Potential of Unconventional Sources of Natural Gas in India

Potential of Unconventional Sources of Natural Gas

“Potential of Unconventional Sources of Natural Gas in India” Dissertation submitted to college of Management and Economic Studies for the partial fulfillment of the degree of

MBA (Energy Trading) Guided by Surbhi Arora Asst. Professor College of Management Studies University of Petroleum and Energy Studies Submitted by –

Mohit Sharma Enrollment no : R590211017 Sap ID: 500014825

College of Management and Economic Studies (CMES) University of Petroleum and Energy Studies (UPES) Dehradun, Uttrakhand (UK) India (UK) 2011-13 Page | 2

Potential of Unconventional Sources of Natural Gas Acknowledgement I acknowledge with my deep gratitude, from the bottom of my heart to the almighty and a number of people (my parents, siblings, MBA Energy Trading course faculty) who always stood by me at every and each stage of this project and helped me a lot to stay put motivated and keep throughout this project.

I owe a debt of my gratitude to my mentor assistant professor Surbhi Arora, who despite of her busy schedule, guided me in this project (with a background of extensive research and years of study of Shale Gas, Coal Bed Methane and Gas Hydrates), provided suggestions and also shared her experience which helped me in analyzing diverse aspects of this work Last but not the least; I would like to thanks my peers who were in some way supporting me all through the prevalence of this assignment. *This online version report is redacted, baseline surveys and analysis is not covered.

Mohit Sharma R590211017 MBA Energy Trading (2011-13) University of Petroleum & Energy Studies Dehradun

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Potential of Unconventional Sources of Natural Gas Executive Summary Depletion of conventional resources, and increasing demand for clean energy, forces India to hunt for alternatives to conventional energy resources. Intense importance has been given for finding out more and more energy resources; specifically non-conventional ones like CBM, shale gas & gas hydrates, as gas is less polluting compared to oil or coal.

The Shale Gas revolution in past decades triggered the research and development of unconventional sources of energy along with Shale Gas like Gas Hydrates, Coal Bed Methane and Tight Sand Gas. With huge natural resources and diversity India have nig potential resources of unconventional sources of gas and gradual development is going on to exploit these resources and shift Indian energy usage pie from conventional sources to unconventional sources which will reduce India’s dependence on oil and gas imports and provide a way for sustainable development of the country, economy for an extended period of time. The gas demand in India is limited by its access to gas supplies based on domestic production and imports availability. If India can produce more gas than it can reduce its coal imports which is environmentally more unfriendly, its gasoline consumption through the use of compressed natural gas, and its demand for LPG through piped natural gas to meet residential cooking and heating requirements, etc.

Natural gas is a versatile fuel and more environment friendly. Unfortunately, Indian government has not been able to implement the right kind of gas policies even after the recommendations given by multiple commissions. The current gas sector gives plenty of opportunity for rent seeking because of extensive government control.

In the recent bidding process uner the New Exploration Licensing Policy separate blocks for Shale Gas as well as Coal Bed Methane were offered. Under the aegis of the Ministry of Earth Sciences (MoES), GoI, a comprehensive research-oriented gas hydrates program has been launched emphasizing the scientific and technology development for identifying promising sites on regional scale and estimating the resource potential, studying the impact of dissociation of gas-hydrates on environment, and developing environment-safe technology for production.

Government will carry in future other similar bidding processes and rounds. The National Geophysical Research Institute (NGRI) and National Institute of Oceanography (NIO) are pursuing the scientific objectives for the identification, delineation and evaluation of gashydrates in various offshore basins. While the National Institute of Ocean Technology (NIOT) is developing remotely-operated vehicles and autonomous coring systems for validating the ground truth, and viable technologies for producing gas from gas-hydrates. Coalbed methane is generated during coalification process which gets adsorbed on coal at higher pressure. However, it is a mining hazard. Presence of CBM in underground mine not only makes mining works difficult and risky, but also makes it costly. Even, its ventilation to atmosphere adds green house gas causing global warming. However, CBM is a remarkably clean fuel if utilized efficiently.

CBM is a clean gas having heating value of\approximately 8500 KCal/kg compared to 9000 KCal/kg of natural gas.

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Potential of Unconventional Sources of Natural Gas

Table of Contents Part

Topic

Page

1

Research Methodology Research Design Objective of Study Data Collection Significance of Study Review of Literature Indian Energy Scenario Background and Introduction Resource Exploration and Categorization Energy Security and Related Aspects Research and Development in Energy Sector Indian Geography Coal Bed Methane Introduction Indian and Global Scenario Gas Hydrates History & Introduction Gas Hydrates in India National Gas Hydrates Program Tight Sand Gas Shale Gas Introduction Characteristics Shale Gas in India General Methodology for Exploration Draft Policy for Exploration and Exploitation of Shale Gas

7 7 7 8 8 9 10 10 24 33 41 43 47 47 49 57 57 60 62 74 76 76 79 82 87

1.1 1.2 1.3 1.4 1.5 2

3 4 4.1 4.2 5 5.1 5.2 6 7 7.1 7.2 7.3 7.4

7.5 8 9

Conclusion and Recommendations Bibliography and References

91 97 98

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Potential of Unconventional Sources of Natural Gas List of Figures and Tables Figure/Table

Description

Page

1 2 3 4 5 6 7

Primary Energy Sources (India) Preferential Fuel Table Environment Indicators Table Health & Safety Indicators Table CBM Resources : Global Perspective Major Coal Fields in India CBM Blocks in India

9 19 28 29 46 47 48

8 9 10 11 12

Stratigraphic Horizons (Coal) Gas Hydrates Reserves (World) Gas Hydrates Reserves (India) Tight Sand Gas Exploration Shale Gas in India

50 54 60 71 81

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Potential of Unconventional Sources of Natural Gas Part 1 - Research Methodology Research is a tool to interpret knowledge and data and further increasing the value, understandability of the given matter and statistics. Research is known as “ the manipulation of things, concepts or symbols done for the sole purpose of generalizing to extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in the practice of an art.” In this study 4 type of unconventional sources of natural gas are taken into consideration.

1.1 Research Design The research is analytical and descriptive in nature. Main purpose of descriptive research is the description of state of affairs as they exist at present and tracing the the course of their history.

The feature of this method is that the researcher has no control over the variables and the researcher can only project what has happened or what is happening. The research is analytical in nature because the usage of data, facts and information already available has been done and an analysis has been done to the available data with the help of various interpretational and statistical tools.

1.2 Objectives of the Study 

To study the various unconventional resources of natural gas in India.



To analyze the various exploration techniques, methods and movements.



To suggest a legal framework suiting the specific needs related to unconventional gas resources.



The study of the shale gas extraction and production technology used by the various countries so as to focus on the Indian scenario of shale extraction.



To understand the existing processes and techniques for Shale Gas, CBM, Gas Hydrates Production.



To analyze the historical trend of such resources of natural gas & explore the leading factors for the same.

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Potential of Unconventional Sources of Natural Gas 

To study the factors those affect the production, transportation and use of such resources of gas

1.3 Data Collection Data for the research has been collected from both primary and secondary sources. Primary data has been obtained from Industry professionals, Working class and the Business class of the society through a questionnaire. Semi-structural questions were asked from the executives i.e., Delphi Method. Secondary data is further cross-referenced to primary data in order to process triangulation and from different articles & reviews of current academic literature & information gleaned from published industry sources. Secondary Data has been collected from various sources such as Reports, Journals, Newspapers, Magazines and Internet etc.

1.4 Significance of the Study Significance of the study is that it will provide an in depth understanding about various aspects of Coal Bed Methane, Gas Hydrates, Tight Sand Gas and Shale Gas which includes initial surveys, how the natural gas is extracted from the different formations lying underneath the earth’s surface, production techniques, governmental policies and future predictions. The study will be helpful in understanding the impact of different kinds of natural gas in the India’s energy portfolio, change in Indian energy usage pie and hurdles faced in the production and development of shale gas, CBM, Gas Hydrates and how it can be avoided. The study would look upon the policies and regulations that should be adapted by India. And the study will help in finding the potential of shale gas in India.

1.5 Literature Review The basic overview of Tight Sand Gas is provided by Chandra, Avinash, 2009, Tight Sand Gas : Potential and Prospects. Gas Hydrates policies, extraction, potential reserves and related activities are listed in, P.M., 2010, Methods of Estimation of Gas Hydrates, Coal Bed Methane Concentration, GUPTA, H.K. and SAIN, K. (2011) Gas-hydrates: Natural Hazard.

In: P. Bobrowsky (Ed.), Encyclopedia of Natural Hazards. The challenges and regulatory Page | 8

Potential of Unconventional Sources of Natural Gas regimes that India might face when Shale Gas acreages are taken into consideration. According to the report “A strategic imperative for India”, India’s current gas demand is limited by its access to natural gas supplies which is based on domestic production and imports availability are looked upon by Deloitte (India).

Following books, reasearch ebooks, papers formed base for the research activity. *) - Energy and Security in South Asia: Cooperation or Conflict? *) – ONGC Bulletin (2007-2011) *) - Investing in Renewable Power Market (2009). *) - Assessment of Potential Shale Gas Resources. *) - India Energy Report – 2012 *) - Power Plays: Energy Options in the age of Peak Oil. *) – Energy Market and Different Legal Frameworks.

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Potential of Unconventional Sources of Natural Gas Part 2 Indian Energy Scenario 2.1 : Background and Introduction

India’s Combined Installed Capacity – 215 GW (which is fifth largest in world) India’s energy pie is largely dependent on thermal power plants and non-renewable sources of energy and for sustainable development it is essential to increase the share of renewable sources of energy. The per capita avg. annual domestic electricity consumption in India was 95 (year - 2009) kWh in rural areas and 287 kWh in urban areas for those with access to electricity, in contrast to the worldwide per capita annual average of 2650 kWh and 6250 kWh in the European Union. India's total domestic, agricultural and industrial (all primary, secondary as well as tertiary sectors) per capita energy consumption estimate varies depending on the source. Two sources place it between 400 to 700 kWh in 2008–2009. As of January 2012, one report found the per capita total consumption in India to be 778 kWh.

Installed Capacity Non-Renewable Sources – 87.5% (7/8) Renewable Sources – 12.5% (1/8)

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Potential of Unconventional Sources of Natural Gas Electricity has become an important aspect, the life blood of the modern world, without which the world will come to almost a virtual standstill. Any sluggishness in the growth of the electricity industry in any part of the world can throw the region far behind other regions in industrial, economic and social growth. Thus, power has been widely recognized as one of the key factors of infrastructure development, for a sustained growth of the country.

Power/Electricity is a primary input factor on which the progress of the economy of a country largely depends. Full utilization of other input factors, such as manpower, land including irrigation, and capital-related resources of an economy depend upon the availability of electricity. In other words, it is not only a key input factor but it also plays a strategic role in utilizing fully the other resources towards the progress of the economy. In addition, electricity has become an essential factor in improving the social conditions and welfare of people. Thus, power is an input essential to the integrated economy of the country. Electricity, therefore, acts with a multiplier effect. Any shortfall in the availability of such a significant and strategic input factor will make the betterment of economy of a nation a distant hope. Thus, electricity is the most essential and vital ingredient for the growth of the nation in the social, industrial, commercial, and agricultural sectors. Hence a balanced development of electricity was identified as an important goal. Well recognized as ‘the industry of industries’ or the as the ‘mother industry’, electricity industry deserves priority in development and necessary support for sustainability during the planning process by the Government.

Also, in the social field, power maintains its supremacy on all fronts, from daily needs and comforts-entertainment to as basic as agriculture and kitchen operations. The role of power sector in economic development is so tremendous that numerous economists very often establish a one-to-one correspondence between energy and economic development. The considered view of many of the influential groups of experts is that the poor state of affairs in infrastructure, including power, is one of the basic maladies of tardy economic growth, a volume or multitude of problems are rising up in the field of electricity industry. This has attracted keen attention from policy makers around the world and rigoros efforts to tackle these problems have become the order of the day. Industrial growth has been so fast and explosive in these years that the increase in energy supply could not maintain an equal pace.

The main problems faced by the world are rapid depletion of non-renewable energy sources, also known as unconventional sources increasing costs for energy, and inability to create sufficient number of ROI for growth. These problems have created a shortage of power in both quantity and quality. Electricity industry was mainly treated as a Government business all over the world, considering its importance as a vital infrastructure for the growth of the country. But growth in the sector, however impressive it was, looked insufficient to cope with the impulsive growth in industrial and other sectors. Consequently, the whole vision on the subject has been undergoing a swift change. A major shift in the electrical industry worldwide is the thinking that it is to be managed by the private sector rather than by the government. Thus, an era of reform for the power sector has opened up.

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Potential of Unconventional Sources of Natural Gas The swift ability to cater to the growing demands of the society and maintaining a sustainable pattern of functioning are few of the main challenges before the industry. Considering its importance as the vital infrastructure for the industrial, economic and social growth of humanity, experts, engineers, economists and policy formers of various countries are working hard for identification of the possible flaws and remedies for them.

Power is extracted or derived from various sources to meet many requirements of humans in this modern age. Energy is used for lighting/illumination, heating, motive power in automobiles, ships & aero planes, water pumping, refrigeration & air conditioning, cooking, motive power of various appliances/machinery, electronic data storage, etc in all sectors such as agriculture, industrial, commercial and domestic sectors. The value of energy minerals produced in India is more than 85% (about 5/6) of all the minerals produced. In addition India imports large quantity of fossil fuels spending huge chunk of its exports income. These energy minerals are also used as raw material in production of industrial products but the usage as source of energy is many folds.

The following are the primary energy sources 

 

Thermal energy (India is largely dependent on this source of energy): Fossil fuels (ex: coal, natural gas, crude oil & its products), nuclear fuels, biomass (including wood), geo thermal energy, industrial by products (ex: LPG, coke oven gas & blast furnace gas), etc.

Hydro power(Development of this source has been steady over the years): Hydro power energy excluding pumped storage operation.

Non conventional energy: Solar energy, wind power, wave power, tidal power, animal draught power, etc in which due to the diversity possessed by India it has huge potential but in the lack of techniques, methods to tap those sources or make a conversion the power derived is far less than the actual potential, even when compared to nations which do not get the amount of sunlight and related diversity factors associated with the sunlight.

However, energy exists in many forms such as electricity, thermal/heat/chemical energy, potential energy, kinetic energy, etc. Power is the most coveted form of energy since it is simple to convert in to other energy forms at very high-conversion efficiency and least effects on environment with the help of motors, furnaces, etc. Also transmitting electricity by cables / conductors is comparatively simple and clean method. All the primary energy resources are used to produce power as an intermediate energy before converting in to final power requirements. The major drawback of power is that it cannot be stored in bulk for using in mobile/transport applications. So the liquid fuels are predominantly used in transport sector.

The countries which are endowed with crude oil (considered source of liquid fuels) reserves are

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Potential of Unconventional Sources of Natural Gas considered as potentially rich countries irrespective of non energy minerals and availability of human resources.

These power fuels are not uniformly distributed on earth to meet their demand. Exploration, extraction and transportation along with final conversion of fuels to ultimate energy is a very highly capital intensive. They also emit pollutants such as dust, SOx, NOx and various green house gases which are harmful to human beings health and long survival. All fossil or biomass fuels contain carbon and hydrogen elements which are mainly contributing to heat energy when burnt or oxidized. The carbon present in the solid/liquid form in these fuels is converted in to gaseous form carbon dioxide. Continuous use of these carbonaceous fuels for meeting ever increasing global energy consumption is gradually increasing the CO2 in the earth atmosphere. Higher concentrations of Carbon di Oxide in the earth atmosphere will aid the green house phenomenon or global warming. So carbon derived energy is gradually discouraged. Coal emits 95% of heat energy from its carbon content whereas natural gas (NG), petroleum fuels & bio mass emit less than 50% of heat energy. Global warming point of view, coal is considered as main culprit.

India is endowed with vast coal reserves though other conventional fuels are not adequately available. India is also endowed with abundant non conventional energy resources such as Thorium nuclear fuel and solar energy but commercially viable technologies are not available to harness these resources on large scale. The various energy resources used in India are given below Petroleum products: These are derived from crude oil which India imports 80% of its requirements. Diesel, petrol, etc are used in transport sector as motive fuel for road vehicles, locomotives and ships. Many of these products are also used as raw material in the manufacture of organic chemicals, synthetic fibers, synthetic rubbers, plastics, fertilizers, etc. which have wide application in present day civilization. When other fuels are not available, these petroleum products are also used for electricity generation, heating and lighting purposes as alternative fuels. The major advantage of these fuels is their transportability by the transport networks such as roads, railways and ships. They can also be stored easily for mobile and stationary applications. Due to these advantages, petroleum products are extensively and intensively used to power all mobile vehicles covering road, rail, marine and air transport sectors.

Natural gas: This is a gaseous fuel and relatively less polluting fuel. Unlike liquid fuels, its inland transportability is possible by pipeline network only and maritime transport is possible by refrigerating in to liquid below minus 160째C temperature. In maritime transport of Liquefied Page | 13

Potential of Unconventional Sources of Natural Gas Natural Gas (LNG), heavy investments are incurred in liquefaction, transport and re-gasification processes. NG has commercial limitation in transporting across the seas. Being a clean fuel and ease of use, it is preferred fuel especially in domestic and commercial sectors. To control the air pollution in cities, Compressed Natural Gas (CNG) is increasingly used in intra city transport vehicles in place of diesel/petrol fuels. Natural gas can also be used in Iron manufacturing to reduce the coking coal consumption in blast furnaces. At present, the available NG is mainly used in fertilizer manufacture and power generation.

LPG: Liquefied Petroleum Gas (LPG) is extracted from natural gas or produced as a by product from crude oil refining. This gas can be easily liquefied by compressing it to 8 bar pressure at ambient temperature. In addition to pipe line transport, LPG is also transported and stored in pressurized cylinders / tanks. LPG is also clean fuel similar to natural gas and also can be stored in bulk for use in mobile vehicles. The indigenously available LPG is not adequate to meet its ever increasing consumption. In India, most of the LPG produced and imported is used as cooking fuel.

Nuclear Fuels: These fuels are used to generate electricity in addition to meet military requirements. The conventional nuclear fuels are Uranium and Plutonium which are used for electricity generation. India does not have substantial conventional nuclear fuels to depend on these fuels for its electricity requirements. However India is blessed with substantial Thorium reserves which can be used for electricity generation once the relevant technology is perfected for commercial level use.

Using nuclear fuels is also fraught with environmental problems such as radiation leakages, disposal of spent radioactive fuels & equipment, decommissioning of nuclear reactors after their useful life, etc. The initial capital requirements and the decommissioning expenses of nuclear power plants are very high. Some critics say that the electricity consumed in establishing and operating a nuclear power plant exceeds the electricity it can generate in its life time.

Hydro power: Electricity is generated by harnessing the water energy when water is descending in the rivers from high level to lower level. Hydro power is very clean energy. Hydropower plants installation submerges vast area of land and creates social and environmental problems such as displacement of population, submergence of forests, etc. The hydro electricity potential in India is approximately 85,000 MW at 60% load factor. Most of the untapped hydro power is located in North Eastern states. Another 1,00,000 MW at 60% load factor is available lying on both sides of border between China and India which can be jointly harnessed in future.

Wind Power: Electricity is generated from the wind energy. The areas with wind speeds exceeding 15 Km per hour is suitable for locating wind power generators. Wind power is also Page | 14

Potential of Unconventional Sources of Natural Gas clean fuel but birds get killed when they try to pass through the wind generator rotor. There is no control on electricity generation from these units as the power is generated depending on erratic wind availability. India has nearly 10,000 MW wind energy potential at 60% load factor.

Wave energy: Wave power is secondary power from wind power. When the wind is blowing on seas/ water bodies, some of the wind energy gets transmitted to water creating wave energy.

