Shale Gas - Expanding India's Gas Frontier

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DEW Journal November 2010

technology

Shale Gas

Shale gas-expanding India’s gas frontier?
Samir Verma, Senior Manager, Schlumberger Business Consulting, India, Asia Shubha Shanthamurthy, Manager, Schlumberger Business Consulting, Europe, CIS & Africa The exploitation of shale gas resources is garnering increasing attention in India, which relies on oil imports to fuel its growing economy. In November, India signed a memorandum of understanding with the U.S. Geological Survey for technical assistance to assess shale gas resources and advance energy cooperation between the two countries. ONGC, India’s largest upstream player, is drilling a series of pilot shale gas wells in the Damodar basin. Reliance Industries, the country’s biggest gas producer, recently spent $3.5 billion on three shale gas projects in the United States – some say the deals were as much to acquire shale gas technology and know-how than simply the assets. But other observers believe India’s shale gas timelines are too aggressive and need to reflect the enormous differences between the evolving Indian gas market and the mature U.S. sector. So, is shale gas a real opportunity for India to feed the next generation of gas power plants or is it a pipe-dream? What should regulators and operators do to avoid the experience of coal bed methane (CBM), which after several rounds of auctions is contributing only a miniscule 5 per cent of the Indian natural gas supplies? How should the regulators create a conducive regulatory environment? How should prospective shale gas operators, e.g. power generators and exploration and production (E&P) companies, approach their shale gas strategy? In this article, Samir Verma and Shubha Shanthamurthy of Schlumberger Business Consulting share lessons from the United States and Europe, and give their perspectives on how prospective Indian shale gas operators should position themselves for success, and what the authorities can do to create a favorable environment for shale gas development.

U.S. – Not a Blueprint for India The North American shale gas industry has been evolving over the last 20 years. Early investigations identified shale gas as a potential resource in the early 1980s, but it wasn’t until the 1990s that the technology became available to produce the gas at commercial rates. While technology is transferable, there are many significant differences between the U.S. model and conditions in India. These differences need to be identified and incorporated into business models and regulations if shale gas is to transform India’s energy balance. Shale gas requires huge physical and technical resources. In the United States, huge physical and technical resources were deployed in regions already familiar to E&P activity from the well-established oil industry. In 2008, 1,400-1,500 rigs drilled close to 35,000 natural gas wells in the United States, while in India, fewer than 100 land rigs (excluding workover rigs) drilled less than 650 wells in the same period. The size of the Indian E&P industry is an order of magnitude smaller to that of the United States, and Indian E&P companies would need scale to bring down costs. Moreover, given the long history of the oil and gas industry in the United States,

there is a deep pool of experienced field personnel and geoscientists whereas India’s skill pool is much smaller and has a longer time-to-autonomy. Accessing and ramping up the technical and project management skills is even more critical when looking at unconventional gas because the production profile of shale gas wells is shorter and steeper than for conventional wells (see exhibit) and hence drilling campaigns have to be closely coordinated with gas evacuation projects. In case of conventional projects, a delay of six months to a year in

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technology

DEW Journal November 2010

Shale Gas
Competition and innovation are critical. The U.S. shale gas revolution would not...
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