Exploration and production of coal-bed methane (CBM) and shale gas are critical to India’s ability to meet its rising demand, and its development will require strong support and regulation from the government, oil and gas stakeholders said on Wednesday and Thursday at the Offshore and Unconventional Oil and Gas Conference in Mumbai.
India has already awarded 33 blocks for the exploration and development of CBM, which could amount to about 5 million cubic metres per day (MMcm/d) of gas. In addition, state-owned Oil and Natural Gas Corp. (ONGC) has completed drilling on the country’s first shale gas well and plans to finish drilling another three by March 2012.
The country is estimated to be sitting on 1.8 trillion cubic metres (65 trillion cubic feet) of shale gas – reserves that could double the country’s domestic production, UN Bose, director of technology and field services for ONGC, said at the conference.
But in order for the industry to plough ahead with unconventional resources, the government needs to enact a regulatory framework, he said.
“The exploitation of shale gas drilling and hydraulic fracturing would create unregulated and undesired disturbances, including induced seismicity in the concerned neighbourhoods, thereby causing much environmental concern. These issues will be required to be addressed as we go along,” Bose said.
The lack of regulatory guidelines and disconnects between different government agencies has so far impeded the oil and gas industry’s attempts to begin producing gas from CBM, he added. “Currently the business model that we have developed needs a relook. In some cases, for example, we have, again, like with shale gas, an overlap of CBM licenses with commercial coal mining, and that’s a hindrance.”
Indian Minister of Petroleum and Natural Gas Shri Jaipal Sudini Reddy countered that, while CBM production is moving slowly, the government is working to encourage the development of all types of unconventional oil and gas.
Reddy pointed to a memorandum of understanding signed between the United States and India in November 2010 as evidence that the government is seeking advice and backing from the most advanced producer of unconventional sources in the world. Under the deal, the US agreed to assist India with assessing its shale resources, beginning exploration and training Indian personnel on shale gas exploration and development.
In addition, the agreement calls for the development of a framework for shale gas production, Reddy noted.
“CBM production takes time and we hope that by the year 2016 we may have a sizeable CBM production,” Reddy said in his inaugural address at the conference. “I hope that, with the start of the 25 year plan, we will be able to have a proper framework in place for shale gas. Gas hydrate is having technological challenges, and hopefully once there is a breakthrough or some development in this area, we will not lag behind to make use of that.”
Shale challenges
Whereas shale gas development in the US benefited from high gas prices - which compensated for the higher production costs - and an extensive pipeline network and competitive industry, India is lacking in many of those areas, noted Avinash Chandra, chairman and managing director of Petrobiz Consultants and the former director general of hydrocarbons at India’s Ministry of Petroleum and Natural Gas.
At the moment, India has a limited gas infrastructure, government-set, below-market domestic gas prices, and an industry dominated by national oil companies (NOCs), Chandra, who helped shape India’s CBM policy in 1997, said at the conference. In addition, the country lacks the technology, expertise and subsurface data necessary to begin exploration and production.
As the government designs a shale gas policy, Chandra recommended ensuring that it offers fiscal incentives to offset the expense of shale gas production. The regime should include income tax holidays for the first 10 years – longer than the seven-year holiday allowed for blocks awarded under the New Exploration Licencing Policy – and allow companies to sell the gas they produce at market-based, unregulated prices, he said.
The government should also encourage companies with strong track records of executing their projects to build pipelines in tandem with their shale gas exploration and production projects, Chandra added.
“India has a good shale gas resource endowment, but it needs to attract the risk capital and technology to complement ONGC’s and OIL’s capital and capabilities,” he said, referring to state-owned Oil India Limited (OIL). “It is essential to bring private sector participation besides NOCs.”
India needs regulations for successful unconventional gas E&P
India has already awarded 33 blocks for the exploration and development of CBM, which could amount to about 5 million cubic metres per day (MMcm/d) of gas. In addition, state-owned Oil and Natural Gas Corp. (ONGC) has completed drilling on the country’s first shale gas well and plans to finish drilling another three by March 2012.
The country is estimated to be sitting on 1.8 trillion cubic metres (65 trillion cubic feet) of shale gas – reserves that could double the country’s domestic production, UN Bose, director of technology and field services for ONGC, said at the conference.
But in order for the industry to plough ahead with unconventional resources, the government needs to enact a regulatory framework, he said.
“The exploitation of shale gas drilling and hydraulic fracturing would create unregulated and undesired disturbances, including induced seismicity in the concerned neighbourhoods, thereby causing much environmental concern. These issues will be required to be addressed as we go along,” Bose said.
The lack of regulatory guidelines and disconnects between different government agencies has so far impeded the oil and gas industry’s attempts to begin producing gas from CBM, he added. “Currently the business model that we have developed needs a relook. In some cases, for example, we have, again, like with shale gas, an overlap of CBM licenses with commercial coal mining, and that’s a hindrance.”
Indian Minister of Petroleum and Natural Gas Shri Jaipal Sudini Reddy countered that, while CBM production is moving slowly, the government is working to encourage the development of all types of unconventional oil and gas.
Reddy pointed to a memorandum of understanding signed between the United States and India in November 2010 as evidence that the government is seeking advice and backing from the most advanced producer of unconventional sources in the world. Under the deal, the US agreed to assist India with assessing its shale resources, beginning exploration and training Indian personnel on shale gas exploration and development.
In addition, the agreement calls for the development of a framework for shale gas production, Reddy noted.
“CBM production takes time and we hope that by the year 2016 we may have a sizeable CBM production,” Reddy said in his inaugural address at the conference. “I hope that, with the start of the 25 year plan, we will be able to have a proper framework in place for shale gas. Gas hydrate is having technological challenges, and hopefully once there is a breakthrough or some development in this area, we will not lag behind to make use of that.”
Shale challenges
Whereas shale gas development in the US benefited from high gas prices - which compensated for the higher production costs - and an extensive pipeline network and competitive industry, India is lacking in many of those areas, noted Avinash Chandra, chairman and managing director of Petrobiz Consultants and the former director general of hydrocarbons at India’s Ministry of Petroleum and Natural Gas.
At the moment, India has a limited gas infrastructure, government-set, below-market domestic gas prices, and an industry dominated by national oil companies (NOCs), Chandra, who helped shape India’s CBM policy in 1997, said at the conference. In addition, the country lacks the technology, expertise and subsurface data necessary to begin exploration and production.
As the government designs a shale gas policy, Chandra recommended ensuring that it offers fiscal incentives to offset the expense of shale gas production. The regime should include income tax holidays for the first 10 years – longer than the seven-year holiday allowed for blocks awarded under the New Exploration Licencing Policy – and allow companies to sell the gas they produce at market-based, unregulated prices, he said.
The government should also encourage companies with strong track records of executing their projects to build pipelines in tandem with their shale gas exploration and production projects, Chandra added.
“India has a good shale gas resource endowment, but it needs to attract the risk capital and technology to complement ONGC’s and OIL’s capital and capabilities,” he said, referring to state-owned Oil India Limited (OIL). “It is essential to bring private sector participation besides NOCs.”