Till now wave energy is not harnessed for electricity generation on major scale. However there are possibilities to harness wave and wind energy available on oceans to augment fresh water availability and hydro electricity generation. Due to deference in solar radiation incidence on earth surface, the atmospheric global winds are generated on land as well as on oceans. These winds while passing over the seas pick up moisture and convert in to clouds. These clouds yield most of the fresh water in the form of rains on the land mass. Often, rain fall is not adequate in many regions/countries due to unfavorable conditions in the oceans such as ocean currents, surface temperature, etc though the global wind patterns are not changing. The available wave and wind power on the oceans can be utilized to enrich the winds with moisture irrespective of nature’s vagaries. The oscillating water surface when waves are formed are used to pump sea water few meters above the surface level and further atomized in to fine droplets / mist by using wind energy. The mist spayed in to the winds would fully vaporize enhancing the humidity of air / winds. The augmented moisture in the winds segregates in to clouds to yield more rain subsequently on land mass.

The south west winds and north east winds are the sources of monsoon rains on Indian subcontinent. South west monsoon winds come from Arabian Sea and cross the peninsular India yielding rain and pass on Bay of Bengal and blow in to North India yielding rain again.

North east monsoon winds enrich with moisture while passing on Bay of Bengal and subsequently yield rain in southern part of India. Though the augmentation of global/monsoon winds with moisture is a gigantic infrastructure building task, it is technically feasible by harnessing a fraction of renewable wind energy available on the territorial oceans. Land mass becomes greener / rich in vegetation acting as carbon sequestration. Many countries face severe water shortage frequently and many more countries are occupied by vast deserts (middle east and north Africa) though sea is located adjacent to these regions.

Biomass: In agriculturally developed pockets of India, agro waste such as rice husk, crop waste, baggassi, inedible plants and leaves, wood from old plantations, etc is available. Generally rural masses consume bio mass for their cooking requirements. When it is found in surplus, it is also used in electricity generation and process industry. Bio-mass also can be gasified to produce synthetic gas, liquefied by fast pyrolysis process to produce bio-oil and carbonized by slow

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Potential of Unconventional Sources of Natural Gas pyrolysis to produce charcoal. All these processes produce varying percentage of bio-char (charcoal), bio-oil and bio-gas.

Biomass carbonization: This is well known technology to produce charcoal and town gas in olden days. The biomass is carbonized either at low temperature (up to 600 deg C) or at high temperature (up to 1200 deg C) in the absence of oxygen. The products of biomass carbonization/slow pyrolysis are charcoal (25% by wt), 850 Nm3 town gas per ton of dry biomass and organic liquid chemicals (30% by wt). The town gas contains hydrogen (45% by wt) with gross calorific value of 3000 Kcal/Nm3.

Bio-oil production: Bio mass can be converted in to bio-oil / pyrolysis oil by the latest fast pyrolysis technologies with conversion efficiency up to 70%. Bio-oil has only 50% of heating value of crude oil and also unstable liquid. The bio-oil is rich in Oxygen content and also acidic unlike crude oil and its derivatives. Extensive research is being done to make bio-oil suitable for mobile vehicles though it can be used for stationary low and medium speed diesel engines and gas turbines with minor changes. The production cost of bio-oil is around Rs 10 per kg when the dry biomass cost is Rs 2.5 per kg.

Pyrolysis oil can be separated in to a water soluble fraction rich in oxygen content and a heavier pyrolytic lignin. Pyrolytic lignin can be used as feed stock to produce naphtha, diesel, etc by hydro-processing (i.e. reaction with Hydrogen). Hydrogen is produced from water soluble fraction of pyrolysis oil.

The garbage collected in Indian cities and towns has higher water content and biomass. This type of wet / watery garbage is converted commercially in to Bio-oil / Bio-crude by Hydro thermal upgrading (HTU) method which is also a type of pyrolysis process.

Biomass gasification: Biomass is gasified in the presence of steam and air to generate producer gas/synthetic gas. Most of the biomass is converted in to producer gas which is rich in hydrogen (15% by wt) with gross calorific value of 1500 kcal/Nm3. In gasification process, the available thermal energy is utilized to produce more hydrogen by splitting water molecules for optimum hydrogen yield. The nutrients (nitrogen, phosphorous and potassium) present in the biomass are accumulated in the produced ash which can be used as fertilizer.

Presently, the non woody surplus biomass such as inedible leaves, inedible crop waste, twigs, etc are either burnt or allowed to degenerate in the fields emitting green house gases such as methane and carbon dioxide. Cattle droppings, human excreta, household garbage, bagasse, poultry droppings, chicken feathers, waste hair, used tires, waste paper, etc are also biomass which can be used for producing bio-oil, bio-gas and bio-char. The spent dung from anaerobic digesters (gobar gas plants) can also be used in production of bio-oil. In India, the dry inedible Page | 16

Potential of Unconventional Sources of Natural Gas biomass availability is nearly equal to all the fossil fuels consumption which is approximately 750 million tons per year. This biomass quantity can produce bio-oil three times equal to India’s crude oil imports and generate Bio-char of 200 million tons annually. The bio-char with heating value 7500 Kcal/kg can replace all the mined coal consumed by its thermal power stations. The bio-gas produced from pyrolysis process contains nearly 5% hydrogen by weight. The hydrogen in the bio-gas generated can produce 50 million tons of Urea fertilizer which will transform India in to Urea exporter after meeting all internal consumption.

Ethanol: Ethanol / ethyl alcohol is fermented from biomass which is rich in starch / carbohydrates content. It is also consumed by humans in large quantities as liquor. Ethanol can be used as transport fuel by blending in diesel and gasoline fuels. Presently ethanol is produced from food grains and sugarcane which are costly and predominantly used as food source. The economics of using food grains and sugarcane as fuel source is not favorable since they fetch more value as food source in India. Sugar cane is a long duration irrigated crop and consumes lot of water. Cultivation of sweet sorghum which is seasonal dry land crop is a better source of biomass and Ethanol production in huge quantities for meeting the needs of transport fuel.

Bio-diesel: The inedible oil seeds produced by plants and trees can be the source of fuel for mobile vehicles to replace costly imported diesel and petrol (gasoline) fuels. The non edible vegetable oils extracted from Jathropa, Karanj (Hindi) / Honge (Kannada) / Koroch (Pongamia pinnata), Algae, etc can be used directly by blending 20% oil in diesel fuel or can be converted in to bio-diesel by esterification of these vegetable oils to replace diesel and petrol fuels totally.

Esterification is achieved by adding methanol or ethanol to the vegetable oils. The estimated vegetable oil yields of bio-diesel crops are      

Soybean: 0.4 tonnes oil/ha.year Rapeseed: 0.8 tonnes oil/ha.year Jathropha: 1-1.5 tonnes oil/ha.year (non edible) Palmoil: 4 tonnes oil/ha.year Koroch / Karanj: 3 – 4.5 tonnes oil/ha.year (non edible) Algae: 10-25 tonnes oil/ha.year (non edible)

The most promising sources of bio-diesel are Algae and Koroch (Bengali) which need not compete with other crops and natural forests for land, water, sunlight, etc.

Algae: Algae (pond scum) are tiny cellular plants suspending in water (fresh, brackish and sea water) which absorb dissolved carbon dioxide in water to produce biomass by photosynthesis with the help of sun light. Algae grow fast and many species of algae contain up to 60% of its dry mass as Bio-diesel (lipids / fats). The de-oiled algae cake is rich in proteins and is good source to augment proteins in cattle and poultry feed. Extensive research has taken place on Page | 17

Potential of Unconventional Sources of Natural Gas algae cultivation in developed countries to demonstrate the farming technology but it could not be commercialized in these countries because of limited favorable weather conditions and high cost of labor. However India has favorable tropical climate to cultivate algae throughout the year on its sandy coastal areas using abundantly available sea water or brackish water. The only external raw material required is carbon dioxide gas in Indian climate. The gobar gas produced in rural areas by using cattle dung contains 50% carbon dioxide gas and 50% methane. When this gobar gas is used in electricity generation by diesel engines, the available exhaust gas is the cheap source of carbon dioxide gas for algae cultivation in rural areas. The combustion gases from Biomass / bio char burning can also be cheap local source of carbon dioxide gas. The skilled labor cost in rural India is also nominal compared to western countries.

Algae cultivation is not new in India. Algae are used to treat the sewage water in natural oxidation ponds to produce oxygen to meet the Biological Oxygen Demand (BOD). Algae produced in the oxidation ponds are not yet harnessed for Bio-diesel production in India. Indian climate is very much suitable for Algae cultivation similar to natural oxidation ponds. Spirulina which is an alga rich in proteins content is commercially cultivated in India.

Koroch: Koroch in Bangladesh is a fresh water flooded tree. This tree can grow on lands which are water inundated up to1.5 meters depth for six months at a stretch. The seedlings can survive under water during the long submergence period. Koroch tree reaches 20 meters height and lives for 100 years. The dry seed pods contain 25% toxic vegetable oil which can be used as bio-diesel. Koroch / Honge is a tree native of India whose oil is used in illumination lamps in olden days. Since Koroch is a flooded forest tree, it can be grown in our man made water reservoirs up to a depth of 1.5 meters without the need to compete with land based food crops. India has nearly 30,000 square km of manmade water bodies and many water storage reservoirs are yet to be built to harness the water resources fully. The reservoir bed up to 1.5 meters depth are exposed for seven months in a year when the stored water in these water bodies are used for irrigation, drinking water, etc, India can become self sufficient in its energy requirements if one year oil imports cost (50 billion US$) is invested on pyrolysis oil and bio-diesel production technologies/infrastructure to meet its energy needs. India is endowed with tropical climate to sustain these renewable and carbon neutral energy resources.

Solar energy: The energy of sun light is used for electricity generation during day time. The average solar radiation per square meter is one KW during day time. Clouds free sky is required to generate solar power and also it needs vast unused area by farm lands, water bodies and forests which also depend on sun light for their existence. Solar power generation on major scale is not yet commercially proven. Though it is a clean energy, the materials used in solar Page | 18

Potential of Unconventional Sources of Natural Gas cells may be source of soil and water contamination causing health hazards. India is blessed with vast solar energy resources and substantial solar power generation is possible as the technology matures.

Animal draught power: Animal power is extensively used in agriculture and transport in rural areas. The draught animals such as bullocks and he-buffaloes can be used for generating commercially viable electricity for meeting daily peak load demand. It will boost the rural employment and income by using the idle time of the cattle for electricity generation. The installation cost and time are comparatively low. In many countries & few parts of India also, cows & she-buffaloes are used for draught power and can also be used for electricity generation.

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Potential of Unconventional Sources of Natural Gas TABLE – PREFERENTIAL FUEL Purposes

Preferred fuels

Next preferred fuels

Least preferred fuels

*Mobile military Diesel, petrol hardware

Ethanol, bio-diesel

-

*Air transport

bio-diesel

Ethanol

ATF, HSK

Marine transport

Bio-oil / pyrolysis oil

LDO, HFO, bunker fuel, Nuclear fuel, LNG

Civilian transport Bio diesel, CNG, LPG vehicles

Battery power/electricity

Diesel / petrol

Railways

Pyrolysis oil, Electricity, Bio LPG diesel

Diesel

Illumination/ lighting

Electricity, Koroch / bio Natural gas, LPG diesel

Kerosene

Domestic- cooking

Natural Gas, Koroch / bio LPG, Electricity diesel, charcoal

Kerosene

Domestic - space & Pyrolysis oil, charcoal, LPG water heating Solar energy, Natural Gas

Electricity, Kerosene

Domestic - other Electricity appliances

Diesel / petrol

Commercialcooking

Battery power

Natural Gas, bio-char

LPG, Pyrolysis Electricity

oil, Kerosene

Commercial- space Solar energy, Natural Gas, LPG & water heating Pyrolysis-oil

Electricity, Kerosene

Commercial- other Electricity, bio-diesel, appliances

Diesel / petrol

Industrial- motive Pyrolysis-oil,

Battery power

bio-diesel, Natural Gas, LPG

Diesel / petrol

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Potential of Unconventional Sources of Natural Gas power

bio-gas, Electricity

Industrial- heating Pyrolysis-oil, Coal, lignite, Natural & cooling Bio-char Electricity Urea fertilizer

Industrialmaterials

Bio-gas / synthetic gas, Natural gas, coal, bio-char raw As required

Agriculture- water Pyrolysis-oil, pumping Electricity

-

bio-diesel, LPG

Gas, Fossil liquid fuels

Naphtha

-

Diesel / petrol

Agricultureheating & drying

Bio-mass, Pyrolysis-oil,

LPG, bio-gas

Diesel / petrol

Agriculturetransport

Bio-diesel, LPG

CNG, bio-gas

Diesel / petrol

Agricultureappliances

Bio-diesel, Electricity

LPG, bio-gas

Diesel / petrol

Electricity

Local coal, bio-char, lignite, Natural gas (peaking Petrol, Diesel, NGL, nuclear, bio mass, pyrolysis power) LPG, LDO, HFO, Naptha oil, bio-gas, gobar gas, hydro, wind, (As per economical cost at user locations)

Coal and lignite: These are mainly used to generate electricity, to fire boilers in process industry, to produce cement, etc. Coking coal is used as raw material in Iron manufacturing which is in shortage in India. India imports most of its coking coal requirements. India is blessed with 200 billon tons coal reserves which will last for 400 years at the present rate of consumption. The coal reserves will last for 40 years even the consumption is increased by 10 folds. These reserves are estimated based on coal found up to 600 meters depth. The reserves would increase further if the exploration is carried out at more depths and also under shallow Page | 21

Potential of Unconventional Sources of Natural Gas sea water area. The presently used coal mining technologies are not cost competitive beyond 600 meters depth. However, underground coal gasification technology is maturing to convert coal in to clean gaseous fuel. The latest technology adopted from oil & gas wells drilling such as serpentine drilling / inseam drilling, guided drilling, bunching of wells, etc. has made in situ coal gasification technology a reliable and commercial proposition.

Big country like India cannot depend on imports as it is going to be huge portion of international trade in energy fuels. Coal is going to be the backbone of its energy sector until another lucrative energy harnessing technology is developed. The per capita CO2 emission by Indians will be less than world average, even after the coal consumption is increased to five times of present consumption.

Indian coal is of low calorific value with high ash content. They have comparatively less sulfur and heavy metals which are advantageous in pollution point of view. Indian coal also has high ash fusion temperature which is a positive factor in coal fired boiler design. Well proven boiler technologies are in use to fire high ash content coal.

The existing rail infrastructure to transport coal to various distant power stations is not adequate. Dedicated cross country coal slurry pipe lines are to be constructed to meet the coal transport requirements.

Energy starvation: It is defined as people living in surroundings where the temperature is less than 20˚C and more than 30˚C. When natural ambient temperature is not in the range of 20˚30˚C and surrounding temperature is not controlled, it is considered that energy starvation conditions are prevailing. This can be while in house or in work place or in commercial establishment or in mobile vehicle. The per capita energy starvation duration in India is in excess of 70%. Thus lot of demand for various energy resources will be felt in future decades as the living standards of people reach that of developed countries.

Energy policy of India: Depending on availability & geographical distribution of various energy sources and commercially viable technologies, the short & long term energy policies of India are to be framed for meeting energy requirements. Other than petroleum products and natural gas, all other energy resources are predominantly used for electricity generation. The following points are to be implemented in India   

Since the liquid fuels are imported in large quantities, their consumption should be limited to unavoidable mobile hardware such as military vehicles, marine transport and air transport only.

Bio-diesel, CNG and LPG are preferred fuels for rest of transport sector.

Domestic & commercial sectors shall be supplied with piped natural gas for meeting heating and catering requirements.

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Potential of Unconventional Sources of Natural Gas  

 

 

Cross country natural gas pipe lines and city gas distribution piping network are to be constructed to supply natural gas to all users.

All available energy resources other than liquid and gaseous fuels should be used for electricity generation. The means of electricity generation shall be based on the delivery cost of electricity at user door step taking in to account generation and transmission costs.

For transporting coal to long distant power stations, cross country coal slurry pipe lines are to be constructed to reduce the cost of coal transport.

Since coal is abundantly available, underground coal gasification technology is to be developed on commercial scale to convert coal in to gaseous fuel not only for electricity generation and but also for other energy requirements.

There shall be technology mission to commercialize bio-diesel production from Algae and Koroch cultivation to replace the conventional transport fuels.

There shall be extensive efforts to popularize biomass gasification and biomass pirolysis to serve as chemical feed stocks, raw material in Urea production, and heating fuels.

The preferred fuels for various requirements are indicated in Table-I. When these preferred fuels are used for each application, the import of petroleum products, LNG, coal and nuclear fuels could be minimized to build self dependent energy sector till the commercially proven technologies are established for using biomass, solar energy and Thorium nuclear fuel.

India's network losses exceeded 32% in 2010 including non-technical losses, compared to world average of less than 15%. Both technical and non-technical factors contribute to these losses, but quantifying their proportions is difficult. But the Government pegs the national T&D losses at around 24% for the year 2011 & has set a target of reducing it to 17.1% by 2017 & to 14.1% by 2022. Some experts estimate that technical losses are about 15% to 20%, A high proportion of non‐technical losses are caused by illegal tapping of lines, but faulty electric meters that underestimate actual consumption also contribute to reduced payment collection. A case study in Kerala estimated that replacing faulty meters could reduce distribution losses from 34% to 29%.

Key implementation challenges for India's electricity sector include new project management and execution, ensuring availability of fuel quantities and qualities, lack of initiative to develop large coal and natural gas resources present in India, land acquisition, environmental clearances at state and central government level, and training of skilled manpower to prevent talent shortages for operating latest technology plants.

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Potential of Unconventional Sources of Natural Gas 2.2 : Resource Exploration and Categorization In view of the significance of the oil & gas sector for overall economic growth, the Government of India, under the Industrial Policy Resolution of 1954, announced that petroleum would be the core sector industry. In pursuance of the Industrial Policy Resolution, 1954, petroleum exploration & production activity was controlled by the government-owned National Oil Companies (NOCs), namely Oil & Natural Gas Corporation (ONGC) and Oil India Private Ltd (OIL). Consequent to the various initiatives taken by the government, currently the area under exploration has increased fourfold. Prior to implementation of NELP, 11% of Indian sedimentary basins area was under exploration. With the conclusion of seven rounds of NELP, the area under exploration has increased to about 50%. One of the world’s largest gas discoveries was made by Reliance Industries Ltd in 2002, in Jamnagar (about 5 trillion cubic meters). Besides, the entry of international companies like Hardy Oil & Gas, Santo, Geo-Global Resources Inc, Newbury, Petronas, Niko Resources and Cairn Energy into India has helped boost the growth of the industry. While the basic framework of the procedures to be followed, guidelines to be framed is similar in India compared to other countries but due to the lack of uniformity outside the production/extraction units and infrastructure there is a need of extra measures to be implemented in order to create a sync between the health, safety and environmental measures and the Indian framework for the optimum utilization of resources and smooth functioning of downstream oil industry. As a result of dynamic nature of the sector it can be divided into *) – Refineries, Oil Rigs and stationary plants from where crude oil, natural gas are extracted or refined. Separate, long term measures of safety are required. *) – Distribution Mode, which includes pipelines, vehicles and other mode of transport of different types of fuel. *) – Chemical safety as well as occupational transport-handling-warehousing safety at different levels.

Comparison, feasibility and implementation of internationally approved standards, methods are also analyzed with the help of data and records.

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Potential of Unconventional Sources of Natural Gas Oil and Gas Industry is a wide supply chain industry which constitutes various operations, activities beginning from the extraction, procurement to the transportation of different forms of fuel to the end consumer. The industry is mainly categorized under i) – Upstream This category is used to refer to the recovery/searching for and production of natural gas, crude oil. The upstream sector also includes the searching for potential underground or underwater oil and gas fields, drilling of exploratory wells, and subsequently operating the wells that recover and bring the crude oil and/or raw natural gas to the surface. With the advancement in technology and increase in the share of unconventional sources of natural gases in the energy pie in general upstream sector is becoming broader gradually. ii) – Midstream The midstream sector (which is quite flexible term and often used interchangeably for various upstreamdownstream activities) generally involves the transportation, storage and marketing of the various oil and gas products produced by petroleum crude oil refineries and by natural gas processing plants.

iii) – Downstream Downstream sector includes purification-processing of different types of natural gas and refining of crude oil and further marketing-distribution of the products derived. As mentioned above it depends on the company’s policy and the host country’s laws whether to assign an activity under midstream or downstream.

