Reliance Industries, controlled by India’s richest man Mukesh Ambani, operates conventional oil and gas wells in the KG Basin and has also found gas in deepwater exploratory wells in the offshore part of the Cauvery basin. It has three coalbed methane blocks in its portfolio, but no shale blocks yet.
India’s Minister of Petroleum and Natural Gas, S. Jaipal Reddy, told Parliament last week that an assessment of shale gas resources was under way, and the first round of shale block licences would be awarded in the government’s 12th five-year development plan that begins on April 1, 2012.
Shale gas has transformed the US energy market in the past five years, turning the US into a net exporter of petroleum products in 2010 and delivering cheap energy to US industrial users.
Oil and gas companies such as XTO Energy (since taken over by ExxonMobil) and Chesapeake Energy have led the way, using the controversial and water-intensive technique of fracking (where a mix of water, salt and chemicals is forced into rocks to fracture them and release the tightly-held gas) to unlock the potential of vast shale reserves in Texas, Pennsylvania, New York, North Dakota, Nebraska, Colorado, Wyoming, Arkansas and Louisiana.
Better pipeline infrastructure has opened up domestic markets, and there is an expectation that the US will become an exporter of LNG within five years as liquefaction export terminals come on-stream.
Ambani says Reliance is now a significant player in US shale, with gas already flowing from its Chevron and Pioneer fields, and the Carrizo venture expected to begin production before the end of this year. Along with Reliance and GAIL, international energy companies including China’s CNOOC and Sinopec, Norway’s Statoil, France’s Total, Japan’s Mitsui and Australia’s BHP Billiton have rushed to join the North American action. Three other Indian state-owned entities, Coal India Ltd, Oil India Ltd and Bharat Petroleum, are also keen to acquire overseas shale assets.
Back in India, Reliance struck a landmark $9 billion deal earlier this year with oil major BP covering Indian gas production and marketing opportunities. BP paid $7.2 billion up front with a possible $1.8 billion to follow, depending on future exploration success. The UK-based company now has 30 per cent of 21 production sharing contracts that Reliance operates in India, including its flagship KG-D6 offshore block in the Bay of Bengal.
Two weeks ago Reliance and BP announced the incorporation of their India Gas Solutions joint venture, which will focus on global sourcing and marketing of natural gas in India. They said the venture would also develop infrastructure to improve gas transport within India.
How big a part shale gas will play in India’s future energy picture is uncertain. The International Gas Union says in its latest World LNG Report that while the success of shale gas in North America has sparked “enormous interest” elsewhere, the outlook for unconventional gas is promising for only a few other countries, such as Australia and China.
It said development will be “slow and uneven” around the world. Even in those countries with significant reserves, the process of tapping shale gas reserves will likely take many years to materialise.
Source : theaustralian.com.au