Cabinet committee approves shale gas exploration

Will the government look into the environmental problems associated with hydraulic fracking to obtain gas?

By Ankur Paliwal
Published: Wednesday 25 September 2013

The Cabinet Committee on Economic Affairs has approved the proposal of the Ministry of Petroleum and Natural Gas to introduce a policy on exploration and exploitation of shale gas and oil by national oil companies.

India has an estimated 63 trillion cubic feet (tcf) of recoverable shale gas reserves, according to the US Energy Information Administration. Shale gas has proved to be a game changer in the United States. And now countries like Europe, China and India are exploring the same possibilities. Shale gas is a natural gas present in the shale rocks under the ground.
The Union Ministry of Petroleum and Natural Gas has identified six basins as potentially shale gas-bearing. These are Cambay in Gujarat, Assam-Arakan in the Northeast, Gondwana in central India, Krishna-Godavari in Andhra Pradesh, Cauvery in southern India and the Indo-Gangetic plains. 

Private industry kept out for now

It is expected that the two government-owned firms, Oil and Natural Gas Corporation (ONGC) and Oil India Ltd, will be first allowed to explore shale gas in the reserves on acreage already awarded to them under the New Exploration Licensing Policy of 1999. National Oil Companies are to apply for grant of shale gas and oil rights in their respective exploration and mining lease acreages and are required to undertake a mandatory minimum work programme, said the statement released by the cabinet committee. Companies are permitted three assessment phases of a maximum period of three years each. Royalty, cess and taxes would be payable at par with conventional oil/ gas being produced from the respective areas, says the statement.

In the next phase, the government will allow state-owned companies and industry to explore shale gas. 

This may upset the industry which believes that industry-friendly environment is crucial for replicating the success that the US has achieved in shale gas. Industry-friendly regulations, a favourable pricing regime, a developed onshore oilfield services (OFS) sector, an extensive gas distribution network and market-driven gas pricing are needed to make shale gas a success in India, states a report, Shale gas-global exploration and key learning by Ernst and Young.  Companies like Reliance Industries Ltd (RIL) are already engaged in shale gas exploration in the United States with huge investments. 

Power plants starve for gas

Industry experts say that shale gas can play a significant role in a power-starved country like India which is reeling under the shortage of gas. “Approximately 22,000 MW of gas-based power generation plants are idling at present,” Amulya Charan, an independent adviser on energy infrastructure and finance, told Reuters in a recent interview. Shale gas is also a cleaner fuel than coal.

However, its exploration is associated with environmental consequences, more so in India. The process of extracting shale gas is called hydraulic fracking. It requires millions of gallons of water sent at high pressure underground to create spaces in the rock pores to release oil and natural gas so it can be brought to the surface. The water after hydraulic fracturing is brought back to the surface and may have high content of Total Dissolved Solids (TDS) and other contaminants which can pollute surface water if not treated. Therefore, the treatment of this water before discharge below or above ground is crucial.

Availability of water is already a major cause of concern in the country. And the potential shale gas bearing areas, such as Cambay, Gondwana, Krishna-Godavari, and the Indo- Gangetic plains are expected to experience severe water stress by 2030.  How the government plans to deal with these problems remains to be seen.


Draft policy for exploration and exploitation of shale oil and gas in India

Golden rules for a golden age of gas: world energy outlook special report on unconventional gas

Shale gas can be a double-edged sword for climate change

Methane and the greenhouse-gas footprint of natural gas from shale formation

Methane contamination of drinking water accompanying gas-well drilling and hydraulic fracturing

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