In India and majority of world, integrated oil and gas companies participate in all of these businesses, smaller companies may have operations in only one, or part of one, of them. In addition, both large and small oil and gas companies may engage in one or more secondary activities that are not typically associated with the oil and gas industry, including:

*) - Power generation *) - Metal Production *) - Natural gas transmission (City Gas Distribution Model implemented in major cities across India.) *) - Coal Mining *) - Renewable energy systems *) - Specialty chemical production The way in which oil and gas companies divide their activities into different businesses varies from firm to firm. As well as reporting consolidated company performance, companies often

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Potential of Unconventional Sources of Natural Gas separately report data for different activities, particularly where there are important differences between the activities for the indicator.

Indian Downstream Sector There are multiple occupational hazards, health and safety concerns associated with the different processes of the industry. Due to various activities of different nature and degree of danger involved in downstream industry, Health, Safety and Environment guidelines, regulations, checks and precautions help in smooth running of the industry. Operating sectors will have significantly different regulated hazardous waste streams with different treatment and management options available. In downstream operations, major shutdowns and periodic maintenance activities can result in short term increases in hazardous waste generated. Large, one-time construction projects, remediation activities, and high-volume aqueous wastes should be tracked separately. However, due to lack of industry norms, flexibility in rules and regulations in India there are certain areas which form significant part of HSE model of a company in which India lag behind compared to other countries.

Reporting Compared to world average, Indian downstream industry in terms of transport by mode of roadways, railways and pipelines in order to save time, effort and money unofficially discourage their employees in reporting issues especially if the magnitude-volume is relatively low.

However, after certain events, accidents some companies are beginning to consider reporting on wider impacts of their activities in the context of a value chain that extends beyond the normal activities within its organizational boundaries. For example, a company may choose to report on how they are influencing emission reductions or improved social responsibility within their supply chain, or in addition on the customer side, companies may choose to report on programs aimed at informing consumers about the efficient use of oil and gas products.

An impact may be described as “direct” when an activity is under the company’s control (as owner or operator). When an activity is under another’s control, but the company has some degree of influence over this activity, the resulting impact may be described as “indirect”. By separately addressing relevant indirect impacts, the company is extending the scope of its reporting within its value chain. Key factors related to reporting are also missing in the companies under Indian downstream industry which are *) - Transparency – An important factor which takes a backseat in India because of corruption, favorism and greed along with petty politics which puts many lives on the line. Information should be reported in a clear, understandable, factual and coherent manner, and facilitate independent review. Transparency relates to the degree to which information on the processes, procedures, assumptions and limitations in report preparation are disclosed.

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Potential of Unconventional Sources of Natural Gas *) - Relevance – It is significant that the reported information is considered by report users, both internal and external to the company to be meaningful and valuable to the user(s) for information purposes. Level of relevance can be exhibited in training sessions. *) - Consistency – The consistent application of information gathering processes and boundary definitions is essential to the development of credible reports. Consistency in what is reported and how it is reported enables meaningful comparisons of a company’s performance over time and facilitates shared understanding, especially internally within companies, as well as comparisons with peer companies. *) - Completeness – Information that is relevant to internal and external users should be included in a manner that is consistent with the stated purpose, scope and boundaries of the report. Reported information should be complete with respect to appropriate operational boundaries and scope of information. *) - Accuracy – Information should be sufficiently accurate and precise to enable intended users to understand the relevance of information with a reasonable level of confidence. Accuracy refers to the levels of certainty and uncertainty of

Performance Benchmarking Earlier to reduce the money, time and efforts the standardization in terms of measurements, records was not preferred. Many oil and gas companies actively engage in HSE benchmarking initiatives and are increasingly involved in sustainability and other non-financial indicator benchmarking. Benchmarking provides an effective tool to improve performance, because it can provide a systematic approach to identify and learn from others about good practices and innovative solutions. Infusing benchmarking helps in long term growth of the company and also improves the goodwill among the consumers.

It offers an external view of a company’s performance and can help identify what is needed for continual improvement in different aspects. Oil and gas companies often rely on industry groups to facilitate benchmarking processes by developing key performance indicators, and by collecting and analyzing performance information. This document provides a common point of reference that can help support broader engagement in benchmarking studies of sustainability or non-financial indicators among oil and gas companies, and thereby encourage good practice sharing to enhance individual company performance.

Data Aggregation Under the obligation of government and laws Indian companies report performance data at varying levels of aggregation ranging from individual facilities to national, regional locations and Page | 27

Potential of Unconventional Sources of Natural Gas to global coverage for the entire corporation. Aggregate reporting at the corporate level is most commonly observed for reporting occupational injuries, environmental emissions and incident data as part of both regulated and voluntary public reporting. Reporting companies are encouraged to determine the level of aggregation that is appropriate and provides a meaningful representation of the data being presented. Reporting companies often present raw performance data in terms of absolute quantities that can be expressed in a physical unit of measurement related to weight, volume, energy or financial value. In general, absolute data can be expressed in units of measurement that are readily convertible. Absolute quantities may provide information about the magnitude or size of an output, input, value, or result depending upon the prevailing need, evaluating method, comparative entity/norm. The normalised quantities are those figures which represent ratios between two absolute quantities of the same or different kind. Ratios allow comparisons among operations of different size and facilitate comparisons of similar products or processes. They also help relate the performance and achievements of one company, business unit, or organization to those of another. Ratio indicators can provide information on the efficiency of an activity, on the relative intensity of an output (e.g., energy intensity) or on the relative quality of a value or achievement.

Infrastructure The company’s and the Special Economic Zones (SEZs), Export Promotion Areas, Towns of Export Excellence etc infrastructure may suit the downstream activities, but the transport network is not at par with the upstream infrastructure and the industry have to adopt some additional measures to avoid accidents involving internal—external sources (in the process of distribution and marketing). In Indian context companies have to *) – Adapt to increasing share of Inland Waterways in the transport sector especially in the case of rural-remote areas which are connected to a flowing water body compared to road-rail network. *) – Regular point check of pipelines at various pumping stations, keeping special measures for leak prone areas. *) – Guidelines, specialized roadways and railways routes suiting the downstream activities in Indian states. *) – Different measures for different topographies and geographical regions.

Environment The companies in oil and gas industry recognizes that their operations have potential impacts on the environment. Some of the environmental impacts may have social and/or economic implications. Companies in the industry have made many commitments to manage and Page | 28

Potential of Unconventional Sources of Natural Gas minimize negative environmental impacts. Often, these commitments go beyond regulatory obligations. The environmental performance indicators described in the table may be useful in describing the performance of company operations.

Indicators such as spills, emissions, wastes and energy use, when expressed as absolute quantities provide a sense of magnitude or scale. Normalization of these quantities facilitates comparisons among organizations of different sizes, and can help express environmental performance in economic terms. Independent records, evaluation, archiving and guideline stabilization is significant to attain optimum level of sustainable growth of the company along with taking care of multiple environmental factors which can differ from one region to another on which a company is operating. Even the additional areas listed here are interdependent to the core areas which proves that a company’s priority should be core areas but neglecting additional areas (in different categories) can prove to be hazardous for the company in the longer run.

Health and Safety The oil and gas industry recognizes that some health and safety hazards are inherent in its operations and products. Companies in the industry have made many commitments to achieve excellence in managing these risks. Often these commitments go well beyond regulatory Page | 29

Potential of Unconventional Sources of Natural Gas obligations. The health and safety performance indicators described in this section are generally recognized as good indicators that may help companies manage operations and promote improvements in health and safety performance.

*) Indicator (H&S-1) : Indicates the Implementation and coverage of an Occupational Health and Safety Management System.

An occupational health and safety management system is a process that applies a disciplined and systematic approach to managing safety and health activities. This approach uses a cyclical process that takes experiences and learning from one cycle and uses them to improve and adjust expectations during the next cycle. Management systems should convey a company’s structure, responsibilities, practices, procedures, and resources for implementing occupational health and safety management, including processes to identify root causes of poor performance, prevent recurrences, and drive continuous improvement. A health and safety management system may be integrated into an environmental, health and safety management system or may stand alone.

Many companies within the oil and gas industry employ management systems as a principal means to achieve continuous improvement of business performance including performance against health and safety objectives.

*) – Indicator (H&S-2) The indicator is used for the purpose of joint management and employee safety and health programs and procedures to ensure participation of employees at all levels in safety and health activities and dialogues.

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Potential of Unconventional Sources of Natural Gas Provides the detailing of the structure of joint management and employee safety and health mechanisms set up to facilitate active employee involvement in safety process improvements and consultations. Include in the discussion how these mechanisms are functionally integrated into the overall health and safety management system and/or how participation of employees through all levels in the company is encouraged. Describe the current status of employee access to and/or participation in safety and health consultations or dialogues, including plans to address any need for improvement. Contract employees often have their own employee and management health and safety programs that are the responsibility of their direct management. Consideration should be given to describing the interactions between company employee participation mechanisms with those of the contractors and partners working on company sites.

The participation programs of employees which address worksite safety and health issues are important in all work environments. It is widely acknowledged that the advantage of employee participation is the in-depth practical knowledge of specific tasks coupled with the larger overview of company policies and procedures.

Another significant benefit is the enhancement of a cooperative attitude among all parts of the work force toward solving health and safety problems. This indicator acknowledges that there are a variety of mechanisms available to promote active employee participation in safety and health efforts. Companies are encouraged to report on those mechanisms that support full involvement of the workforce in suggesting safety and health improvements.

*) – Indicator (H&S-3) Programs and practices to understand the general health risks and experiences affecting the local workforce.

Describe the processes and programs the company has for identifying the general workforce health problems that are most significant in each location and approaches used to address these health problems. This indicator addresses health problems in the workforce that are both work-related and non work-related. It could include health issues that are prevalent in the communities where businesses are located. Sources of information can include local public health officials, medical absenteeism data, health benefits data, information from company sponsored medical clinics, health impact assessment (HIA) information, knowledge of workrelated incidents and summary data from employee personal health risk and wellness data.

The programs to understand work force health issues will vary widely by location. Dialogue with employees is an effective method of obtaining a good understanding of opportunities for improvement.

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Potential of Unconventional Sources of Natural Gas *) – Indicator (H&S-4) Fourth indicator for Records-Archive System for recording occupational injuries and illnesses, and reporting them as the following rates: *) - Total Number of Injury Rate *) - The Lost Time-Injury Rate *) - Fatality Rate *) – Miscellaneous Time and Injury Comparative Analysis.

Guidance on recordability criteria for occupational injuries and fatalities is given in the “References and Supporting Document” summary (below). While it appears that OSHA recordkeeping guidance is frequently employed across the industry for global corporate reporting, there is not adequate consensus at this time to recommend this as a standard practice throughout the oil and gas industry.

Work-related incident rates (frequencies) for total recordable injuries, total recordable illnesses and lost time injuries are calculated on a basis of number of incidents per 1 million hours worked. The fatality rate is calculated on a basis of number of fatalities per 100 million hours worked. Reporting of total injury, lost time injury and fatality rates should include separate and combined rates for both company employees and contracted workers. The total illness rate should be reported for company employees only.

*) – Indicator (H&S-5) Existence of a process to invest in and act on product-related knowledge, and to communicate results of the risk characterization and management process to customers and the public.

Describe processes and programmes that the company has in place for characterizing and managing product health risks, and to make the results available to customers and the public.

This process applies to all products sold to customers.

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Potential of Unconventional Sources of Natural Gas

2.3 : Energy Security and Related Aspects India hopes to achieve a high rate of growth over the next several decades, notwithstanding the recent global financial crisis. Energy availability—in adequate quantity and good quality— would be a pre-requisite to sustain targeted levels of economic growth and the desired levels and spread of social development. However, the quantum of energy demand would obviously be a function of the energy pathways that India can choose to adopt or design to follow. Using the MARKAL (MARKet ALlocation) model an analysis has been undertaken of four alternative energy development pathways that could lead to significantly different outcomes in terms of the fuel mix, technologies deployed and, therefore, total conventional energy demand. Also presented and discussed are policies and measures that would need to be implemented to ensure realization of each of these scenarios. Given the long lifetimes of energy infrastructure, it is extremely important that investments made today serve us their full life and, therefore, such investments must be aligned with the long-term choices that India may need to make.

All four scenarios present results up to 2031/32 (end of the Fifteenth Five-year Plan) and uniformly assume an average annual economic growth rate of about 8% over this period, a consistent population growth and affluence level, and the same socio-economic structure. The model itself has been configured to 2036/37, recognizing the long gestation time for setting up of energy projects. With economic growth, access to modern fuels and technology choices is assumed to increase as sections of society progress along the economic ladder. The pace of implementation of already announced government policies and programs has been adjusted so as to capture more realistic trends in the short to medium term. For example, while the progress with regard to electrification has been slow in comparison to the targets for providing universal access to electricity by 2012, it is assumed that all households would have electricity by 2017, at least. Moreover, households are assumed to make a transition towards cleaner cooking fuels such as LPG with a rise in incomes.

One of the eight missions defined in the NAPCC recognizes the importance of energy efficiency.

The challenge of promoting energy efficiency in India lies not so much in the availability of technology, as it does with a distorted pricing system that leads to perverse incentives to either promote wasteful energy consumption or to resort to theft! The issue of high initial costs does exist, primarily due to the existence of a large and unregulated market for non-standardized products, but is relatively simpler to design a solution for. The experience with energy efficiency in any sector of the economy — be it agriculture, the residential sector, industry (including small and medium enterprises [SMEs]) or the commercial sector – points towards the need for correcting the pricing of either the fuels to reflect their true scarcity value or the prices of appliances/equipment through appropriate fiscal interventions.

Residential sector - The residential sector, at 25% of final electricity consumption, is the second largest contributor to demand and possibly the largest contributor to Page | 33

Potential of Unconventional Sources of Natural Gas peak demands in the system. Lighting accounts for 35% and space conditioning for 30% of the total electricity consumed in the sector. Approximately 13% of the electricity is consumed by refrigerators and 8% in water heating. Trends in consumption patterns reveal that electricity consumption is increasing at a rate of approximately 10% in this sector. The lighting, space conditioning, and water heating demands coincide substantially with peak load periods, and the introduction of well-designed time-of-day pricing can, affect savings of nearly 30%.

With the exception of lifeline consumers, all other consumers must be charged a peak tariff that is at least a factor of two or three higher than the off- peak tariff, and a recommendation on the minimum differential must be stipulated in the National Electricity Policy. The Mission on Energy Efficiency must also work with state regulatory commissions to encourage them to increase such a differential if their local contexts demand so. Industrial sector Industry accounts for about 50% of the total commercial energy consumption in the country. The energy-intensive industries fall in both the large industry segment (for example, iron and steel, cement, fertilizer, pulp and paper, textiles, and aluminium) as well as in the medium, small and micro-enterprises (MSMEs) segment (for example, foundries, forging, glass, ceramics, brassware, brick making, refractories, rice mills, and a highly dispersed food–processing sector). Many units in the industrial sectors like iron and steel, chemicals, pulp and paper, aluminium, and textiles also fall under the broad category of the MSME sector. This large sector is already experiencing a transformation towards high energy efficiency levels largely due to the cost implications of the existing tariff structures as also the pressures of competition. However, it is the MSME sector that requires a push in terms of ensuring that energy-efficient technologies get adopted in the sector on a large scale.

The low end-use efficiencies in MSMEs can be attributed to several barriers, (i) use of obsolete technologies, (ii) non-availability of readymade technological solutions, (iii) low level of awareness/information availability, (iv) non-availability of technology providers at local/cluster level, and (v) relatively high cost of technologies and poor access to finance.

Given the diversity of the MSME sector, the promotion of technology up-gradation in this sector necessitates the development of sector-specific integrated programs for technology development. TERI’s experience of working in the small-scale industrial sector during the last 10 years shows that it is possible to reduce energy consumption by up to 30%–35%, if sustained and concerted efforts are put in RDD&D for developing cluster/sector-specific technologies.

For example, in case of the Firozabad glass industry cluster, TERI has developed and demonstrated an energy-efficient glass melting furnace in the cluster, and already nearly 50% of the units in this cluster have switched over to this energy-efficient design, thus saving close to 10000 toe (tonne of oil equivalent) of natural gas annually. Specific cluster programmes for MSMEs that are aimed towards technology upgradation and improvement of energy efficiency must be launched. These can be done quickly for nearly 150 manufacturing clusters that are energy intensive. The interventions in different energy-intensive MSME subsectors would require undertaking detailed diagnostic studies, focusing on technology and needs assessment, designing, developing, and demonstrating energy-efficient technologies to suit local conditions, Page | 34

Potential of Unconventional Sources of Natural Gas providing advisory support to small units for disseminating these technologies and building local capacities so that the new, energy-efficient technology options may be adopted by a relatively large number of units in the clusters. A public–private partnership (PPP) model comprising industry, academia/R&D institutions, service providers, and government is required for each cluster for developing and implementing programmes. One of the key tasks of the Mission on Energy Efficiency should be to strengthen the Bureau of Energy Efficiency’s (BEE) initiative on SMEs through the establishment of such goal-oriented partnerships with adequate funding and performance targets over a sufficiently long-term period. Identifying energy- efficiency goals for each cluster, this programme should first carry out competitive bids for demonstrating efficiency improvement interventions (including any technology development/adaptation costs) with appropriate weightage being provided to more ambitious and early-impact programmes. Involving the key stakeholders of such a consortium in facilitating the widespread dissemination of successful interventions would be a useful ‘carrot’ to increase the success rate of such a programme. Such demonstration projects should also be required to address the key institutional and capacity barriers that might exist to rapid implementation of efficiency improvements. Agricultural sector The initial high cost of energyefficient motors, poor pricing regimes, and lack of knowledge about the long-term gains are the major factors responsible for sub-optimum efficiencies. Motors used by the farmers are generally of poor quality and efficiency. Energy-efficient motors account for a very small percentage of motor sales in India. The cost of energy-efficient motors is ~20%–30% higher than standard motors in India. Higher prices of these and subsidies on power consumed lead to low demand, creating a vicious cycle and making it difficult for prices to reflect economies of scale. Financial incentives in the form of reductions in sales tax, abolishment of octroi on energy-efficient products, and reduction in customs and excise duty on imported energyefficient equipment must be provided. Retrofitting of even 10% of the existing inefficient pump sets (~15.35 million as of March 2007) annually, would translate into a savings of ~4 billion kWh (kilowatt-hour) per year at the user’s end and ~900 MW of equivalent generation capacity. The Mission on Energy Efficiency must intervene with relevant stakeholders to achieve the desired outcome. The avoided capacity requirements would amount to an avoided in fructuous investment of over Rs 4000 crores annually. Setting aside this amount for such a retrofit programme could almost fully cover its cost.

The National Mission on Energy Efficiency must set quantitative goals for bringing about efficiency improvements. Such goals must be bold enough to specify an energy intensity goal for the economy as a whole and must be supported by well-defined sector and subsector goals and requisite budgets as illustrated above. As a reasonable illustration, India could aspire to bring down its overall energy intensity of the economy by about 30% of 2001/02 levels by 2021/22, which would still translate into a higher total energy consumption but a rate of growth of energy demand that could be significantly lower. This reduction in demand can be achieved by setting efficiency targets for specific sectors, such as: *) - Reducing technical losses on the transmission and distribution (T&D) network from the current 16%–19% to a level of 8%–12%. *) - Achieving an energy saving of around 20% by 2020 in the industry sector.

