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BW Businessworld

The Centres Of Attraction

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State-owned Oil and Natural Gas Corporation (ONGC) might just have hit pay dirt. The oil giant's special engineering team has drilled to the shale-rock fault in the Raniganj coal-bed methane block (CBM) of Damodar Basin in West Bengal. It is now set to hydro-fracture the rock with specially imported pumps from the US to extract gas. Hydrofracturing  involves injecting water under high pressure into a bedrock formation through the well to increase the size of fractures.

"We have completed the drills. And after gathering the data and completing the tests, we will start hydro-fracturing the shale rock next week," says ONGC's executive director (offshore) P.K. Ghosh.

His colleague and project manager of this exploration Ravi Mishra adds that most of the data had been gathered "and we now know this block a lot better. Hydro-fracturing, though, is the real challenge".

ONGC has teamed up with Schlumberger of Germany for shale gas exploration in the country with an initial capital outlay of about $28 million (Rs 126 crore). Drilling began in September 2010. Sources in Schlumberger say the data will be sent to its Terra Tek geo-mechanics laboratory in Salt Lake City in Utah, US. This analysis will take six months to complete.

Success in this block would mean that India would be able to understand its shale gas potential better. Global energy tracker Platts quoted Schlumberger officials as saying that India's shale gas reserves range anywhere between 600 and 2,000 trillion cubic feet (tcf). This figure is, however, open to debate as no study has been conducted on the shale bedrocks in western and north-western India.

It takes years to commercially exploit such drills. It is believed that the country has good shale gas reservoirs in the basins of Assam's Arakan, Indus, Ganges, Krishna-Godavari, Mahanadi and Cambay. Compared to the wide estimate of 600-2,000 tcf of India's shale gas potential, the US has 3,500 tcf and China 2,500 tcf. Western Europe along with Australia and New Zealand, too, are eyeing shale gas as an energy source.

Like ONGC, Oil India, too, has initiated a similar project in Assam that is in its early stages. Will these shale-gas hunts deliver? Essar Oil's chief operating officer, Prem Sawhney,  is a conservative voice when it comes to the potential of shale, but is hopeful of a brighter future for this unconventional  source of energy. He argues that  most of the shale gas reservoirs in India are beneath CBM blocks. And to that extent there would be an overlap of blocks, "there has to be policy on territorial rights", he says. He feels that a fiscal package (read a favourable taxation regime) for such forays will be critical.   

Be that as it may, during the course of US President Barack Obama's recent visit, a memorandum of understanding (MoU) was signed between the two countries on sharing technology to understand the potential of the sub-continent's shale gas reservoirs. As per some agreements, the US Geological Survey would give its report on shale rock fields in the country.

The director-general of hydrocarbons, S.K. Srivastava, has been on record saying that results pouring in from recent expression blocks of shale rock are encouraging. His office is on an overdrive mode towards framing a policy for the allocation of shale gas blocks by end of 2011. The need for a separate legislation on shale oil and gas compared to that extracted from hydrocarbons too has been aired of late.

The success of the ongoing drills in the Raniganj block will have a bearing on the crafting of a separate legislation on shale rock extractions. This legislation would allow the definition of shale gas as separate from hydrocarbons and minerals.

(This story was published in Businessworld Issue Dated 24-01-2011)