As the Indian economy grows, country’s need for energy takes centre stage. In recent years, shale gas has been increasingly discussed as an important source of energy for the country. Rapid growth of shale gas exploration and production in US has been widely talked about in India and an important point of discussion is whether Indian could taste a similar success domestically.
It has been widely accepted that India has huge shale gas potential but comparisons between India and US should end there as India faces radically different challenges when it comes to shale gas resources, said C.M. Jain, Deputy General Manager- Head Unconventional Resources, ONGC at the 2nd India Unconventional Gas forum held last month in Mumbai.
The sector in India faces challenges in the space of man power, technology, infrastructure, regulatory framework and availability of water resources. The nature of challenges is very unique to India and the solutions too need to be India specific, Jain said.
Talking about differences between US and India, Jain noted that one challenge facing Indian shale gas development is lack of relevant data.
“US has a long operational history in shale gas E&P activities and there is a good availability of data. India has limited data and would require heavy investments to find the ‘sweet spot’,” he said.
He noted that one of the most important reasons for success of shale gas in US has been the technological innovation that took place in the last decade. Such innovations need to be seen in India also.
He added that although shale quality in India is one of the finest in the world, the depth is slightly more which will result in higher cost for the shale gas player, affecting the economics of the play.
Another area of concern in India, according to Jain, is lack of availability of land.
“Land availability is a hurdle due to India’s population density and land acquisition will see strong resistance,” he said. This is unlike US where land availability is not a serious issue and the country has close to 40,000 wells, he added.
Jain noted that availability and management of water resources are likely to be biggest challenges for the shale gas operators. Since fracking requires large amounts of water, availability and then consequently the disposal of contaminated water will be crucial.
“The cost of water treatment will be high and will impact the economics of the play,” he said.
Lack of proper and extensive pipeline infrastructure is another crucial bottleneck for the sector as quick and safe transportation of gas from the site to market is very important for the play, he said.
Jain said that for India to fully realise its shale gas potential the country will have to not only address these challenges but will also have to address them very quickly. He added that to attack these problems, government will have to come up with business friendly regulatory framework.
Jain said that first and foremost, policy guidelines for shale gas operations should be different from conventional energy sector as dynamics of these two are different.
Talking about the issue of man power skills and technological issues, Jain proposed that if Indian players could get into joint venture with some established and experienced US players it will help in bring required skills and technology which will help to reduce cost and venture into the area quickly.
To tackle the issues related to land, water and environment, Jain said that the players will need to bring on board the local communities, treat them as stakeholders and make them partners in the benefit. The players should work with local communities to build the infrastructure so that belongingness is created among the communities.
On the fiscal side of things, he proposed that government should encourage participation by giving tax holidays and providing custome duty exemptions. Issue of lack of pipeline could also be tackled by providing incentives for pipelines.
Jain also pointed out that government policies should be such that duplication of work is avoided. He said that since a lot of times shale gas resources are found in the conventional acreage, incumbent operators should be given the first right to refusal as the incumbent has a lot of data related to that acreage. The new player will have to start from scratch, he added.
To conclude he said that price is the most important factor and government of India should let the market decide the price of the gas.
This post originally published at Natural Gas Asia