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Potential of Unconventional Sources of Natural Gas *) - Improving the average efficiency of vehicles by 15%. *) - Maintaining the share of public transport in total motorized, road-based passenger movement at 70%. *) - Accelerating the efficiency performance of the stock of household appliances as follows: *) - Refrigerators By 7% over the autonomous efficiency improvements assumed in the business as usual (BAU) *) - Air conditioners By about 25% over the efficiency improvement in the BAU. This Mission must have a high powered governance structure, along the lines of the Telecom Commission chaired in the past by Mr Sam Pitroda, and must work through a system of task forces comprising experts from relevant sectors, representatives of relevant ministries (at least at the joint secretary level), and representatives from industry and financial institutions. The chairman of this Mission must report to the Prime Minister of India.

Maximizing Energy Efficiency The levels of energy efficiency in the economy can, in turn, be best achieved by a combination of factors that need to work in concert. These include a pricing strategy that clearly reflects the cost (real and opportunity) of energy service provision; a fiscal regime on appliances, equipment, and infrastructure that clearly incentivizes efficiency; ensuring competition in demand satisfaction at every point along the supply chain; and a regulatory framework that progressively rewards efficiency-related innovations. Energy pricing and competition The desirable elements of efficient pricing have been stressed for decades in various committee reports of the government and are reiterated, in principle, in the Electricity Act 2003. However, it is obvious that real concerns on issues of affordability and political acceptability of moving to cost-of-service pricing have impeded the implementation of such a pricing regime. The government must take advantage of the high technological prowess of the country to design effective and transparent subsidies that overcome the challenge of energy access in a progressive manner (see section on Energy Access for further details). Energy pricing itself must recognize the trade-offs and substitutability between various energy sources, and must be undertaken in an integrated manner with full consciousness of their implications for driving consumer choices and substitution possibilities, both in the short and long terms.

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Potential of Unconventional Sources of Natural Gas Pricing of petroleum products, natural gas, and electricity has been the subject of raging debates in recent times. As a general guideline, this paper recommends the following. *) - In an increasingly open economy, the pricing of Primary energy resources must reflect their opportunity cost at the border, when there is the option of international trade. Therefore, trade pricing of crude oil should reflect the cost insurance and freight (CIF) price of crude that India imports, but the free on board (FOB) price of any crude quality that it exports. *) - When a resource is not trade-able, either due to global surpluses or due to quality Considerations, then a rational and rigorous process for domestic discovery of prices should be facilitated. If this requires a restructuring of energy markets (for example, coal), then an expeditious action plan needs to be drawn up for the purpose with necessary amendments to laws and regulatory frameworks. *) - Pricing of secondary energy forms, along the supply chain, must be left to the market, under effective regulatory oversight, and must allow players to benefit from any competitive advantage arising from efficiency investments as they deem fit. *) - India’s energy infrastructure—be it the transmission and distribution networks or the natural gas pipelines or even the energy production/generation/import infrastructure— needs major expansion and upgrading. Infrastructure expansion is driven by several factors including projected long-term energy demand and considerations of regional growth—it cannot be responding merely to current needs! As such, and in order for a planned development of such infrastructure, the government must pursue its strategy of competitive bidding for both infrastructure expansion and upgrading projects. As we move down the supply chain, the cost of energy would be the sum of the energy infrastructure service cost and the energy resource cost. *) - Where infrastructure needed for energy transport is shared with other beneficiaries (as in the case of railways), the tariff determined for the transport service provided must recognize the implications that it may have for the competitiveness of the energy resource concerned. It is necessary that such tariffs are established in consultation with the institution responsible for energy price oversight, and in accordance with the principle of proportionality. *) - Congestion pricing (time-of-day pricing in case of electricity supply) must be resorted to in order to signal capacity constraints and avoid high-cost infrastructure expansion needs. *) - Energy subsidies to targeted consumers must be provided as far down the supply chain as possible so as to encourage efficiencies and prevent subsidy leakages in the system.

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Potential of Unconventional Sources of Natural Gas Finally, the treatment of by products and ‘waste’ products should be consistent and supportive of the energy sector.

Under the Ministry of Environment and Forests (MoEF) notification, all coal- and lignite-fired power stations have to dispatch fly ash free of cost to anybody desirous of having it, including cement manufacturers, traders, and exporters who can, in turn, sell it at any price they desire.

Under this regime, wherein the value of fly ash is largely being derived by middlemen, neither is the electricity sector benefiting from the potential revenues nor are the government or the common man benefiting from the lower raw material costs od cement manufacture. In sum, the loss to electricity and cement consumers is providing windfall profits to the traders, exporters, and cement manufacturers. Properly priced, fly ash used by cement producers could result in electricity price reduction of nearly 10 p/unit.

Fiscal Regime The taxes and subsidies on energy resources and on energy- using appliances/equipment must be designed to support energy efficiency in the economy and reflect externality costs. While coordinated action in this area at the central level is feasible, the challenge of ensuring this at the state level would be significantly bigger. The central government must clearly specify the fiscal responsibility of states with regard to state-level taxes and subsidies. At the state level, the coordinating committee of the state finance ministers needs to incorporate this prioritization of energy-efficient appliances while determining the common taxation framework across different states. Regulation for efficiency One of the biggest dilemmas for service providers is what is referred to as the ‘rebound’ effect—if service providers were to get involved in encouraging energy efficiency amongst their consumers, it would reduce the size of their market! This is a typical challenge faced by most distribution utilities across sectors and countries. The energy regulators need to be constantly reviewing and implementing innovative pricing and regulatory mechanisms for overcoming this challenge and rewarding (reducing the pain) service providers for this effort. This would require high level expertise among regulatory bodies on regulatory economics, price elasticity concepts and estimation (both in the short and long runs), and associated welfare effects. Regular training of regulators by professional institutions on the technical, regulatory, economic, and environmental aspects of the energy business should be made a requirement of service.

Securing Energy Resources Securing India’s energy supplies, after ensuring its most efficient utilization, is a function of domestic resource exploitation, tying up international resources— either directly or through equity investments—creating the necessary import/transport infrastructure and developing/accessing technologies for harnessing energy resources efficiently. As seen from the scenarios defined above, there exists significant potential for reducing our demand for energy resources by ensuring energy-efficient development paths and maximizing the use of renewable energy.

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Potential of Unconventional Sources of Natural Gas

Energy imports Even with the aggressive push towards efficiency and renewable energy, India would still need to have to import coal at a peak level of ~200 MT and crude oil of ~300 MT between now and 2030. At these significantly higher manageable levels of imports, we need to reevaluate the relative economics of entering into long-term contracts vis-à-vis making equity investments abroad. Assuming that other major international consumers of fossil fuels would also be moving along similar paths as being defined by India, the global demand for these energy forms could soften substantially. While evaluating this option, the experience of allowing the corporate sector to make such investments as part of competitively bid projects (for example, coal mines acquired by private companies for power-generation purposes) should be borne in mind.

Coal After decades of make believe that we had enough coal resources to last us for another 200 years, the Government of India has finally accepted that the life of the resource may be limited to about 45 years. However, recognizing that any country’s ability to rely heavily on this highly polluting energy form would be short lived, India must restrategize its coal development to exhaust its reserves in the next 30 years or so. The new coal-based thermal power generating capacity should be limited at a level that is sustainable with available domestic resources without having to invest in new import infrastructures. The failure of the coal ministry to bring about reforms in the sector—including productivity improvements, private participation, and competition—and the vulnerabilities this creates in the power sector, indicate the need to set up a joint commission, comprising government, industry, and representatives of the power sector and the coal sector. The commission would be empowered to revise policy, establish and implement competition policies, and provide the necessary environment for private-sector participation. The GOI strategy to link coal mines to the private power plants would ensure a more efficient production profile from coal mines, which would enhance production levels.

Oil India’s oil vulnerability is well documented. At the same time, the country is unable to generate enough interest in exploration and production activities despite various improvements made in the different rounds of the NELP. The NELP programme was started nearly 10 years ago, but only 20% of the country’s sedimentary basins can still be classified as ‘well explored’. India needs to quickly move towards the Open Acreage Licensing Policy so as to exploit any potential resources towards alleviating its medium-term energy security challenge. In addition, all efforts must be made to maximize the sustainable flow of oil from existing wells. TERI, in partnership with Oil and Natural Gas Corporation (ONGC), has demonstrated the economic attractiveness of its microbiologically enhanced oil recovery (MEOR) processes. The cost of this technology is less than half of that of the conventional enhanced oil recovery methods. If applied to the ~7000 stripper oil wells within India itself, an additional 3 million barrels of oil per year can be Page | 39

Potential of Unconventional Sources of Natural Gas generated. India could explore licensing this technology to the oil-rich countries for a certain percentage of the incremental oil generated!

Natural gas While natural gas consumption must increase, its use for power generation is suggested primarily for industrial captive use purposes and for fertilizer production—both limited to the extent of domestic availability of the resource. Larger domestic finds would, of course, result in gas increasingly substituting for coal. As such, the existing gas, import facilities that have been established should suffice for the longer term as well. The significance of the Iran–Pakistan– India gas pipeline in the context of energy security can diminish substantially! The natural gas pricing policy needs to be clarified at the earliest to give a push to natural gas and related infrastructure sectors. Rather than pursuing multiple prices and the pricing system as currently existing in the country, it is suggested that natural gas from various sources be pooled and supplied to consumers though a transparent bidding/auctioning process. The role of the regulator in ensuring smooth and fair functioning of the process is immense.

Nuclear Energy India has done well to conclude the civil nuclear agreement with the US. It now also has to urgently give attention to other dimensions of establishing nuclear capacity in the country.

Putting in place and creating public awareness on its nuclear safety and accident prevention protocols, identifying potential nuclear power plant sites and initiating public dialogues, creating the requisite capacity in educational institutions to meet the human resource requirements, addressing concerns on waste disposal, among other initiatives, are all proactivemeasures that are best undertaken sooner than later. The nuclear establishment carries with it a public perception of secrecy and a defence connotation. Scaling up nuclear power generation and possibly inviting the private sector to participate require a much more open and transparent consultative process to be institutionalized.

Waste-to-energy Some of the existing gap between demand and supply of electricity in cities can be met by using waste as a source of energy. Though energy generation from industrial waste sources like distillery, paper and pulp, bagasse, dairy, and slaughterhouse waste is well practised in the country, energy generation from urban waste, especially municipal solid waste (MSW), is still not a feasible option. MSW generated in the country contains on an average 40%–50% organic waste and 15%–20% recyclable waste (primarily paper and plastic wastes). These waste streams can be used as a feedstock by biomethanation and refuse-derived fuel (RDF) processes to generate power in units ranging from 1 MW to 1024 MW cap.

India’s energy security: new opportunities for a sustainable future It is estimated that the annual power generation potential from MSW alone in the country would be around 36000 MW. However, as we do not have sufficient experience in operating these technologies on commercial levels, technology customization and indigenization would be required. High capital cost is one of the most important barriers to MSW-based waste-toenergy processes in India.

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Based on projects implemented as on date, the cost of a typical 5 MW unit comes to around Rs 40–60 crore, with each MW of electricity consuming 150 tonnes of municipal waste annually.

This amounts to an investment of Rs 8–10 crore per MW, or three to four times the cost of conventional thermal power. While it will be difficult for such plants to compete economically with conventional plants, the incidental benefits in terms of waste management and avoided health damage could make this an attractive option. Favourable power purchase agreements, combined with capital cost-based incentives, could be designed for such projects.

The scale of the energy challenge that the country faces compels it to seek aggressive private sector participation. While it is essential and non-negotiable to follow due process when awarding projects to the private sector, a few key points need to be kept in mind. *) - Clear delineation of long-term policy and regulatory framework that would enhance investor confidence. *) - The need to provide a level playing field to all players, including the public sector organizations. *) - The high economic cost of delays .

2.4 : Research and Development in the Energy Sector India’s R&D efforts have often been criticized for being sub-optimal and lacking in goal orientation. The situation in energy-related R&D is perhaps even more serious. The challenge of the sector, as brought out in earlier pages, is too large for it to be continued to be treated as a vehicle of social largesse and diffused capacity building.

While India may not be able to match the R&D resources of the developed world, it is all the more imperative that its scarce financial resources are targeted strategically—to bring about cost reductions, develop/exploit context-specific resources, and develop relevant applications—and with purpose. Some technologies that could be on the verge of commercial deployment, with just an additional resource injection for design improvements, which the government could place on its priority list, include the following. *) - Biomass gasification systems Several organizations in the country have related biomass gasification systems that require critical innovations relating to gas clean-up systems and engine design. Such systems could also be modified for providing clean cooking energy solutions for school canteens, dhabas, and other establishments, with appropriate safety features built in.

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*) - Biofuels A second generation biofuels programme needs to be designed and implemented in a mission mode. *) - Solar energy R&D on solar PV and thermal technologies, per se, has advanced significantly at the global level. India would do well to focus its R&D efforts on developing context-specific applications and research on grid interface issues. *) - Wind energy Resource mapping exercises have to be refined to be in line with new technology developments globally, with a particular emphasis on offshore wind resources. *) - SME sector Designing, developing, and demonstrating energy-efficient technologies to suit specific conditions of SME clusters. *) - The Smart grids The increasing share of renewable energy in India’s energy mix and the greater emphasis on energy efficiency could have serious implications on—and be limited by—the nature of electricity grids. India needs to implement pilot projects on the concept of ‘smart’ grids that would prepare us for such large-scale integration of non-firm and distributed energy sources into our energy systems and their management. In line with the general call for an integrated approach to this sector, it may be worthwhile creating an integrated energy R&D fund administered under the guidance of a research advisory committee at the highest level.

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Potential of Unconventional Sources of Natural Gas Part 3 Indian Geography On the south, India projects into and is bounded by the Indian Ocean – in particular, by the Arabian Sea on the southwest, the Laccadive Sea to the south, and the Bay of Bengal on the southeast. The Palk Strait and Gulf of Mannar separate India from Sri Lanka to its immediate southeast, and the Maldives are some 400 kilometres (250 mi) to the southwest. India's Andaman and Nicobar Islands, some 1,200 kilometres (750 mi) southeast of the mainland, share maritime borders with Burma, Thailand and Indonesia. Kanyakumari at 8°4′41″N and 77°32′28″E is the southernmost tip of the Indian mainland, while the southernmost point in India is Indira Point on Great Nicobar Island. India's territorial waters extend into the sea to a distance of 12 nautical miles (13.8 mi; 22.2 km) from the coast baseline.

The northern frontiers of India are defined largely by the Himalayan mountain range, where the country borders China, Bhutan, and Nepal. Its western border with Pakistan lies in the Punjab Plain and the Thar Desert. In the far northeast, the Chin Hills and Kachin Hills, deeply forested mountainous regions, separate India from Burma. On the east, its border with Bangladesh is largely defined by the Khasi Hillis and Mizo Hills, and the watershed region of the Indo-Gangetic Plains.The Ganges is the longest river originating in India. The Ganges-Brahmaputra system occupies most of northern, central, and eastern India, while the Deccan Plateau occupies most of southern India. Kanchenjunga, on the border between Nepal and the Indian state of Sikkim, is the highest point in India at 8,598 m (28,209 ft) and the world's 3rd highest peak. Climate across India ranges from equatorial in the far south, to alpine in the upper reaches of the Himalayas.

Location: Southern Asia, bordering the Arabian Sea and the Bay of Bengal, between Burma and Pakistan Geographic coordinates: 20 00 N, 77 00 E Map references: Asia Area: total: 3,287,263 sq km country comparison to the world: 7 Page | 43

Potential of Unconventional Sources of Natural Gas land: 2,973,193 sq km water: 314,070 sq km Area - comparative: slightly more than one-third the size of the US Land boundaries: total: 14,103 km border countries: Bangladesh 4,053 km, Bhutan 605 km, Burma 1,463 km, China 3,380 km, Nepal 1,690 km, Pakistan 2,912 km Coastline: 7,000 km Maritime claims: territorial sea: 12 nm contiguous zone: 24 nm exclusive economic zone: 200 nm continental shelf: 200 nm or to the edge of the continental margin Climate: Current Weather varies from tropical monsoon in south to temperate in north Terrain: upland plain (Deccan Plateau) in south, flat to rolling plain along the Ganges, deserts in west, Himalayas in north Elevation extremes: lowest point: Indian Ocean 0 m highest point: Kanchenjunga 8,598 m Natural resources: coal (fourth-largest reserves in the world), iron ore, manganese, mica, bauxite, rare earth elements, titanium ore, chromite, natural gas, diamonds, petroleum, limestone, arable land Land use: arable land: 48.83% permanent crops: 2.8% other: 48.37% (2005) Irrigated land: Page | 44

Potential of Unconventional Sources of Natural Gas 558,080 sq km (2003) Total renewable water resources: 1,907.8 cu km (1999) Freshwater withdrawal (domestic/industrial/agricultural): total: 645.84 cu km/yr (8%/5%/86%) per capita: 585 cu m/yr (2000) Natural hazards: droughts; flash floods, as well as widespread and destructive flooding from monsoonal rains; severe thunderstorms; earthquakes volcanism: Barren Island (elev. 354 m, 1,161 ft) in the Andaman Sea has been active in recent years Environment - current issues: deforestation; soil erosion; overgrazing; desertification; air pollution from industrial effluents and vehicle emissions; water pollution from raw sewage and runoff of agricultural pesticides; tap water is not potable throughout the country; huge and growing population is overstraining natural resources Environment - international agreements: party to: Antarctic-Environmental Protocol, Antarctic-Marine Living Resources, Antarctic Treaty, Biodiversity, Climate Change, Climate Change-Kyoto Protocol, Desertification, Endangered Species, Environmental Modification, Hazardous Wastes, Law of the Sea, Ozone Layer Protection, Ship Pollution, Tropical Timber 83, Tropical Timber 94, Wetlands, Whaling signed, but not ratified: none of the selected agreements Geography - note: dominates South Asian subcontinent; near important Indian Ocean trade routes; Kanchenjunga, third tallest mountain in the world, lies on the border with Nepal ndia covers 3,287,263 sq km, which extends from the Himalayas, the world's highest mountains, to the southern tropical rain forests. It is the seventh largest country in the world and the mountains and sea that surround India separate it from other parts of Asia. In the shape of a triangle, India's topography is greatly varied in that there although there are deserts and rain forests, much of it's land is comprised of fertile river plains and high plateaus. Some of the main rivers that flow through India are the Ganges, Brahmaputra and the Indus. These rivers start in the high mountains and carry down rich alluvial soil to the plains below, thus creating the fertile river plains.

Four distinct regions can be found in India - mountains, plains, the desert and the southern peninsula. The mountainous region is comprised of the Himalayas, a mountain range that has Page | 45

Potential of Unconventional Sources of Natural Gas some of the highest peaks in the world. They have rivers that increase and decrease in amount with the snowfall. During the monsoon season, the heavy water coming out of them causes frequent flooding. On one side of India, the heights make them impassable, whereas in the east the ranges are considerably lower. The plains are made up of basins by three main rivers in India - the Indus, the Ganga and the Brahmaputra. Flat alluvium (rich soil deposited by rivers) is abundant and this area is considered to be one of the largest areas of it in the world. In addition to that international distinction, this area is also considered to be one of the most heavily populated areas in the world. The desert areas in India are split by land that is rocky and comprised of limestone ridges. The last region, the peninsula, has mountains surrounding it, with coastal areas on the other side of the mountains.

The climate in India is characterized as tropical-monsoon. Seasonal winds determine the climate. There is a north-east monsoon that is known as the winter monsoon and it goes across the land to the sea. The south-west monsoon is called the summer monsoon as it comes from the sea and blows across the land. This monsoon brings the highest amount of rainfall to the country.

India is the seventh largest country in the world. It has the world's second largest population.

Located entirely in the northern hemisphere it is bound by Pakistan, Afghanistan, China, Nepal, Bhutan, Myanmar and Bangladesh. The Arabian sea, the Indian Ocean and the Bay of Bengal border it's coastline.

The mainland has three well-defined geographical regions, the mountain zone of the Himalayas, the Indo-gangetic plain, ( formed by the basins of three great rivers Indus, Ganga and Brahmaputra) and the southern peninsula of the Deccan Plateau.

The main river systems are the Himalayan rivers like Ganga and Brahmaputra which are snowfed; the peninsular rivers like Godavari, Krishna and Mahanadi; and the coastal rivers.

