1 Shalegas-Mumbai

8/15/2019 1 Shalegas-Mumbai

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Shale Gas

An Indian Perspective


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Presentation Overview

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2 Shale Gas Characteristics

3 US Experience in Shale Gas

4 Indian Scenario

5 Challenges of Developing Shale Gas in India

6 Possible Solution to Overcome Challenges

1 Prevailing Scenario


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Prevailing Scenario


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Unprecedented growth of shale gas in US generated new hopes

for energy deficient countries Shale gas recognized much earlier, but two things changed the

scenario rapidly after 2001

Technology for horizontal drilling and slick water fracking

Improved prices of gas in US market

In USA, shale gas production contributes nearly 22% of the total

gas production

Following the footsteps, other countries are indulging in massive

shale gas hunt across the globe.

ONGC undertook shale gas pilot in Damodar Basin and

witnessed flow of gas to surface, first ever in India.

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Shale Gas Characteristics


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Gas Shales are organically rich, TOC over 2% (Kerogen -II & III),

Maturity ~1 VRo %, Low to ultra-low permeability

Continuous plays and opens up huge areas for explorationwherever thick shales are encountered .

Drilling strategy critical – Large no. of horizontal wells, multiple

wells from single pad

Stimulation necessary to produce. Water requirement for per stagefrac is ~ 3-4 million gallons and a well require up to 8-16 stages

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Common Traits of Shale

Low recovery factor, dependant on

fracture permeability

Longer well life- more than 25 yrs,because gas is stored mainly in

molecular state at low pressures,

Low risk and high success ratio

make shale play most attractive


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US Experience in Shale Gas


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Mitchell Energy during 1980s-1990s made deep shale gas

production a commercial reality in Barnett Shale.

By 2005, Barnett Shale alone produced shale gas over ½ tcf/yr,

which increased to over 5 tcf in 2011- (22% of gas production)

Major shales producing shale gas are Barnett, Fayetteville,

Haynesville, Marcellus, Woodford, Eagle Ford etc. Technically recoverable U.S. shale gas resources estimated at

862 tcf, which is 34 % of the domestic natural gas resource base.

US drilled over 40,000 wells in different shales. Currently,

operators in US deploy over 1500 rigs for shale gas

A close network of pipelines measuring over 600,000 km exists

for off-taking of the gas to the market.

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Indian Scenario


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Indian economy on the long-term growth trend since 80s which

is approaching the average GDP growth rate of 8-8.5 %.

To fuel this economic growth, India demands more energy and

the major part of this to come through fossil fuels.

Current consumption of petroleum is >3 million barrels per day

and expected to increase to 7.5 million barrels by 2025.

Expanding economy and limited availability of indigenous energy

sources pose serious challenges for long term energy security.

In this scenario, the growth of shale gas in US invigorated India

to make all out efforts to unleash the potential of shale gas.

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India has 7 producing basins and hydrocarbon in these basins are

sourced from mature source rocks in underlying shales.

TOC, Maturity, Shale type, Mineralogical Composition,

Thickness, Depth, Gas Content and Saturation are important

for shale gas.

Evaluation requires holistic assessment on these parameters.Low values in one is compensated by good values of the other

Deeper shales in Indian basins, possess high TOC(2-7%) and

maturity (> 0.9 Vro) to gas window and thickness is adequate

and comparable to producing shales in US Shale Type is also favorable being silty in nature

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As per the initial studies, basins like Cambay, KG, Cauvery and

Damodar, are found to be promising. Potential shales are-

Cambay Basin (Older and Younger Cambay Shale) Resource 20 tcf

KG Basin (Kommugudem, Raghavpuram shale) Resource 27 tcf

Cauvery Basin (Andimadam shales, Sattapadi shales) Resource 9 tcf

Damodar basins (Barren Measure) Resource 7 tcf Source: EIA Report 2011)

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As per the EIA, these basins have shale

gas resource of the order of 290 tcf of

which 63 tcf is technically recoverable.

Other basins viz, Rajasthan, Assam,Gondwana and Vindhyan, suggests either

the shales are thermally immature for gas

or data is insufficient to make any

assessment at present.


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Successful R&D pilot by ONGC,testing of first ever shale gas to

surface from Barren Measure shales

in Damodar basin has put India on

Shale Gas map of the world.

This opened up new hopes for

meeting our energy needs and

encouraged to venture into other

basins for Shale Gas.

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Challenges of Shale GasExploration in India


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Indian E&P industry has extensive experience in conventional

hydrocarbons and equipped with advanced technology

Shale gas plays being different in terms of heterogeneity,

constrained reservoir characterization, production methodology,

demands special skills and experience.

Need specialized project mgt skills as it involves multi-

tasking and wide range of activities to be managed for achievingefficiency.

Accessing and ramping up technical and project mgt skills are

critical to business and needs improvising over conventional skills.

Availability of shale specific sub-surface data is limited and

operators need to invest heavily in exploration activities to

identify sweet spots before moving to the commercial

production.

