India's Unconventional Energy Path

(Photo: Water Contamination Center)

(Asia Sentinel) With India importing nearly 25 percent of its gas needs – which could rise to 50 percent by 2020 – the government is spurring a push into a plethora of new, unconventional energy sources including shale gas and oil, oil sands, coal bed methane, underground coal gas, coal-to-liquid, tight gas and others to replace traditional natural gas and crude oil.

Even as India pushes for the new options, however, there are unsolved concerns about the environmental fallout of such energy sources that, given India's fractious NGOs, could spell serious trouble for the companies out to produce energy from them – especially multinationals. This is a country that could call out hundreds of protesters against Coca-Cola bottling plants for allegedly polluting groundwater or absorbing groundwater that villagers claimed as theirs.

The search for energy and mineral resources has already spurred a bloody Maoist rebellion in India's mineral-rich states of Andhra Pradesh, Madhya Pradesh, Bihar, Jharkhand, Chhattisgarh and Orissa. According to a 26 April, 2010 Asia Sentinel report, some analysts call the threat the biggest India faces.

Shale gas, for instance, is produced by a process called hydraulic fracturing or "fracking" – fracturing rock formations deep underground that potentially involves massive pollution of underground water and seismic activity, apart from huge amounts of wasted water in bringing shale gas to the surface. Given the state of new technology, the impact on large-scale production is not definitive, however. Although some oil and gas industry analysts have labeled the concerns as "overblown," major incidents such as the 65-day BP oil rupture that spilled an estimated 5 million barrels of crude oil into the Gulf of Mexico, which make the need for proper safeguards crucial. The lenience shown to officials of the Union Carbide-created poison gas disaster in Bhopal have also raised environmental outrage.

In India the Madras high court recently urged firms to implement social and environment responsibility norms. However, profit-driven hydrocarbon and mining companies are known to usually ignore such aspects unless there is a strict crackdown on polluting activity.

Shale Gas Option

India is preparing a road map for its first-ever shale gas auctions within the next 12 months, marking the tapping of the second unconventional natural gas resource after coal bed methane. Indian shale gas reserves have not been measured, but they are estimated to be higher than conventional gas reserves. Reliance Industries, which has already invested in US shale gas projects, is expected to play a leading role in Indian exploitation of the resource. RIL has acquired 40 percent of Atlas Energy's Marcellus Shale acreage in the US for US$1.7 billion followed by 45 percent of US-based Pioneer Natural Resources shale gas assets for US$1.15 billion. Y K Modi's Great Eastern Energy Corporation is also keen on shale to expand its existing coal bed methane portfolio. Multinationals such as Exxon Mobil and Royal Dutch Shell are also expected to seek to go after Indian reserves

The decision to tap shale gas followed a recent meeting presided over by Jitin Prasada, the minister of state for petroleum and natural gas, with officials of the Directorate General of Hydrocarbons, to outline a policy plan for shale gas output in India, following in the footsteps of America, China and Canada. Shale gas producing areas are to be marked out by early next year, followed by open bids for the blocks in which both Indian and foreign companies will be able to participate.

India is also likely to bring in the services of the US Geological Survey to share knowledge in the area. Some 20 percent of America's gas production today is derived from shale gas. India's Oil Minister Murli Deora recently met with the US deputy secretary of energy, Daniel Poneman to discuss shale gas exploration.

Several known hydrocarbon basins – Cambay in Gujarat, Assam-Arakan in the northeast and Gondwana in central India have been identified as potential shale rich locations. State owned ONGC has earmarked Rs 1.3 billion for a pilot project for shale gas exploration at the Damodar Basin and has been looking to work with America to develop the new energy source. Preliminary talks have taken place with Canada as well.

Pushing coal bed methane

New Delhi recently awarded seven CBM blocks for exploration, with Essar Oil bagging four of them, Australian firm Arrow Energy two via separate joint ventures with Oil India Ltd and Tata Power, while one block went to Great Eastern Energy Corporation. Essar's four CBM blocks offers the company an additional acreage of 2,233 sq km and potential of 7.6 trillion cubic feet (tcf) CBM gas.

"The decision will accelerate energy security of the country," the government said in a prepared statement after round four of bidding for CBM blocks.

The Arrow-Tata consortium has been awarded the Assam and Satpura (in central Indian province Madhya Pradesh) blocks. The latter is likely to hold 900 billion cubic feet of gas and is to be used to back Tata power units that supply electricity to Mumbai. Arrow Energy, with 80 percent, will be the operator of Satpura with initial production expected in 2014.

Arrow also has CBM interests in Australia, China, Indonesia and Vietnam. The company was recently acquired by a joint venture of Shell and Petrochina. Reports indicate Arrow is in talks with ONGC to develop CBM blocks in West Bengal and Jharkhand. ONGC owns six blocks and has been looking for a technology partner to develop them.

Petroleum minister Deora has said CBM production in India is expected to touch nearly 7.5 million standard cubic meters per day in 2012-13. Production began in 2007 with Great Eastern commercial supplies. Great Eastern has two dozen wells in West Bengal.

Essar Oil is looking to become the country's second commercial producer. The company's Raniganj coal block holds about 30 percent of proven coal-gas reserves in India.

Of a total of 250 tcf of natural gas estimated in India, 45 tcf is expected from coal deposits. Three companies -- Reliance Industries (3.6 tcf), GEEC (1.9 tcf) and Essar Oil (2.2 tcf) -- have declared 8 tcf commercially recoverable CBM.

RIL's coal-gas finds are in Madhya Pradesh, Essar and GEEC's are in West Bengal

UCG Projects

ONGC is preparing to begin underground coal gasification production, with three major projects in the offing.

"We are waiting for the mining lease approval from the coal ministry, said company chairman R S Sharma recently. "These three major projects will bring future growth.''

ONGC estimates the Mangalore project in Karnataka to be completed by 2012; in Tripura (in north east India) around 2-3 billion cu.m of production is expected to commence from March 2012, while at Vatsan in Gujarat, ONGC expects to produce 2 billion cubic meters by 2013-14, all of which the state-owned energy company hopes can offset declining revenue as crude oil production begins to fall.

ONGC has been experimenting with underground coal gasification technology for the last five years, setting up pilot projects in 2005 in Gujarat and Tamil Nadu, to be followed by others in Rajasthan. The pilot plans are now being enlarged as the government seeks to build a base for UGC output. UCG technology uses a chemical reaction to convert coal into gas underground before pumping it to the surface. Given India's nearly 260 billion metric tons of coal reserves, it is hoped that UCG will become an important energy source. Coal, which now accounts for more than 60 percent of India's primary energy needs, is one of the world's biggest sources of greenhouse gases.

In a related development Naveen Jindal-led Jindal Steel and Power (JSPL) has finalized plans to set up a coal-to-liquid (CTL) plant in Orissa (eastern India) that will require investment of Rs 420 billion. A joint venture between India's Tata Group and South Africa's Sasol plans to invest US$10-billion in a CTL project, also in Orissa, by 2018.