India has a rich variety of vegetation and animal life, with special types of flora and fauna.

The climate of the country varies from region to region. In some places, including the coastal areas, the climate is almost uniform throughout the year. There are quite a few places in the country which have a moderate climate, such as towns in the North of the country or Bangalore in the South. On the other hand most areas are very hot in summer.

The Indian seasons can be divided as follows:   

March to June: Summer July to October: Monsoon November to February: Winter

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Potential of Unconventional Sources of Natural Gas Part 4 Coal Bed Methane 4.1) : Introduction

Depletion of conventional resources, and increasing demand for clean energy, forces India to hunt for alternatives to conventional energy resources. Intense importance has been given for finding out more and more energy resources; specifically non-conventional ones like CBM, shale gas & gas hydrates, as gas is less polluting compared to oil or coal. CBM is considered to be one of the most viable alternatives to combat the situation. With growing demand and rising oil and gas prices, CBM is definitely a feasible alternative supplementary energy source. Coalbed methane is generated during coalification process which gets adsorbed on coal at higher pressure. However, it is a mining hazard. Presence of CBM in underground mine not only makes mining works difficult and risky, but also makes it costly. Even, its ventilation to atmosphere adds green house gas causing global warming. However, CBM is a remarkably clean fuel if utilized efficiently. CBM is a clean gas having heating value of approximately 8500 KCal/kg compared to 9000 KCal/kg of natural gas.

It is of pipe line quality; hence can be fed directly to national pipeline grid without much treatment. Production of methane gas from coalbed would lead to de-methanation of coal beds and avoidance of methane emissions into the atmosphere, thus turning an environmental hazard into a clean energy resource. As the third largest coal producer in the world, India has good prospects for commercial production of coal bed methane. Methane may be a possible Page | 47

Potential of Unconventional Sources of Natural Gas alternative to compressed natural gas (CNG) and its use as automotive fuel will certainly help reducing pollution levels. India is one of the select countries which have undertaken steps through a transparent policy to harness domestic CBM resources.

The Government of India has received overwhelming responses from prospective producers with several big players starting operations on exploration and development of CBM in India and set to become the fourth after US, Australia and China in terms of exploration and production of coal bed methane. However, in order to fully develop India's CBM potential, delineation of prospective CBM blocks is necessary. There are other measures like provision of technical training, promotion of research and development, and transfer of CBM development technologies that can further the growth of the sector. India lacks in CBM related services which delayed the scheduled production. Efficient production of CBM is becoming a real challenge to the E & P companies due to lack in detailed reservoir characterization. So far, the most investigations have been limited to measurement of adsorption isotherms under static conditions and is deficient in providing information of gas pressure-driven and concentrationdriven conditions. More care should be taken on measurement of porosity and permeability also. To produce more methane from the coal enhanced technology like CO2 sequestration may be implemented. This process can not only reduce the emission of this gas to atmosphere, will also help in extra production of methane gas. Though, presently, CO2 is not an implemented Page | 48

Potential of Unconventional Sources of Natural Gas much because of high cost. But the necessity to reduce greenhouse gas emissions has provided a dual role for coalbeds - as a source of natural gas and as a repository for CO2. In the present investigation, Singareni coal field has been selected as the study area. Samples have been collected from various locations & depths. Standard methods have been followed to characterize the collected coal samples and evaluation gas reserve.

4.2) - Indian and Global Scenario

*Major Coal Bed Methane Blocks in India

India: India is potentially rich in CBM. The Directorate General of Hydrocarbons of India estimates that deposits in major coal fields (in twelve states of India covering an area of 35,400 km2) contain approximately 4.6 TCM of CBM . Coal in these basins ranges from high-volatile to low-volatile bituminous with high ash content (10 to 40 percent), and its gas content is between 3-16 m3/ton depending on the rank of the coal, depth of burial, and geotectonic settings of the basins as estimated by the CMPDI. In the Jharia Coalfield which is considered to be the most prospective area, the gas content is estimated to be between 7.3 and 23.8 m3 per ton of coal within the depth range of 150m to 1200 m. Analysis indicates every 100-m increase in depth is associated with a 1.3 m3 increase of methane content.

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Potential of Unconventional Sources of Natural Gas In India, commercial CBM production is yet to be started in full pace. Few E&P companies like ONGC Ltd., GEECL and Essar Oil have started production, but field development is yet to be completed.

Global: The largest CBM resource bases lie in the former Soviet Union, Canada, China, Australia and the United States. However, much of the world’s CBM recovery potential remains untapped. In 2006 it was estimated that of global resources totaling 143 trillion cubic meters, only 1 trillion cubic metres was actually recovered from reserves. This is due to a lack of incentive in some countries to fully exploit the resource base, particularly in parts of the former Soviet Union where conventional natural gas is abundant. The United States has demonstrated a strong drive to utilize its resource base. Exploitation in Canada has been somewhat slower than in the US, but is expected to increase with the development of new exploration and extraction technologies. The potential for supplementing significant proportions of natural gas supply with CBM is also growing in China, where demand for natural gas was set to outstrip domestic production by 2010.

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Materials and Methods Coal samples were collected from Dorli- Bellampalli coal Belt of Singareni coalfield, Andhrapradesh, India. Samples are collected from various seams of the bore holes at different locations. Caprock of each seam is mainly made of coarse to very coarse grained sandstone, greyish all over. The depth under study varies from 369m to 541m. The coal samples were first crushed, ground and sieved through 72-BSS mesh openings. Proximate analyses of the samples were performed using muffle furnace as per the standard method. The equilibrium moisture content of the samples was determined using the standard test method [ASTM D 1424 – 93].

Ash contents of samples were estimated in accordance with the ASTM D3174-04 and Proximate as well as Elemental Data Analysis

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-elemental compositions of coal samples were determined using CHNS Analyzer (Elementar Vario EL III- CHNS analyzer). From the results it was observed that the ash content varies from 10.52% to 26.59% except one sample that showed an irregularly high ash content of 45.99%.

Proximate analysis of the investigated coal samples reveal that the moisture content (M %) varies from 2.46% to 3.82%, whereas volatile matter ranges from 23.30% to 40.26% and fixed carbon (FC) content varies from 26.01% to 53.21%. From elemental analysis it is seen that the fixed carbon percentages varies from 38% to 71 %. In general it is recognized that the fixed carbon of coal increases with increase in coal depth which is directly proportional to the coal maturity and rank. The value of vitrinite reflectance ( %) gives idea about the coal rank and grade. In the present study, the vitrinite reflectance (Ro%) is calculated by using the formula by Rice using the data from approximate analysis.

The formula is as follows: Page | 52

Potential of Unconventional Sources of Natural Gas R% = -2.712 Ă— log (VM) + 5.092 (4) The R% varies from 0.45% to 0.88% .

From the proximate analysis and value of vitrinite reflectance (Ro) varies from 0.45 to 0.88%.

Hence, the coal samples under study belong to sub-bituminus to bituminous rank. Since it is generally true that methane is not adsorbed onto non-coal material, ash and moisture values can be used to make appropriate corrections on the total measured gas contents. Gas content is seen to increase with depth, and bituminous coals are associated with the highest gas contents, followed by sub bituminous coals. Cross plot of Gas Content versus non- coal content (ash + moisture content). Moisture and ash content within the coal reduces the adsorption capacity of methane. Adsorption capacity of methane decreases with increasing ash and moisture percentage within the coal. As little as 1% moisture may reduce the adsorption capacity by 25%, and 5% moisture results in a loss of adsorption capacity of 65%.

Production Production of gas is controlled by a three step process (i) - Desorption of gas from the coal matrix, (ii) - Diffusion to the cleat system, (iii) - Flow through fractures.

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Many coal reservoirs are water saturated, and water provides the reservoir pressure that holds gas in the adsorbed state. Flow of coalbed methane involves movement of methane molecules along a pressure gradient. The diffusion through the matrix pore structure, and steps include desorption from the micropores, finally fluid flows (Darcy) through the coal fracture (cleat) system. Coal seams have two sets of mode; breaking in tension joints or fractures that run perpendicular to one another. The predominant set, face cleats, is continuous, while the butt cleat often terminates into the face cleats.

Cleat systems usually become better developed with increasing rank, and they are typically consistent with local and regional stress fields. The size, spacing, and continuity of the cleat system control the rate of fluid flow once the methane molecules have diffused through the matrix pore structure. These properties of the coal seams vary widely during production as the pressure declines. Coal, being brittle in nature, cannot resist the overburden pressure with reduction in pore pressure during dewatering; and fractures are developed.

In addition, hydraulic fracturing is done to increase the permeability of coal. Because, permeability and porosity of coal is extremely low for which production rate is also low. The basic petrophysical properties of coal responsible for production of methane, e.g. porosity, permeability vary widely with change in the pore pressure during dewatering as well as gas Page | 54

Potential of Unconventional Sources of Natural Gas production period. Hence, efficient production of methane from coal bed needs continuous monitoring of variation in porosity, permeability and compressibility of coal. The unique features of the coal are that coals are extremely friable, that is, they crumble and break easily.

Therefore, it is nearly impossible to recover a “whole� core. Direct measurement of intrusive properties like permeability, porosity, compressibility, relative permeability measurements are very difficult and must rely on indirect measurement.

In India, ONGC Ltd. has implemented multilaterial well technology to increase the drainage area and enhance the production in the Jharia block. But, brittle characteristic of coal restricts the production at the expected rate. Moreover, coal is highly compressible (~as high as 2x10-3) psi1) [13]. Variation of permeability and bottom hole properties during production requires accurate well test analysis using correct model. CBM reservoirs are of dual porosity system, which demands for special models of well test analysis. So, only static adsorption-desorption study can not suffice the analysis of coal bed methane production. As these properties will continuously vary during production, efficient & economic production of methane from coal bed requires constant monitoring and analysis of the system by experienced and proficient persons.The main hurdle associated with the production of CBM is the requirement of long dewatering of coal bed before production. This difficulty may be resolved to some extent with implementing the CO2 sequestration technology. Due to higher adsorption affinity of CO2 to Page | 55

Potential of Unconventional Sources of Natural Gas coal surface, methane will be forced to desorb from the coal surface at comparatively high pressure and can reduce the dewatering time and hence the total project period. Also the problem associated with variation in coal properties related to pressure depletion may be alleviated. China, Australia, USA have been started to implement this technology for enhanced recovery of CBM gases.

The DGH has offered 33 blocks covering 17,000 km in four rounds of bidding, but only four blocks have come to production so far. “Of the eight blocks awarded in the first round, only four are producing 2.5 lakh cubic metres of gas per day, much below the expected rate of production. The Directorate General of Hydrocarbons will soon offer seven coal bed methane blocks under the fifth round of bidding with the Central Mine and Planning & Design Institute (CMPDI) finalising the data dossier. The DGH had engaged CMPDI in 2011 to identify CBM blocks and prepare a list for the fifth round. down. Although the DGH

made huge projections regarding CBM production in the country, the rate of success has been far from satisfactory. The DGH has already awarded 1.8 trillion cubic metres (tcm) of CBM reserves for exploration and extraction of the 4.4 tcm of identified reserves. However, CMPDI has pointed out that the DGH figure was inflated and the actual identified reserve was 3.4 tcm.

CMPDI has tested 75 bore holes across the country to come to the number, the DGH official said. The DGH offered 8 blocks in the first round, 9 in the second round, 10 in the third round and 7 in the fourth round.

CBM technology is proceeding with good space to prove itself as a cleaner energy security to India as well as the World. However, production strategy of methane from CBM is very much different from conventional gas reservoir. The study revealed that the coal type, rank, volatile matter and fixed carbon are strongly influence the adsorption capacity of methane into the coal bed. With increasing depth maturation of coal increases and generation of methane gas also increases. Gondwana basin as the most prospective CBM field is being developed now. From the studies, it is observed that Singareni coal field under Gandowana basin contains low gas Hence, presently it is not considered for CBM exctraction. However, in future this field may be considered for methane extraction using advanced technology and in emergency condition.

Sequestration of CO2 helps in mitigation of global warming, at the same time helps in recovery of methane gas from coal bed unveiled otherwise. However, detailed and intensive studies are required for efficient and economic production of coal bed methane. India with ~4.6 TCM of methane reserves in coal bed can enrich its per capita energy demand by successful exploitation of CBM.

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Potential of Unconventional Sources of Natural Gas Part 5 Gas Hydrates 5.1 - Introduction and History Gas hydrate is a crystalline substance of methane and water, and is found in the shallow sediments of permafrost and outer continental margins. Study of gas hydrate deposits attracted the global attention due to their huge energy potential. Several parameters such as the bathymetry, seafloor temperature, total organic carbon (TOC) content, sediment-thickness, rate of sedimentation, geothermal gradient that control the formation and occurrence of gas hydrate deposits indicate good prospect along the Indian margin.

*Map indicating discovered Gas Hydrate Reserves-Deposits (Makogan).

Presently, in many countries national programs exist for the research and production of natural gas from gas-hydrate deposits. As a result over 220 gas hydrate deposits have been discovered, more than a hundred wells drilled, and kilometers of hydrated cores studied. Properties of the

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Potential of Unconventional Sources of Natural Gas hydrated cores have been investigated, effective tools for the recovery of gas from the hydrate deposits prepared and new technology for the exploration of gas-hydrate fields developed.

The commercial production of natural gas from gas-hydrates exists for many years now with good results. Still, many complex problems have to be studied. More high-level studies on the properties of the gas-hydrates are needed and new technology for the production of natural gas from gas-hydrates has to be developed. Note, it is not the amount of potential reserves of hydrated gas that is important, but the volume of gas that can be commercially produced (17– 20% from potential).

Gas-hydrates were first obtained by Priestley (1778) under laboratory conditions by bubbling SO2 through 0 °C water at atmospheric pressure. Priestley was a gifted researcher of his time who discovered a number of gases, in particular oxygen, hydrogen, SO2 and others; however, when describing the crystals he obtained, he did not name them hydrates. About 33 yr later, similar crystals of aqueous chlorine clathrate (Davy, 1811) were named hydrates of gas. Some scientists consider Davy to be the discoverer of gas-hydrates; however, Priestley was the first scientist to create gas-hydrates in a laboratory. The results by Davy did not draw the attention of contemporaries and the studies of hydrates did not gain serious development for almost a century. In 1934, Hammerschmidt noted that the inspection of gas pipes of the USA was complicated by the formation of solid plugs in the wintertime. It was assumed that the plugs were ice from the hydro-test and condensed water.

Relying on his laboratory investigations, Hammerschmidt showed that the solid plugs consisted not of ice, but of hydrate of the transported gas. The need to investigate in detail the conditions of the formation of gas-hydrates and to find an effective means of preventing solid hydrate plugs in pipelines became urgent; 144 papers on gas-hydrates were published during the period from 1934 to 1965. The third period in the history of studying gas-hydrates is tied to the discovery of natural gas-hydrates, which will be an unconventional source of energy in the coming decades. The Markhinskaya well drilled in 1963 in Yakutiya to a depth of 1800 m revealed a section of rock at 0 °C temperature at the 1450 m depth, with permafrost ending at approximately 1200 m depth. Comparing the conditions of that section of rock with hydrate formation conditions allowed scientists to formulate an idea of the possibility of the existence of gas-hydrate accumulations in the cooled layers. That idea, which was received with serious doubt by many experts, needed experimental confirmation. Hydrates of natural gas were formed in a laboratory in 1966 in porous media and in real core samples at the Gubkin Oil Institute in Moscow. The results, which compellingly showed the possibility of formation and stable existence of naturally occurring gas-hydrates in rock layers, were recorded as the scientific discovery of natural gas-hydrates. After a comprehensive international examination, the discovery of natural hydrates was recorded in the USSR State Register of scientific discoveries.

Gas-hydrates are compounds inwhich themolecules of gas are trapped in crystalline cells consisting of water molecules retained by the energy of hydrogen bonds. Gashydrates can be Page | 58

Potential of Unconventional Sources of Natural Gas stable over a wide range of pressures and temperatures; for example, methane hydrates are stable from 20 nPa to 2 GPa at temperatures from 70 to 350 K. The morphology of hydrate crystals is very diverse and is determined by composition and conditions of crystal growth.

Some properties of hydrates are unique. For example, 1 m3 of water may tie up 207 m3 of methane to form 1.26 m3 of solid hydrate, while without gas 1 m3 of water freezes to form 1.09 m3 of ice. One volume of methane hydrate at 26 atm and 0 째C contains 164 volumes of gas. In a hydrate, 80% of the volume is occupied by water and 20% by gas. Thus, 164 m3 of gas are contained in a volume of 0.2 m3.

The dissociation of hydrates by increasing temperature when the volume is held constant will be accompanied by a substantial increase in pressure. For methane hydrate formed at 26 bar and a 0 째C, it is possible to obtain up to 1600 bar pressure increase. Hydrate density depends on its composition, pressure and temperature. Depending on the composition of gas, the density of the hydrate will vary from 0.8 to 1.2 g/cm3. Natural gas-hydrates are metastable minerals, where the formation and/or decomposition depends on pressure and temperature, composition of gas, salinity of water, and characteristics of the porous medium in which they are formed. Hydrate crystals in reservoir rock can be dispersed in the pore space without the destruction of pores, but in some cases, the rock will be affected.

Hydrates can be in the form of small nodules (5 to12 cm) or in the form of the small lenses or even of pure layers that can be several meters thick. Liberating gas from a GHD requires heating up the entire rock mass containing the gas-hydrate. The amount of energy needed will depend on the heat capacity of the hydrate, the heat capacity of the hydrate saturated layers, the specific amount of hydrate in the layers and the degree of supercooling that caused the formation of the deposit. Under certain conditions, the energy necessary for liberating the gas in the hydrate layer can exceed the value of the potential energy of gas that will be produced.

Hydrates possess high acoustic conductivity and low electrical conductivity, which is used in effective methods of finding and evaluating a GHD. The decomposition of hydrate in the layer, especially under the conditions of water areas, can be accompanied by significant changes in the strength of the sediments containing the gas-hydrates. The experimentally specific values of the heat of the formation or decomposition of hydrates of various hydrocarbons in the temperature range of the melting of water are given below.

*Gas Hydrates : Properties, Occurrence and Recovery (Handa, 1986) Page | 59

Potential of Unconventional Sources of Natural Gas 5.2 - Gas Hydrates in India The problem of development and production of gas from GHD is an important problem for the 21st Century. A number of countries, including the USA, Russia, Japan, India, China, Korea and others, have national programs for studying and industrial production of natural gas from hydrates. Furthermore, in many countries serious studies of gas-hydrates are conducted in many university laboratories. However, even a basic review of publications on gas-hydrates shows that most research projects are conducted separately, at different scientific levels, and the published results frequently are not noticed by the energy industry.

The research community should be more united in an effort to improve the technology needed to find, evaluate and produce gas from gas-hydrate deposits. To rapidly improve the technology, the industry should form an International Coordination Board to help solve the vital problems associated with the development of GHDs. The board should provide guidance to get research money to the right organizations for the right projects. The world will eventually need the energy concentrated in natural gas-hydrates. However, the technology must be developed now to be able to produce GHDs in the coming 10 to 15 yr.

Pockmarks at seafloor or gas escape features such as faulting or gas-chimneys in the shallow sediment offer indirect evidences for gas hydrate. About 1894 trillion cubic meter of gas in the form of gas hydrate is speculated in the Indian offshore, which is more than 1,500 times the country’s present gas reserve. Gas hydrate is thus considered as a viable major energy resource for India.