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Technical Skills


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There is a need for establishing an integrated laboratory in India.

Requirement of technical resources and physical inputs such asrigs, and services viz, frac services, spl. Logging is huge as

compared to conventional drilling.

Need large number of service providers to increase the

availability and competition to lower the cost

Mobilization of resources need surface infrastructure to

transport drilling rigs, tankers, other infrastructure to pipe the

water.

Innovations in fracing, use of fiber & propants and even horizontalmulti-lateral drilling made business efficient and reduced cost.

India has to quickly learn from the experience and adapt to the

new order for efficient business.

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Technology and Infrastructure


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Availability of services, infrastructure and resources is very

limited in India, which is bound to increase the cost of operation.

Depth of potential shales in priority basins is in the order of

2000-3000 m, will further increase the cost of drilling and

fracking,

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Techno-Economics


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Shale gas requires large number of wells to be drilled, which will

involve extensive use of land. In India, population density is 10 times of US. Land use for drilling

may face severe resistance from inhabitants for disruption of

agriculture and other activities, which are their lively hood.

Regulatory framework in US allows sub-surface rights tolandowners. In India, sub-surface rights are with Govt., therefore

landowners are unlikely to be benefited directly from

development

This will require strategic considerations for making landownersagree to provide land for development.

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Land Acquisition


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Not only requirement of water an issue, 70% of frac water is

dewatered from well and is contaminated with hazardouschemicals.

Disposed water may be harmful for agriculture, animals and

human beings, and needs to be treated for its reuse.

The cost of treatment may be high which adversely impacts the

economics of shale plays.

Regulations in this regard need to be in-place addressing all these

critical issues, before venturing into development of shale plays.

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Environmental Aspects


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Many of the US shale gas plays were developed near

conventional HC producing areas enabling use of existing gasevacuation infrastructure.

Further, US has about 600,000 km of pipeline for off taking the

gas to the market.

In India, other than KG and Cambay basins may not be close toexisting production sites

Transport of gas to market can become an expensive

proposition. The available network of pipelines in India is about

15,000 km only and will require large infrastructure developmentand initiatives.

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Pipeline Infrastructure


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Possible Solution toOvercome Challenges


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Business Strategy by E&P Operators

Joint Venture:To collapse learning curve, bring in experience,

technology and skills, collaborate with the existing players of USthrough joint ventures. This will also reduce cost and risk.

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Business Strategy by E&P operators

Consortium: To address problems of land acquisition,

infrastructure and resources, need to build a strong organization,through consortium, which should essentially include :

Landowners, to provide them direct benefits from the use of land,

would make the land acquisition a smooth sailing.

Water and infrastructure providers, would bring in experienceof working with local communities to establish infrastructure.

Gas consumers would reduce the off take risk particularly where

infrastructure is not available

Co-opting local communities would help in development of the

communities through welfare measure and reduce resistance

Co-Opt State Govt: For help with water resources and land

access, in exchange of the infrastructure investment.

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Business Friendly Regulatory Framework

Govt of India need to take some special initiatives.

Suitable fiscal incentives such as royalty exemption, tax holidays sothat Indian operators are enticed to bring the shale gas into reality

Incentives to E&P service providers for growth of service

companies, needed for competition, bring cost down and ensure

availability.

Limited sub-surface shale gas specific data available for Indian basins.

Govt to take initiatives for generation of multi-client data.

Need to create a National Database so that operators can

identify prospective shale gas areas before making commitment for

investment

Water Management: Govt to make rain water harvesting and

recycling of flowback water, mandatory for shale gas operators and

provide incentives for taking such projects, helping community

welfare.25


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To bring cost effectiveness and avoid duplication of work, Right

of First Refusal is to be provided to existing operator in a block.

Separating work commitments during exploration and

development phases and heavily weighing development phase.

Subsidizing exploration phase for less explored basins in the first

round of bidding and including exploration subsidy

Govt might consider granting of proper permissions for setting

up bases in India by relevant companies for timely availability of

rigs, fracturing jobs etc that are required for this venture, .

Appropriate initiatives to facilitate construction of network of

gas pipelines all over the country, may be through underwriting.

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Govt should allow market to set the price of shale gas and not

set the price at uneconomic levels as production of shale gas atregular price may not be economically feasible.

Since natural gas is the cleanest fossil fuel, Govt should

encourage use of natural gas instead of other polluting fuels.

Statuary grants/ approvals from the respective State Govt. viz.PEL grant, Env clearances, Land Acquisition and related issues

may be facilitated by the regulator on a ‘single-window’ basis.

State Governments may be made signatories to the Contract or

necessary approvals may be ‘packaged’ within the Contract

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Shale gas is an attractive opportunity for India as it holds the

potential to help India achieve energy security.

Indian regulators should create conducive environment to

nurture this nascent yet highly potential fuel source and

prospective operators should position themselves throughcustomised business model to bring shale gas to reality.

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Finally---------


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