With the economy set to grow at an average rate of about 8 per cent in the next couple of years, demand for gas will continue unabated. According to estimates by ICRA, gas demand will increase to over 263 million metric standard cubic metres per day (mmscmd) by 2020-21. Given the tight domestic oil and gas supply situation and burgeoning energy requirements, the development of unconventional energy resources – coal bed methane (CBM) and shale gas – could offer some respite, as significant indigenous resources of both remain untapped.
Coal bed methane
According to the Ministry of Petroleum and Natural Gas (MoPNG), India has estimated CBM resources of about 2,600 billion cubic metres (bcm) (91.8 trillion cubic feet [tcf]), of which 280.34 bcm (9.9 tcf) has been established so far. Geographically, these resources are spread across 12 states, including West Bengal, Jharkhand, Madhya Pradesh and Chhattisgarh.
Till now, 33 blocks, comprising about 64 per cent of the total CBM bearing area (26,000 square km), have been awarded. These blocks were awarded through four rounds of bidding between 2001 and 2008. At present, CBM is produced from only five blocks – Jharia (Jharkhand) by the Oil and Natural Gas Corporation (ONGC), Raniganj East (West Bengal) by Essar Oil Limited, Raniganj South (West Bengal) by Great Eastern Energy Corporation Limited (GEECL) and Sohagpur East and West (Madhya Pradesh) by Reliance Industries Limited (RIL). According to the MoPNG, in 2016-17, CBM production was 565 mmscm, a growth of 44 per cent over the previous year.
Essar Oil was the highest producer with an output of about 900,000 cosmic molecular gas mass density. Meanwhile, GEECL, another important CBM producer, recorded a production of 14.79 million metric standard cubic feet per day from its Raniganj South block during the year. Recently, in March 2017, RIL started commercial production of CBM gas from two blocks in Madhya Pradesh – Sohagpur East and West. The initial daily volume from RIL’s blocks is about 400,000 cubic metres.
In a bid to incentivise CBM production, the Cabinet Committee on Economic Affairs approved a new policy in March 2017 allowing marketing and pricing freedom for CBM gas. The new policy allows contractors to sell CBM at an “arm’s length” price in the domestic market. The contractors have also been allowed to sell the produce to their own affiliates if they do not find any buyers, though they will continue to pay royalty and cess to the government.
Going forward, Essar plans to ramp up pro-duction at its Raniganj East block to 3 mmscmd by 2017-18. GEECL intends to invest Rs 20 billion over the next few years to drill 144 new wells at its Raniganj block. Moreover, ONGC is expected to start production from two blocks (North Karanpura and Bokaro) by the latter half of 2017-18. The output from RIL’s Sohagpur East and West blocks is expected to increase to 2.5 mmscmd by March 2018 and the company plans to drill 600-800 wells and expand infrastructure in the next phases of development.
India has significant potential to produce shale gas on a commercial basis. Eight basins – Cambay, Krishna-Godavari (KG), Cauvery, Rajasthan, Assam-Arakan, Gondwana, Vindhyan and Damodar – have been identified for shale gas exploration. According to the United States Geological Survey (2013), India has about 6.1 tcf of technically recoverable shale gas in the Cambay onland, KG onland and Cauvery onland basins.
At present, there is no commercial production of shale gas in the country, though steps towards tapping it are now being taken. A key development took place in October 2013, when the government notified policy guidelines for the exploration and exploitation of shale gas and oil by national oil companies ONGC and Oil India Limited (OIL). The policy permitted these players to explore and exploit shale gas and oil in the onland exploration lease/petroleum mining lease (PML) blocks awarded to them under the nomination regime. Each company is permitted three assessment phases of a maximum period of three years each. ONGC has identified and initiated exploration activities in 50 nomination blocks under Phase I – 28 blocks in the Cambay basin, 10 in the KG basin, 9 in the Cauvery basin, and 3 in the Assam-Arakan basin. ONGC has drilled a total of 21 wells in 18 blocks for shale gas and oil.
OIL has identified six nomination blocks and initiated exploration in them under Phase I. These are Dibrugarh PML, Chabua PML, Dumduma PML, Jairampur extension PML, Jaisalmer PML, and Deomali PML. Together, ONGC and OIL incurred an expenditure of Rs 2 billion on shale gas exploration from 2013-16 to 2016-17. All the blocks are still at the exploration stage.
The way forward
Though CBM and shale gas are promising sources of energy, their development presents various challenges. The issues pertain primarily to the availability of suitable technology, the paucity of skilled manpower, delays in securing requisite clearances, inadequate pipeline infrastructure and huge water requirements. Therefore, there is an urgent need for effective solutions to the issues facing the segment to facilitate the development of these resources.