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Potential of Unconventional Sources of Natural Gas *Concentrated CO2 (Cat. Wiskery) Crystals Therefore, the identification and quantification of gas hydrate is very essential. Gas hydrate can make the sediments impervious and thus trap free-gas underneath. Seismic attributes like the reflection strength, blanking, attenuation (Q-1) and instantaneous frequency can be used to identify gas hydrate and free-gas bearing sedimentary strata. The most commonly used marker for gas hydrate is an anomalous seismic reflector, known as the bottom simulating reflector or BSR. Application of these approaches show occurrences of gas hydrate in the Krishna-Godavari (KG), Mahanadi and Andaman regions of the Bay of Bengal, and the Kerala-Konkan and Saurashtra regions of the Arabian Sea. It is observed wide-spread occurrences of BSR on the recently acquired seismic data in the Mahanadi and KG regions. Several approaches have been proposed for estimation of gas hydrate based on seismic travel time tomography, fullwaveform inversion, amplitude versus offset (AVO) and rock-physics modeling. The data are being utilized for evaluating the resource potential using indigenously developed techniques.

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Potential of Unconventional Sources of Natural Gas 5.3 - National Gas Hydrate Program The program is initiated by the Government of India led by Director General of Hydrocarbons and multiple foreign agencies like U.S. Geological Survey. Covering here the first stage of the program. NGHP Expedition 01 logged a significant number of important accomplishments.

The crew completed 113.5 days of operations without significant injury or incident, while at the same time achieving a remarkable degree of efficiency; only 1 percent of total operation time could be categorized as “down time� due to equipment malfunction or weather. The drilling completed during the expedition enabled the examination of 9,250 meters of total sedimentary section from 39 drilling locations across 21 sites located in four geologically-distinct settings.

This included the collection of LWD log data in 12 holes spread over 10 sites, wireline log data at 13 sites, and vertical seismic profile data at 6 sites.The coring operation was particularly successful, boasting the collection of 494 conventional cores, encompassing 2,850 meters of sediment, from 21 holes (with a 78 percent overall recovery factor). In addition, scientists collected detailed shallow geochemical profiles at 13 locations and established temperature gradients at 11 locations. The expedition also carried out 97 deployments of advanced pressure coring devices, resulting in the collection of 49 cores (up to 1-meter-long) that contain virtually Page | 62

Potential of Unconventional Sources of Natural Gas undisturbed gas hydrate in host sediments at near in situ pressures. The large volume of core material provided an opportunity for extensive sample collection to support a wide range of post-cruise analyses by researchers around the globe. Samples included roughly 6,800 whole round core samples for examination of interstitial water geochemistry, microbiology, and other information; 12,500 smaller (5 to 20 cc) sub-samples for paleomagnetic, mineralogical, and paleontological analyses; 140 gashydrate- bearing sediment samples maintained in liquid nitrogen; five 1-m gas-hydrate-bearing pressure cores for analyzing the physical and mechanical properties of gas-hydrate-bearing sediment; and 21 re-pressurized cores (nine of which represent sub-samples from gas-hydrate-bearing pressure cores).

The number and level of expertise of the scientists on board allowed the NGHP Expedition 01 science team to efficiently utilize extensive on-board lab facilities to examine and prepare preliminary reports on the physical properties, geochemistry, and sedimentology of all the samples collected prior to the end of the expedition. Because much of the “science� was begun while the samples were being obtained and logged, findings and insights should be available relatively early, despite the huge volume of data collected. Preliminary results indicate that this expedition:

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Potential of Unconventional Sources of Natural Gas • Conducted comprehensive analyses of gas-hydrate-bearing marine sediments in both passive continental margin and marine accretionary wedge settings.

• Discovered gas hydrate in numerous complex geologic settings and collected an unprecedented number of gas hydrate cores.

• Delineated and sampled one of the richest marine gas hydrate accumulations yet discovered (Krishna-Godovari basin).

• Discovered one of the thickest and deepest gas hydrate occurrences yet known (Andaman Islands) which revealed gas-hydrate-bearing volcanic ash layers as deep as 600 meters below the seafloor.

• Established the existence of a fully developed gas hydrate system in the Mahanadi basin of the Bay of Bengal.

• Demonstrated the utility of employing advanced logging-while-drilling operations to highgrade potential sites for later coring operations.

• Demonstrated a series of significant advances in infra-red imaging and pressure coring data acquisition and analysis techniques.

Features of Gas-Hydrates Deposits/Zones The mechanism of how gas-hydrate deposits are formed and where hydrates are located has been affected by numerous factors, such as: (1) - Thermodynamic regime in the region; (2) - Intensity of generation and migration of hydrocarbons; (3)- Composition of the gas; (4) - Degree of gas saturation and salinity of the reservoir water; (5) - Structure of the porous medium; (6) - Litho logic characteristics of the section; (7) - Geo-thermal gradients in the zone of hydrate formation and in the basement rocks; (8) - Phase state of hydrate formers.

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*Mix of secondary transparent and black hydrates in water.

The hydrate formation zone (HFZ) represents the thickness of sediments in which the pressure and the temperature correspond to the thermodynamic conditions of stable existence of gashydrates of a specified composition. These HFZs are found where the earth is cool, such as the Arctic and deep water. With an increase in the salinity of water, the thickness of the HFZ decreases. The thickness and the temperature of the HFZ in the offshore strongly depend on the value of sea bottom temperatures and gradient in the sediments. With an increase in sea bottom temperatures, the size of the HFZ decreases. In the regions where permafrost exists, the thickness of sediment in which gas-hydrate deposits exist can reach 400 to 800 m. The HFZ in the ocean is found in the deepwater shelf and the oceanic slope in depths of water 200 m or deeper for the conditions of in polar oceans, and from 500 to 700 m or deeper for the equatorial regions. The upper boundary of the HFZ offshore is located near the sea floor.

GHDs occur in two basic forms: primary and secondary. A primary deposit is one that formed and has never melted. Primary deposits are usually found in deep water, where temperatures do not change rapidly overtime. Primary deposits are formed by the gases dissolved in the reservoir water and are located in sediments near the sea floor, which are characterized by high porosity, low temperature and low rock strength. Frequently, a primary GHD does not have Page | 65

Potential of Unconventional Sources of Natural Gas good barriers or seals. The hydrate begins to form in the pore space and eventually plugs the migration paths, which trap more hydrates.

The hydrates can also be the cement holding the rock together. After the decomposition of hydrates, the porous media may revert to an unconsolidated formation. Gas-hydrates in primary GHDs can be found in the dispersed state or in the form of nodules. For a primary GHD, the gas can be found over large areas that do not depend on geology structures.

We can also find free oil or gas under primary GHDs. Secondary GHDs are usually located in the Arctic onshore. They are formed from deposits of free gas located under the impenetrable formation layers (traps) with a temperature decrease in the formation that is lower than the equilibrium temperature for gas of this composition. The temperature in the rock layers on the continents will cycle repeatedly in geologic time. During these cycles, the gas-hydrates in the rocks will form and dissolve as the temperature cycles. Many times, free gas or oil lies under the hydrate layers. An example of this kind of field is the Messoyakha field, which is now is a decomposition stage caused by an increase in the temperature in the deposits. About 2000 year- ago, the Messoyakha was a 100% gas-hydrate field, with no gas in the Free State. The layers are warming, and some of the gas is now accumulating as free gas. Thus, GHDs are always forming and melting over geologic time.

The most promising regions to look for commercial deposits of gas-hydrate are the deepwater shelves, continental slopes and continental abyssal trenches, with water depths from 700 m to 2500 m. However, the most promising resources of gas-hydrates are concentrated in only 9% to 12% of the ocean floor. Rock formations with pressures and temperatures favorable for the formation of gas-hydrates are abundant.

However, in most of the rock, the saturation of gashydrate will be too low to be commercially developed. For example, on Messoyakha only 40 m of hydrate has been identified in the HFZ layers that are 600 m thick. This corresponds to 6.6% of the thickness of the HFZ. In the Nankai Trough offshore Japan, thermodynamic conditions corresponding to formation and stable existence GHD appear in 505 m of overall thickness of the sedimentary rocks. However, only 17 m contains gas-hydrates at reasonable saturations, which is only 3.4% of the total thickness.

The composition of a hydrate is determined by the composition of the gas and water and by the pressure and temperature at the moment of formation. Over geologic time, thermodynamic conditions and the vertical and lateral migration of gas and water will change; therefore, the composition of hydrate can change both with the absorption of free gas by the hydrate and during the re-crystallization of the hydrate. In the cores taken where gas-hydrates have been found, the hydrate usually consists of methane with the small mixtures of heavier components.

However, in a number of cases the composition of the hydrates contains significant volumes of heavy gases. The presence of heavy gases in the composition of a hydrate indicates of the presence of oil deposits in the rock layers underlying the GHD.

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Potential of Unconventional Sources of Natural Gas Measurement (Chlorides) Hydrate formation removes water and gas molecules from the pore space and increases the salinity of the surrounding pore water. Conversely, hydrate dissociation during drilling and core recovery releases fresh water, causing pore water to become fresher. Also, in an open system, the excluded ions diffuse away over time after formation of gas hydrates. Ion exclusion of dissolved salts produces distinctive geochemical signatures that are used to identify the presence of gas hydrate and to estimate the hydrate concentration.

The main challenge for this method is to accurately predict the base line (background) chlorinity profile. It is possible to estimate both the in situ pore fluid salinity and the in situ gas hydrate concentration using resistivity data. The chloride anomaly can be used to estimate gas hydrate saturation in the pore space before recovery. where Clpw and Clsw are measured chloride concentrations of pore water and normal bottom seawater (background), respectively. There are various uncertainties in this method Chloride measurement is performed on core samples extracted during drilling but the core recovery without damaging it, maintaining in situ conditions in laboratory, and finding the right background chloride concentration are some of the difficulties with hydrate concentration estimation with chloride measurements.

Resistivity (Electrical) Gas hydrate, like ice, acts as an electrical insulator. The presence of gas hydrate (or free gas) increases the resistivity of rock. For example, downhole resistivity measurements in the northern Cascadia margin have shown a value of ~ 2.0 ohm-m for hydrate bearing sediments in contrast to a value of ~ 1.0 ohm-m for the surrounding sediments. Assuming that high resistivity above the BSR is caused by the presence of gas hydrate in pores (meaning pores are filled with water and/or gas hydrate), hydrate saturation can be estimated where Ro is the resistivity of water saturated formation (background), Rt is the measured resistivity, and n is the exponent. The exponent is about 1.94 for hydrate bearing clastic sediments and is about 1.62 in gas-bearing zone. For example, if resistivity of hydrate-free sediment and hydratebearing sediment are 1 ohm-m and 2 ohm-m, respectively, the gas hydrate saturation is about 0.30. T he exponent is empirical and can introduce error in hydrate concentration estimates. The critical factor for hydrate concentration estimation using resistivity data is choosing the baseline indicating hydrate free sediments, which is dependent on the pore water salinity. suggest calibrating Archie’s equation using the Hashim-Shtrikman lower bound on electrical resistivity, and modifying Archie’s equation for the presence of clay in hydrate-bearing sediments. Resistivity can be directly measured from well log and estimated from electromagnetic survey. Controlled Source Electromagnetic (CSEM) survey has been recently used for mapping gas hydrate in marine environment.

Gas hydrate dissociation is an endothermic process. Once gas hydrate dissociates, sediment containing hydrate is cooled relative to the surrounding sediment, thus creating a negative temperature anomaly. During recent deep-sea drillings, infrared thermal imaging camera has Page | 67

Potential of Unconventional Sources of Natural Gas been used to image sediment cores and negative temperature anomaly (average 40C cooler) has been identified due to gas hydrate. Thermal method at drilling locations has often been used for qualitative identification of gas hydrates. Among the six methods discussed, some are remote sensing methods (seismic, electrical), and others involve direct measurements from downhole logging (seismic, electrical, NMR-DENSITY porosity, density) and coring (chloride, temperature). Each method (or data type) has its own accuracy, sensitivity and cost issue.

Seismic methods are the most common but the estimated gas hydrate concentration can be less accurate than coring method. Although coring method has certain difficulty such as the core sampling, preserving samples in in situ condition, and making laboratory measurements on core samples, but it provides more accurate prediction of hydrate concentration. Evidently, remote sensing and logging methods are in situ measurements and coring methods require laboratory measurements.

Developing Gas Hydrates Deposits The following properties are used when we devise ways to evaluate GHD: (1) - High acoustic conductivity, (2) - High electrical resistance, (3) - Lowered density; (4) - Low thermal conductivity, (5) - Low permeability for the gas and the water.

We can evaluate GHDs by using seismic data, Gravimetry, measurement of heat and diffusion fluxes above the GHD, and measurement of the dynamics of the electromagnetic field in the region being investigated. The most common method is seismic surveying at frequencies of approximately 30 to 120 Hz with resolution of 12 to 24 m and high frequency. We can use standard 2D seismic to locate the lower boundary of the hydrate-saturated formation by looking for a bottom seismic reflector (BSR). BSRs are caused by free gas underneath the hydrate layer. Unfortunately, 2D seismic surveying does not answer many of the most important questions; in particular, it does not give data about the degree of hydrate saturation of layers.

The results of 3D seismic surveying of high resolution are more informative and make it possible to determine lower and upper boundaries of the hydrate layers. Soon, valuated results of the concentration of hydrate in the rock layer, which makes it possible to determine the amount of gas trapped in GHDs. Detailed evaluation of GHDs is accomplished by combining seismic with well-log and core data obtained from wells. However, much more research is required to perfect this method.

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Potential of Unconventional Sources of Natural Gas To eventually produce gas economically from GHDs, we must determine not the potential gas in place in the GHD, but what amount can be extracted economically. The effectiveness of the extracted resources is determined by geological and thermodynamic conditions, and also by the specific concentration of gas-hydrates in the deposit. To produce the free gas, the GHD must be changed from a solid to a fluid. Thus,wemust use much of the energy contained in the GHD to heating the GHD and the rock layers near the GHD. Primary calculations show that the coefficient of the extraction of the hydrated gas can reach 50% to 75%; however, from total world potential resources it should average from 17% to 20%.

For offshore conditions, with the depths of water from 0.7 to 2.5 km, effective production of gas from GHDs in the majority of the cases may occur when hydrate saturation of the porous media ismore than 30% to 40%. However, each geologic region will have to be studied in details to know the minimal hydrate saturation that will be required. To change GHDs to natural gas, we must decrease reservoir pressure lower than equilibrium, increase the temperature higher than equilibrium or inject active reagents, which facilitate the decomposition of hydrate. The easiest method is to lower the reservoir pressure in GHD; this is the only feasible method when free gas is found below the GHD. Majority of the GHDs are in the supercooled state; that is, the temperature of the hydrate-saturated, stratified layers is considerably lower than equilibrium.

The pressure in GHD, should exceed equilibrium by more than several hundred atmospheres, and strongly increases reservoir temperature.

Seismic velocity is most commonly used to derive gas hydrate saturation. Gas hydrate saturation estimation from seismic velocity is an inverse problem where one tries to find the hydrate saturation for which modeled velocity best matches with measured velocity. Actual calculations are typically done with software/scripts written in a high-level computer language like Java, C, Fortran, Matlab, or Microsoft Excel. Here, we discuss two simple implementation methods of estimating gas hydrate saturation from seismic velocity: using a look-up table or regression analysis (method 1) and a direct estimation method (method 2). The difference between the two methods is in implementation, and the method 1 is more general. The gas saturation is ignored for simplification, but in the case of free gas and gas hydrate coexisting both can be simultaneously estimated. The steps for hydrate saturation estimation in method 1 are: 1) - First create a table of modeled seismic velocity (Vp and/or Vs) using a preferred velocity modeling method for various gas hydrate saturations and given porosity values.

2) - Compute velocity mismatch (difference of modeled and measured velocities).

3) - Look up for the minimum velocity mismatch created in step 2. the corresponding gas hydrate saturation (Sh) represents and estimate of gas hydrate.

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This can be done with Vp only and more reliably with both Vp and Vs simultaneously. The hydrate saturation estimation using method 2 can be simply performed by rewriting the velocity modeling equation for Sh. The method 2 can be used with only one velocity (Vp), modeled with either the time-average equation for Vp (equation 2) or the Wood relation for Vp (equation 3). The equations for estimating hydrate saturation (method 2) using the timeaverage equation and the Wood equation are where Vp is the measured P-wave velocity and Sh is the gas hydrate saturation. In both methods 1 and 2, the common requirements are: the matrix properties, the velocity for hydrate-free sediments (background velocity), and calibration of modeled and measured velocities.

The calibration of modeled and measured velocities is to make sure that for the background case (hydrate-free sediments) modeled and measured velocities are in agreement. In this paper, in method 1 the modeled velocity is calibrated (say by multiplying with scalar1) before computing velocity error and in method 2 the measured velocity is calibrated (say by multiplying with scalar2). Assuming that the background measured P-wave velocity is VPback, and the modeled P-wave velocity (for Sh = 0) is VPsh0, the scalar1 (=VPback/VPsh0) is the ratio of VPback and VPsh0 and the scalar2 (=VPsh0/VPback) is the ratio of VPsh0 and VPback.

The methods 1 and 2 can be simply performed in a Microsoft Excel sheet. Figure 1 shows a data example to compute gas hydrate saturation from Vp alone with both methods 1 and 2. The Vp in this example is modeled with Wyllie’s time average equation (equation 2) for hydrate bearing sediments in the absence of free gas, and assuming clean sand (quartz as mineral). Data in columns A to C are from a well log, column D is background Vp for hydrate-free sediments, column G is various input parameters, column H is background modeled Vp (VPsh0) using the Timeaverage equation, and columns J to DF is a table of absolute velocity difference (modeled calibrated Vp – measured Vp) for various gas hydrate saturations and porosities. The columns M through DE in Figure 1 are hidden. The actual script used to calculate J5 in the table is ABS((1/(C5*$J$3/ $G$7+C5*$J$2/$G$3+C5*$J$4/$G$17+(1-C5)/$G$11))*D5/H5-B5), where

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Potential of Unconventional Sources of Natural Gas D5/H5 is scalar1. The column E is gas hydrate saturation estimated from method 1, and the actual script used to calculate E5 is INDEX ($J$4:$DF$4, 1, MATCH(MIN(J5:DF5), J5:DF5,0))*100.

The column F is gas hydrate saturation estimated from method 2, and the actual script to calculate F5 is (1/C5*(1/(B5*H5/ D5)-1/$G$11)-(1/$G$7-1/$G$11))/(1/$G$17-1/$G$7)*100.

The gas hydrate saturation is calculated for each depth point.

*Gas hydrate saturation estimated from well logs in KG basin with various resisitivity, density and pressure levels.

Note that saturations estimated from methods 1 and 2 are same, and to estimate gas hydrate saturation using method 2 only column H (modeled Vp for Sh=0) is needed and not the velocity error table, however, method 2 can only be used with Vp, and when Vp is either modeled with an equation (the time-average equation or the Wood’s equation in this article) that can be rewritten for the forward computation of hydrate saturation in terms of Vp, density and porosity. It is recommended to use both Vp and Vs simultaneously if available, and in this case one will have to use method 1 to estimate gas hydrate. It is an example of Microsoft Excel scripts to calculate gas hydrate saturation. The estimated hydrate saturation will be different due to differences in 1) velocity modeling methods, 2) background models and 3) mineral/fluid properties.

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Potential of Unconventional Sources of Natural Gas Ministry of Earth Sciences Program Under the aegis of the Ministry of Earth Sciences (MoES), GoI, a comprehensive researchoriented gas hydrates program has been launched emphasizing the scientific and technology development for identifying promising sites on regional scale and estimating the resource potential, studying the impact of dissociation of gas-hydrates on environment, and developing environment-safe technology for production. The National Geophysical Research Institute (NGRI) and National Institute of Oceanography (NIO) are pursuing the scientific objectives for the identification, delineation and evaluation of gas hydrates in various offshore basins. While the National Institute of Ocean Technology (NIOT) is developing remotely-operated vehicles and autonomous coring systems for validating the ground truth, and viable technologies for producing gas from gas-hydrates.

Figures showing locations of seismic profiles (with black lines) along which MCS data have been acquired recently in (a) Mahanadi and (b) KG basins along the eastern Indian margin. The identified BSRs have been marked by white. Red and green lines show the locations of seismic sections that exhibit representative BSRs in second figures.

The National Gas Hydrate Program (NGHP), under the auspices of the Ministry of Petroleum & Natural Gas (MoP&NG), GoI, has also been formulated in which the Oil & Natural Gas Corporation Limited, Oil India Limited, Gas Authority of India Limited, Directorate General of Hydrocarbons, NGRI, NIO, NIOT, Indian Institute of Technology at Kharagpur and Kanpur, and Indian School of Mines are carrying out research for geo-scientific investigation of gas-hydrates along the Indian shelf followed by technology development for production of gas from gashydrates. Gas-hydrates are mainly recognized by seismic experiment with the identification of an anomalous seismic reflector, known as the bottom simulating reflector or BSR, based on its characteristic features. The BSR is a physical boundary between sediments containing gasPage | 72

Potential of Unconventional Sources of Natural Gas hydrates above and free gas-saturated sediments below, and is often associated with the base of gas-hydrate stability field. Hence, theoretical map of gas-hydrate stability zone plays an important role in identifying BSRs on seismic sections.

By analyzing available multichannel seismic (MCS) data, the BSRs were identified earlier in the Mahanadi (Mn) and Andaman (Am) regions. The first scientific expedition using a remotely operated vehicle, recently developed by NIOT, brings out chemosynthetic habitats at a depth of 1017 m and implies the surface expression of gas-hydrates in KG basin (Ramadass et al. 2010).

The drilling and coring by NGHP Expedition-01 (Collett et al. 2008) have validated the ground truth where gas-hydrates were predicted from surface seismic data in the Bay of Bengal. This has boosted to advance further research for the detection, delineation, and quantification of gas-hydrates along the Indian margin followed by a strong initiative for production in an environmental-safe manner.

Data Analysis Major portions of the deep-water regions along the Indian shelf are not fully explored. Most of the MCS data examined so far were acquired for the exploration of conventional hydrocarbons and may not be adequate for evaluating the resource potential and understanding the genesis of gas-hydrates. Under the sponsorship of the MoES, very recently, NGRI has acquired 7500 lkm of 2-D MCS data, using a modern ship equipped with the state-of-the- art acquisition system, between 500 to 1500 m water depth in the KG and Mn basins with a view to identifying new prospective zones, and evaluating the resource potential. The data are of high quality that has produced very good image of shallow sediments in both basins.

The preliminary analysis of recently acquired seismic data delineates widespread occurrences of distinct BSRs over a large area in both KG and Mn basins. BSRs identified along representative seismic lines in these two basins. The gas-hydrates stability thickness map that has been computed theoretically using the available bathymetry, seafloor temperature and geothermal gradient data has helped in identifying the BSRs from seismic sections. As the energy potential of gas-hydrates is tremendous, the recent investigation provides great hopes to overcome the present energy crisis of India.

By employing a suite of approaches for the qualification and quantification of gas-hydrates, newer studies help in (i) Understanding the petroleum system associated with gas-hydrates. (ii) Delineating the extension of sediments containing gas-hydrates. (iii) Quantifying the amount of gas-hydrates in these two basins.

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Potential of Unconventional Sources of Natural Gas Part 6 Tight Sand Gas

The tight gas is considered an established and promising resource because of its inherent association with conventional hydrocarbon systems. Tight Gas is found usually associated with the existing oil fields as missed or bypassed zones or unexplored/unidentified areas in the same field or in a new area which have not been explored at all. It is an unconventional natural gas which is difficult to access because of the nature of the rock and sand surrounding the deposit.

Because this gas is so much more difficult to extract than natural gas from other sources, hydraulic fracturing and directional drilling is necessary to produce the well. With permeability of the rock as little as one nanodarcy, reservoir simulation becomes important to optimize the spacing and completion of staged fractures to maximize yield with respect to cost.

The term tight gas sands refers to low-permeability sandstone reservoirs that produce primarily dry natural gas. A tight gas reservoir is one that cannot be produced at economic flow rates or recover economic volumes of gas unless the well is stimulated by a large hydraulic fracture treatment and/or produced using horizontal wellbores. This definition also applies to coalbed methane, shale gas, and tight carbonate reservoirs. Tight sands produce about 6 tcf of gas per year in the United States, about 25% of the total gas produced. The Energy Information Administration estimates that 310 tcf of technically recoverable tight gas exists within the US, representing over 17% of the total recoverable gas. Worldwide, more than 7,400 tcf of natural gas is estimated to be contained within tight sands, with some estimates as large as 30,000 TCF. Page | 74

Potential of Unconventional Sources of Natural Gas Tight Gas - as known popularly, constitute a huge resource potential contained in the poor quality reservoirs. The only parameter which classifies a reservoir to be tight is its permeability below or equal to 0.01mD. USA with Tight Gas production of 3.8 TCf/a, contributing approx 19% of its total gas production, stands at top. Other countries like Canada, Australia, China, are making strides to include or increase its share into their energy basket. India, despite its sizeable demand supply gap of gas is now taking a concerted and focused approach on this significant resource. A number of cases on tight gas occurrences have been inferred on preliminary investigations. The noticeable perspectives appear to be the Bhuvanagiri Formation(permeability of 0.033mD) and Mandapeta sandstone(permeability of 0.01mD) in the Cauvery and Krishna-Godavari basins respectively both of which are established producers.

The Albian Andimadam sandstone (Cauvery Basin)is texturally immature and a low porosity, permeability reservoir. The Mukta and Bassen formations(Mumbai offshore basin) in the wedge out area appear to be tight. The Wadu pay unit embedded in Mandhali member(lower Eocene), Cambay Basin is also inferred to be tight. Similarly significant gas reserves are likely to be locked up in the tight reservoirs in the Vindhyan Basin. The Jabera well flowed gas at 2000m3/d but reservoirs were found tight because of silica fillings and quartz overgrowth. Many other instances of tight reservoirs in other basins have also been identified holding considerable gas resources. With advent of new technologies which has greatly advanced the exploration, drilling & completion, reservoir engineering and exploitation of tight gas coupled with low cost factors, & higher gas prices has lead to augmented interest in tight gas as favored alternative or complementary resource globally and so in India too.

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Potential of Unconventional Sources of Natural Gas Part 7 Shale Gas 7.1 - Introduction Shale gas is natural gas produced from shale formations. Gas shales are organic-rich shale formations. In terms of its chemical makeup, shale gas is basically a dry gas composed of methane. Various factors which have contributed to its rapid development are mainly advancement in horizontal drilling, hydraulic fracturing, and, perhaps most importantly, rapid increase in natural gas prices in the last several years as a result of significant supply and demand pressures. Shale gas is natural gas produced from shale. Shale gas has become an increasingly important source of natural gas in the United States over the past decade, and interest has spread to potential gas shalesin Canada, Europe, Asia, and Australia. Shale has low matrix permeability, so gas production in commercial quantities requires fractures to provide permeability. Shale gas has been produced for years from shales with natural fractures; the shale gas boom in recent years has been due to modern technology in hydraulic fracturing to create extensive artificial fractures around well bores. Shales that host economic quantities of gas have a number of common properties. They are: *) - Rich in organic material (0.5% to 25%), *) - Usually mature petroleum source rocks in the thermogenic gas window, where high heat and pressure have converted petroleum to natural gas. *) - Sufficiently brittle and rigid enough to maintain open fractures. *) - In some areas, shale intervals with high natural gamma radiation are the most productive, as high gamma radiation is often correlated with high organic carbon content. *) - Some of the gas produced is held in natural fractures, some in pore spaces, and some is adsorbed onto the organic material. *) - The gas in the fractures is produced immediately; the gas adsorbed onto organic material is released as the formation pressure is drawn down by the well.

Shale has low matrix permeability, so gas production in commercial quantities requires fractures to provide permeability. Shale gas has been produced for years from shales with natural fractures; the shale gas boom in recent years has been due to modern technology in hydraulic fracturing to create extensive artificial fractures around well bores. Horizontal drilling is often used with shale gas wells, with lateral lengths up to 10,000 feet (3,000 m) within the shale, to create maximum borehole surface area in contact with the shale. It is natural gas Page | 76

Potential of Unconventional Sources of Natural Gas produced from shale. Shale is a fine-grained, clastic sedimentary rock composed of mud that is a mix of flakes of clay minerals and tiny fragments (silt-sized particles) of other minerals, especially quartz and calcite. Shale gas is defined as a fine-grained reservoir in which gas is selfsourced, and some of the gas is stored in the sorbed state. Sorbed gas is predominantly stored in the organic fraction – so organics are present. Shale gas is not just “shale”. Productive gas shales range from organic-rich to fine-grained rocks. The gas is produced by inducing fracs preferably by water from multilevel completions. The pressures are generally low but the length of production period compensates by volume.

The surging shale gas production in the US and the possibility of replicating this success worldwide holds the potential to revolutionize the global energy market in the future. Recent technological advancements in hydraulic fracturing and horizontal drilling have made shale gas operations economically viable. The widely dispersed shale gas reserves represent the strong potential of shale gas to emerge as a major alternative source of energy globally.

According to the US Energy Information Administration (EIA), it is estimated that the top 33 countries, including the US and India, are estimated to have around 6,622 trillion cubic feet (tcf) of technically recoverable shale gas resources. To put this in perspective, the global natural gas consumption was 113.8 tcf in 2011. The reserves are likely to increase as more regions are explored and evaluated. Based on current reserve estimates and consumption, shale gas reserves could potentially satisfy global gas requirements for the next six decades.

The unlocking of huge domestic shale reserves has transformed the US energy market. The exponential rise in natural gas production in the country has reduced the country’s reliance on imported gas, particularly liquefied natural gas (LNG) imports, to meet its requirements.

According to the EIA, Natural gas prices in the US are at record lows as the surge in shale gas production coupled with lower demand has resulted in oversupply and record high gas inventories. The average price of gas at the Henry Hub has reduced from US$8.8 per mmbtu in 2008 to around US$2.9 per mmbtu in July 2012.7 Natural gas prices in the country have diverged from crude oil prices and gas prices index in other parts of the world. Oil and gas prices in the US have been moving in different directions since 2009, resulting in an increase in the oil-to-gas price ratio. Similarly, gas prices in the US are prevailing at a substantial discount to gas prices prevailing in Europe and LNG prices in the Asia-Pacific region, as they are still aligned to crude oil prices.

India has high potential of shale reserves. According to sources, a comprehensive shale gas pilot project carried out in Damodar Valley Basin, has made an initial gas-in-place estimate of 300-2,100 trillion cubic feet (tcf) in Indian shale gas basins which is around 300 times higher than Krishna Godavari (D6) Basin, by far the largest gas field in the country. In matured Cambay Basin wherein more than 5000 wells have been drilled and initial oil in -place of the order of 1150 million tonnes have already been established. But for the first time, gas has been struck from Shale Reservoir of Middle Eocene section. The paper presents discovery of gas from shale reservoir thereby viewing Cambay Shales not only as cap and source rock but also as reservoir rock. This has opened new frontier for exploration. To put this shale gas resource estimate in some perspective, world proven reserves of natural gas as of January 1, 2010 are about 6,609 trillion cubic feet,6 and world Page | 77

Potential of Unconventional Sources of Natural Gas technically recoverable gas resources are roughly 16,000 trillion cubic feet, largely excluding shale gas. Thus, adding the identified shale gas resources to other gas resources increases total world technically recoverable gas resources by over 40 percent to 22,600 trillion cubic feet.

There is no doubt that shale gas has been successfully developed in North America. Shale gas is a game changer and US with its technological developments and know-how has emerged as a leader in this sector. It is further evidenced by the U.S.-China Shale Gas Resource Initiative and the shale gas accord between U.S. and India. However, blindly emulating their fiscal regime could prove to be difficult and foolhardy. Governments can achieve their fiscal objectives with whichever fiscal system they choose as long as the system is designed properly. And designing a proper system requires identifying the externalities and adapting the fiscal regime around such externalities. The shale gas revolution has contributed to the growth of the US economy by increasing the competiveness of the gasconsuming industries along with creating employment and revenue opportunitiesfor state and federal government.

• Growth of gas-based power plants: Abundant and assured supplies of cheap gas have led to the expansion of gas-based power plants in the country. In the last decade, electricity generated from gas-based plants has increased by more than 50% as power generators substituted coal with gas.

• Drop in electricity prices: Since 2008, wholesale electricity prices has slumped in excess of 50%, resulting in lower electricity costs for residential and industrial customers.

• Lower feedstock costs: US-based chemical and petrochemical manufacturers who use gas as a feedstock have amply benefitted from the decline in input costs. This has given them a competitive edge over players from other regions. In the previous decade, high feedstock prices resulted in many companies moving their operations to the Middle East and Asia. However, the trend has now reversed with many companies, including Exxon Mobil, Dow Chemical and Chevron Phillips Chemical, increasing their investments in the US chemical and petrochemical industry.

• Job creation: The increase in shale gas operations is creating various new job avenues across the country. The shale gas industry is estimated to have provided employment to more than 601,000 workers across the value chain in 2010.

• Key source of government revenues: The shale gas industry is emerging as an important source of government revenues. In 2010, the industry is estimated to have contributed around US$18.6 billion in taxes, including US$9.6 billion in federal taxes and US$8.8 billion in state and local taxes. This revolution has transformed the country’s outlook for energy supplies and has even dramatically altered the trade flow outlook of the global gas market. By 2030, shale gas is projected to account for Page | 78

Potential of Unconventional Sources of Natural Gas around 46% of the country’s total gas production. From being a major importer of LNG a few years back, the US is projected to emerge as an exporter over the next few years. For instance, the EIA had estimated in its Annual Energy Outlook 2006 the US LNG imports to reach almost 334.5 mmscmd by 203014. However, in the latest 2012 outlook, the agency estimates that the country is expected to export 47.6 mmscmd of LNG by 2030. Currently, the regulator has approved only one export terminal (Cheniere’s Sabine Pass terminal).

While a number of new LNG export terminals have been envisioned, their commissioning is subject to government approval. The shale gas success story in the US has resulted in heightened speculation over the potential for shale gas to transform energy markets in other regions. According to the latest estimates by the EIA, Poland (187 tcf) has the largest technically recoverable shale resources in Europe, while China (1,275 tcf), South Africa (485 tcf) and Argentina (774 tcf) lead the resource base in Asia, Africa and South America, respectively. The US, which given its experience of shale gas production, probably has the most accurately estimated resources and accounts for 13% of the global total. Shale gas exploration is currently underway across the globe, with Argentina, Poland and the UK leading the way. Although there is immense potential for developing shale gas reserves worldwide, environmental and social concerns could impact growth prospects.

China has the world’s largest shale reserves, accounting for almost 20% of the global reserves and approximately 92% of the reserves in Asia. The Chinese Government has been taking concrete steps in harnessing its huge shale gas potential. It plans to produce 18 mmscmd of shale gas annually by 2015 and increase production to between 164 mmscmd and 274 mmscmd by the end of 2020.17 In order to develop technical expertise, Chinese NOCs have been aggressively participating in shale gas activities in the US through stake purchases and forming joint ventures.

Global shale gas reserves distribution [>600tcf 599-300tcf 299-100tcf <99tcf Source: US Energy Information Administration] Exploration is currently in progress in several countries in Europe, including Austria, Germany, Hungary, Ireland, Poland, Sweden and the UK. Nearly 57% of the estimated shale reserves in Europe are concentrated in two countries — Poland and France. The need to reduce the region’s dependence on Russian gas supplies and meeting carbon emission targets are the main drivers contributing to shale gas development in the region. However, environmental concerns over hydraulic fracturing have led some European countries to rethink their strategy on developing shale gas reserves. While countries such as France and Bulgaria have banned hydraulic fracturing, others such as the Czech Republic have imposed a temporary moratorium until new legislations are put in place. Argentina accounts for 63% of the reserves in South America. The Argentinean Government is encouraging investments in the shale gas industry to offset the declining conventional oil and gas production in the country and reduce its dependence on imported gas from Bolivia.

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7.2 - Characteristics Some of the widely acknowledged truths about the shale gas industry in general and in India in particular are: a) - The current policy allows the oil companies to only produce conventional oil and gas from their authorised blocks. Since shale gas comes under unconventional gas, any testing or exploration of this gas would be impossible as it is not covered under the licence terms. A separate bidding would have to be set up as any unwarranted windfall would mean flouting the terms and the conditions under the license. b) - The Indian exploration and production sector (E&P) is smaller and less mature compared to the North American sector. c) - Production profile of shale gas sector is steeper and shorter than conventional fuels, i.e. the output of gas will be high in the first few years or so and then will fall steeply. Shale wells might have a life of 8-12 years, compared with 30 to 40 years for a conventional gas well. Even this may be overstated. d) - India lacks the technology and the knowledge required to extract gas from shale and would therefore need major foreign investment and investors. e) - It is difficult to estimate the cost of extracting shale gas: coupled with the use of expensive and specialist technology it should be expensive to develop a shale gas field. However, much of the cost also depends on the geology of the shale gas plays and the number of wells in the same play. f) - The shale gas sector in the United States developed at a fast pace due to the easy and lowcost access to the gas transport network, something India would have to work on as well. g) - Shale gas production in the United States developed largely in areas with low population and therefore disruption to the local community was minimal. In India, shale gas production could face opposition not only from landowners but also from local communities. Another important difference between U.S. and India and indeed every country around the world is that while the surface rights remain with the landowner, the sub-surface rights vest in the Government. Therefore, the government would be auctioning (leasing) blocks to the gas producer. Land acquisition is a state subject, so the fiscal policy would have to set out division of revenues between the Central and the State Government to remove political barriers.

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Potential of Unconventional Sources of Natural Gas Monetary Aspects International companies always compare fiscal regimes of different countries when deciding to invest in the energy sector. Companies always want to recover their costs as soon as possible especially when the shale gas well has a short life. One of the reasons why North America makes such a fascinating study is because the neighboring countries United States and Canada have had such different outcomes to their fiscal regimes. While U.S. has flourished, Canada has stumbled to be as competitive as U.S. The combination of provincial royalty and provincial and federal income tax regimes have failed to protect Canadian taxpayer interests and delivered an artificial financial windfall to investors who can get raw resources out of Canada and into foreign (including US) processing plants, as quickly as possible.”

a) - The fiscal policy should include either a royalty tax or severance tax, apart from corporate income tax. These earnings should be shared between the State and the Central Government to incentivize the state government’s participation in acquiring land. The earnings through tax will also help the Government to improve essential services and infrastructure. However, the Government should also be wary of exceedingly taxing economic rent. Taxes add to the overall cost of doing business and the mind-set of cashing in on the shale gas bonanza could spell doom for investments. b) - Alternatively, the Government could tax corporate income over and above the normal income tax that companies pay for their commercial activities, as has been done in Norway.

Norway phased out royalties completely by 2006. In 1996 Norway figured out that “it was impossible to get the design of royalty regimes right, when ‘right’ means fair to both the taxpayers who own the resource and the private investors who put their capital at risk when invest in partnership with the state.” Now Norway’s sovereign wealth fund earns more from the difference in the corporate income tax that oil and gas companies pay than it did from royalties. The fiscal regime in Norway ensures that the taxpayers lose no economic rent compared to the Canadian fiscal regime. c) - The Government should also tread carefully while considering tax exemptions. A front-end and back-end tax exemption together would eliminate the benefits of severance tax or royalty.

Further, the shale gas plays are most productive in the first year and then production drops sharply. The government take would decrease if there is a tax holiday in the initial years and the risks in earning adequate revenue would increase. d) - The government would also need the money to restore the society and the environment to its preshale gas development stage, to the extent possible. Much like the decommissioning fund that has been set up in several countries to avoid the liability shifting to the State after production stops, the Government should set aside a part of the revenues earned against any claims and liability in the future.

This fund should also be ring-fenced against any insolvency claims. The fiscal policy could also stipulate provision of financial security if there is any doubt of the gas producer defaulting on its obligations.

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Potential of Unconventional Sources of Natural Gas e) - There should only be a back-end exemption for low-producing wells if it is uneconomical for the producers to extract gas from shale. If prices are high, then taxes should be paid.

“Having the lowest royalty burden does not necessarily make a jurisdiction more attractive for investment. The timing of when royalties are paid to governments and maximum royalty rates impact investment decisions; and taxes.” Competitiveness of the shale gas sector should be the primary objective of India’s fiscal regime. There should also be continuous monitoring of the shale gas fiscal regimes of shale gas producing countries around the world to ensure that India’s shale gas sector remains an attractive place to invest.

7.3 - Shale Gas in India

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India has huge shale deposits across the Gangetic plain, Assam, Gujarat, Rajasthan, and many coastal areas. Gas has long been found in shale across the world, but its extraction has been viewed as uneconomic because of shale‘s low permeability — gas does not flow easily through this rock. So, exploration for oil and gas has traditionally focused on limestone and sandstone, which have high permeability.

India contains a number of basins with organic-rich shales, mainly the Cambay, Krishna Godavari, Cauvery, and Damodar Valley basins. There are some other potential reserves such as the Upper Assam, Vindhyan, Parinhita- Godavari, and South Rewa, but it was found that either the shales were thermally too immature for gas or the data with which to conduct a resource assessment were not available.

Shale basins in India are geologically highly complex. Many of the basins, such as the Cambay and the Cauvery, have horst and graben structures and are extensively faulted. The prospective area for shale gas in these basins is restricted to a series of isolated basin depressions (subbasins). While the shales in these basins are thick, considerable uncertainty exists as to whether (and what interval) of the shale is sufficiently mature for gas generation. Shale basins in the Indian subcontinent are geologically complex. The tectonic settings of these basins vary from thrust belts in the north and northeast to rift basins in western and central India respectively.

Shale gas/oil exploration in India is in its infancy, especially when compared to the United States. In India, there are a number of basins with proven shale resource potential that require high-resolution data evaluation to assess their prospectively. Recently, ONGC drilled and completed India’s first shale gas well: RNSG-1 in eastern India. The well was drilled to a depth of 2,000 meters and reportedly had gas shows at the base of the Permian Barren Measure Shale.

Recently, ONGC drilled and completed the India‘s first shale gas well, in northwest of Calcutta in West Bengal. The well was drilled to a depth of 2,000 meters and reportedly had gas shows at the base of the Permian Barren Measure Shale. Two vertical wells were previously tested in the Cambay Basin and had modest oil and shale gas production in the shallower, 4,300 foot thick intervals of the Cambay “Black Shale”. Overall, ARI estimates a total of 290 Tcf of risked shale gas in-place for India. The technically recoverable shale gas resource is estimated at 63 Tcf in India. These estimates could increase with collection of additional reservoir information.

Cambay Basin, India - The upper Paleocene to middle Eocene Cambay Shale is interpreted to be a major source rock in the Cambay Basin. Cambay Shale was deposited in deltaic and nearshore marine environments in the northern and central parts of the basin, and in deeper marine environments in the southern part of the basin. Therefore, this source rock presumably contains greater amounts of type II kerogen southward in the basin. Thermal maturity increases from north to south across the basin. Although the Cambay Shale is in the oil-generation window in the north, it is in the gas-generation window in the south. At the base of the shale, Page | 83

Potential of Unconventional Sources of Natural Gas vitrinite reflectance (Ro) values are greater than 1.1 percent. Total organic carbon contents (TOC) are greatest in the basin depocenters, with concentrations greater than 4 weight percent.

The Cambay Basin is an elongated, intra-cratonic rift basin (graben) of Late Cretaceous to Tertiary located in the State of Gujarat in northwestern India. The basin covers an onshore area of about 20,000 m2. It is bounded on its eastern and western sides by basin-margin faults. It extends south into the offshore Gulf of Cambay, limiting its onshore area, and north into Rajasthan. The Cambay Basin contains five distinct fault blocks, from north to south : • Sanchor Patan (Too Shallow for Shale Gas) • Mehsana-Ahmadabad (Prospective Area) • Tarapur (One Prospective Area) • Broach (Prospective Area) • Narmada (Insufficient Data) Each of these blocks is characterized by local lows, some of which appear to have sufficient thermal maturity to be prospective for shale gas.

Krishna Godavari Basin, India The Krishna Godavari Basin extends over a 7,800 m2 area onshore (plus additional area in the offshore) in eastern India. The basin consists of a series of horsts and grabens. The basin contains a series of organically rich shales, including the deeper Permian Kommugudem Shale, which is gas prone (Type III organics) and appears to be in the gas window in the basin’s grabens. The Upper Cretaceous Raghavapuram Shale and the shallower Paleocene and Eocene shales are in the oil window.

The Upper Jurassic to Cretaceous Raghavapuram Shale and its stratigraphic equivalents are inferred to be the main source rock for much of the Krishna–Godavari Basin. The Raghavapuram Shale was deposited in marginal marine to inner shelf environments, whereas the stratigraphically equivalent Chintalapalli Shale accumulated under bathyal conditions. The shale contains as much as 2.4 weight percent TOC, and its thermal maturity ranges from immature to mature with respect to gas generation. Type III kerogen is most common, but type II is present where the shale was deposited under deeper marine conditions.

Cauvery Basin, India The Cauvery Basin covers an onshore area of about 9,100 m2 on the east coast of India, plus an additional area of about 9,000 m2 in the offshore. The basin comprises numerous horsts and rifted grabens. The basin contains a thick interval of organic rich source rocks in Lower Cretaceous Andimadam and Sattapadi shale formations which overly the Archaean basement. With a combined prospective area of 1005 m2 and an average resource concentration of 143 Bcf/m2, around 43 Tcf of risked shale gas in-place is estimated of which 9 Tcf is considered technically recoverable.

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Potential of Unconventional Sources of Natural Gas Potential source rocks in the Cauvery Basin include shales of the Lower Cretaceous Andimadam Formation and the Lower to Upper Cretaceous Sattapadi Shale and its stratigraphic equivalents (Directorate General of Hydrocarbons, Cauvery Basin, written commun., 2009). The shales are interpreted to have been deposited in marine environments. The Sattapadi Shale contains 2 to 2.5 weight percent TOC and is thermally mature for hydrocarbon generation in deeper parts of the basin. Ro values vary from approximately 1.0 percent to as much as approximately 1.5 percent. Kerogen types are predominantly type III with minor amounts of type II.

Damodar Valley Basin, India The Damodar Valley Basin is part of a group of basins collectively named the “Gondwanas”, owing to their similar dispositional environment and Permian-Carboniferious through Triassic stratigraphic fill. The “Gondwanas”, comprising the Satpura, Pranhita-Godavari, Son-Mahanadi and Damodar Basins, were part of a system of rift channels in the northeast of the Gondwana super continent.

Along with the Cambay Basin, the Damodar Valley Basin is a priority basin for shale gas exploration by the Indian government. In late September 2010, Indian National Oil and Gas Page | 85

Potential of Unconventional Sources of Natural Gas Company (ONGC) spotted the country’s first shale gas well, in the Raniganj sub-basin. The well was completed mid-January 2011, having reportedly encountered gas flows from the Barren Measures Shale at approximately 5,600 feet. Detailed well test or production results are not publicly available.

The geologic model that forms the basis for the assessment of Bombay, Cauvery, and Krishna– Godavari Provinces is that the shales are self-sourced. Gas was generated in Mesozoic and Cenozoic organic-rich shales and filled matrix and organic matter porosity in the same shales.

Evaluations for each of the shale gas systems and areas to be assessed used five criteria: (1) average TOC of 2 weight percent or greater; (2) presence of type I, II, or IIS kerogen; (3) thermal maturity equivalent to at least 1.1 percent Ro; (4) presence of thermogenic gas; (5) net source rock thickness of 15 meters or more.

All five of these criteria must be present at one place to continue with an assessment.

For each of the assessed provinces, the presence of organic-rich shales, the presence of type II in relation to type III kerogen, the potential for matrix storage of gas, and the thermal windows for oil in relation to gas generation are all subject to significant geologic uncertainty.

Consequently, shale-gas accumulations in the United States were used as geologic and engineering analogs in the USGS assessment of these provinces Analog data from U.S. accumulations included estimated ultimate recoveries from shale-gas wells, average drainage areas of wells (cell sizes), and ranges of success ratios.

The results of the USGS assessment of potential shale gas resources in the Bombay, Cauvery, and Krishna–Godavari Provinces of India are listed in table 2. In summary, the estimated mean volumes of technically recoverable petroleum resources are as follows: (1) for the Cambay Shale Gas South Assessment Unit (AU) of the Bombay Province—924 billion cubic feet of gas (BCFG; range, 383 to 1,966 BCFG) and 31 million barrels of natural gas liquids (MMBNGL; range, 12 to 69 MMBNGL); (2) for the Sattapadi-Andimadam Shale Gas AU in the Cauvery Province—1,123 BCFG (range, 444 to 2,660 BCFG) and 39 MMBNGL (range, 14 to 95 MMBNGL); (3) for the Raghavapuram Shale Gas AU of the Krishna–Godavari Province—4,080 BCFG (range, 1,406 to 9,133 BCFG) and 90 MMBNGL (range, 28 to 207 MMBNGL). The ranges of Page | 86

Potential of Unconventional Sources of Natural Gas resource estimates for shale gas reflect the considerable geologic uncertainty in these assessment units.

7.4 - General Methodology for Exploration The shale gas exploration workflow typically starts with observation of gas in the cuttings with the mud. Understanding the extent of shale gas pay with the help of pilot wells, seismic interpretation, and log correlation is important. Quantification of shale gas can be done by adsorption and desorption studies on the cores to measure Langmuir volume and gas content with change in pore pressure. The petrophysical evaluation and reservoir characterization is the backbone of evaluating a shale gas reserve. Various other techniques such as coring methodology, openhole logging, elemental spectroscopy, and lithology identification are essential for understanding the Total Organic Content (TOC) and estimate the production potential. Geomechanical analysis and the study of stress regime help to design well completion, drilling horizontal wells, and selecting appropriate perforation technique. The data gathered during the process, right from drilling to completion and fracturing, can be used to predict the performance of the shale gas production for future using numerical reservoir simulator. The use of horizontal and multilateral techniques in shale gas reservoirs is expanding rapidly.

Hydraulic fracturing stimulation is the most extensively accepted tool used for the development of shale gas reservoirs. This is due to the fact that shale reservoirs have a very tight nature with low permeability and to make them flow at an economical rate stimulation by hydraulic fracturing is necessary. The ultimate aim is to increase the productivity index. This method helps to gain vertical connectivity amongst various gas bearing layers and allow easy connectivity.

The primary differences between modern shale gas development and conventional natural gas development are the extensive uses of horizontal drilling and high-volume hydraulic fracturing.

Although shale gas has been produced for more than 100 years in the United States, the wells were often marginally economical. Higher natural gas prices and the recent advances in hydraulic fracturing and horizontal completions have made shale gas wells more profitable.

Shale gas tends to cost more than gas from conventional wells, because of the expense of massive hydraulic fracturing required to produce shale gas, and of horizontal drilling. However, this is often offset by the low risk of shale gas wells.

It has been a belief that shale releases fewer greenhouse gas (GHG) emissions than other fossil fuels. However, there is growing evidence that shale gas emits more greenhouse gases than conventional national gas, and may emit as much or more than oil or coal. Methane is a very powerful greenhouse gas, although it stays in the atmosphere for only one tenth as long a period as carbon dioxide. Recent evidence indicates that methane has a global warming potential that is 105-fold greater than carbon dioxide when viewed over a 20-year period and 33-fold greater when viewed over a 100-year period, compared mass-to-mass.

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Potential of Unconventional Sources of Natural Gas Screening exploration targets – • Gas in place • Matrix permeability • Determining intervals to frac or drill horizontals • Predicting production rates • Predicting decline rates • Determining drainage areas (spacing units) in thick intervals of shale • Gas producers have no confidence in their Original Gas in Place calculations

Non-Technical Challenges Many companies operating in the upstream gas industry in Asia and Middle East are interested in the outstanding success achieved by the USA and Canadian tight and shale gas producers. It seems almost miraculous that companies can obtain economic gas production rates from rocks with permeability measured in nanodarcies - so low in fact that it is impossible to determine it accurately The companies in this region have now realized that they may be sitting on top of huge untapped gas reserves that had previously been evaluated as sub-economic. But there exist certain non technical issues or regulations which bound them to produce gas from these areas.

Some of the vital issues are as follows: 1. Cost of field development operations.

Cost of drilling and completing in Asian countries is 2.5 to 5 times higher than similar operations in USA and Canada. This may be due to less infrastructure and government support in terms of subsidies.

2. Lack of fiscal incentives and infrastructure.

Unlike the USA and Canada, most countries have so far not offered significant fiscal incentives.

3. Inability to experiment with wellbores.

Reservoir development in western countries is built around the need to experiment with the wellbore - a process of trial and error. But Asian based companies find this concept difficult to grasp. Here much of the engineering is done retroactively, based on the actual performance of the well bore, rather than up-front before the well is drilled.

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Potential of Unconventional Sources of Natural Gas 4. Lack of wellbore-specific information.

In the USA, most states mandate disclosure of substantial and significant information for each wellbore drilled and this information is in turn available on public-access databases. Thus it is possible for operators to compare completion methods and practices for huge number of wells in similar formations. The lack of widely shared information in Asian countries makes it harder for the efficient independent operators to exploit resources.

5. Lack of political will.

There are considerable political differences among many of the countries in this region - so much so that some of the countries have actually been to war with each other in the recent memory. Apart from this corruption, bureaucracy, political instability, and prohibitive customs regulations all mean that operations are often significantly delayed or cancelled altogether.

6. Competition from alternative sources Companies need to face a huge market competition from existing products and also due to the monopoly of gas rich countries.

Indiaâ&#x20AC;&#x2122;s gas demand is limited by its access to gas supplies based on domestic production and imports availability. If India can produce more gas, then it can reduce its coal imports which is environmentally more unfriendly.

Unfortunately, the Indian government has not been able to implement the right kind of gas policies even after the recommendations given by several high powered commissions. The basic requirement for proper gas sector development in India is that the government should allow the market to set the prices as recommended by many gas committees. Why has no company in India explored for shale gas despite several rounds of bidding for exploration blocks in the last two decades? The sad answer is that our exploration policy allows companies to produce only conventional oil and gas from their exploration blocks. If they find non -conventional energy â&#x20AC;&#x201D; such as coal-bed methane or shale gas â&#x20AC;&#x201D; they are forbidden to produce this.

This is because the petroleum ministry regards any non-conventional deposit as an unwarranted windfall for the exploring company, and wants separate bidding for nonconventional energy. For coal bed gas, it has called for bids and awarded exploration contracts in known coal deposits. But gas can also be found in deep coal deposits unknown today. When drilling for oil, Indian companies have already hit thick coal seams deep underground, but not bothered to test these for gas because they would not be allowed to extract it. The same holds for shale gas. When drilling for oil, every company hits shale deposits, but ignores their gas potential since they are not allowed to harness it.

Two changes in exploration policy are urgently needed:

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Potential of Unconventional Sources of Natural Gas • The government needs to come out with a shale gas policy. It should facilitate seismic surveys that can quickly delineate potential shale gas deposits, and then invite bids for exploration.

• All future exploration contracts for oil should permit exploitation of shale gas as well as conventional gas.

Though India possesses significant reserves of natural gas, 38 Tcf in 2009, it still relies on imports to satisfy domestic consumption. In 2009, the country consumed 5.1 Bcfd of natural gas, while producing 3.9 Bcfd. Were India to develop the technically recoverable shale gas resources, it may add an additional 63 Tcf of natural gas to its domestic reserve base. India’s vast resources of shale gas were untapped due to strict government policies and the lack of interest from the industry. However, with the advent of new technologies and the growing energy needs coupled with appropriate market prices make this time right to explore and exploit this resource on equal priority. Reservoir characterization and detailed planning is necessary for success in shale gas exploration. Drilling of horizontal wells and techniques like hydraulic fracturing will increase recovery and economic viability to produce shale gas.

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7.5 - Draft Policy for Exploration and Exploitation of Shale Oil and Shale Gas in India

*) - India has several Shale formations indicating the presence of Shale Oil/Gas. Preliminary estimates suggest that fairly thick sequences with high shale gas potential are extensively present in the oil, gas and coal sedimentary basins such as Cambay, Gondwana, KrishaGodawari on land and Cauvery on-land. Directorate General of Hydrocarbons (DGH) has initiated steps to identify prospective area for Shale Gas exploration and acquisition of additional geo-scientific data. With new exploration technologies, such as multistage hydraulic fracturing or “fracking” combines with horizontal drilling, Production of shale gas has become easier and economic, contrary to the different countries has the potential to bring about drastic changes in composition of their energy basket. *) - A recent study (April 2011) by Energy Information Administration (EIA), USA indicates that there is a significant potential for Shale Gas that could play an increasingly important role in global natural gas markets. The Report assessed 48 Shale Gas basins in 32 countries. India is one of the countries covered in this Report along with Canada, Mexico, China, Australia Libya, Brazil etc. The initial estimate of technically recoverable shale gas resource in these countries 2

(5,760 TCF ), and USA (862 TCF) put together works out to 6,622 TCF. This study has assessed risked gas-in-place of 290 TCF with technically recoverable resource of 63 TCF for 4 out of 26 sedimentary basins in India. In view of the advances made by the USA in exploration and recovery of shale oil and gas resources, MoP&NG has entered into and MOU with the United States Geological survey (USGS). In a study conducted by the USGS in 2011-12, technically recoverable resource of 6.1 TCF has been estimated in 3 out of 26 sedimentary basins in India.

The study also indicates potential for shale oil in Indian basins. Further, process of identification of potential shale oil/gas resources in 11 other basins has also been initiated. *) – Certain issues related to I. Optimal Exploitation of Shale Gas/ Oil requires Horizontal and Multilateral wells and Multistage Hydraulic fracturing treatments of stimulate oil and gas production from shale.

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Potential of Unconventional Sources of Natural Gas II. This may require large volume of water~3-4 million gallons per well (11000 to 15000 cubic metres of water required for drilling / hydro fracturing depending upon the well type and Shale characteristics).

III. The water after Hydraulic fracturing is flowed back to the surface and may have high content of Total Dissolved Solids (TDS) and other contaminants (typically contains proppant (sand), chemical residue occur in many geologic formation, mainly in shale). Therefore, the treatment of this water before discharge to surface / subsurface water needs to be in line with the Central / State Ground Water Authority regulations.

IV. Possibility of contamination of Aquifer (both surface ad subsurface) from hydrofracturing and fracturing fluid disposal and the need for safeguarding the Aquifer. Multiple casing programme (at least 2 casings) will be mandatory requirement across all sub-surface fresh water aquifers. *) - Although there are no specific provisions as on date relating to regulation of the process of hydraulic fracturing, and water injection process as has been provided in the Safe Drinking Water Act (SDWA) brought out by the Environment Protection Agency (EPA) in the USA, the water (prevention and control of pollution) act 1974, has stringent provisions to regulate / prohibit disposal of polluting matters into water streams / wells (section 24-25). As per section 3(J) (iv) of the Act, streams include subterranean waters, which would include Aquifers.

National environment policy 2006 para 5.2.5 (ii) Point (i) action plan states as under: â&#x20AC;&#x153;Suitable sites for dumping the toxic waste material may be identified and remedial measures may be taken to prevent the movement of the toxic waste in the ground water.â&#x20AC;?

Proposed Policy *) - In line with the policy of the Government of India attracting private investment to move towards self reliance in the indigenous production of oil and gas sector, it is important to have a framework to facilitate and regulate Shale Oil and Gas Exploration and Exploitation. This initial technical study undertaken in the country has indicated presence of Shale Gas as a hydrocarbons resource that can be commercially explored and exploited. *) - The offer of acreages under this policy would be made through an open International Competitive Bidding (ICB) process. The successful bidders would be required to enter into a contract with the Government, which will be negotiated based on the Model Contract (MC). *) - Simultaneous Exploration and Exploitation of Hydrocarbons i.e. conventional Oil and Natural Gas, Coal Bed Methane (CBM), tight gas and Shale Oil and Gas from the same contract area by same/ different operators will be governed by the relevant policy of the Government of India. As such, in case of acreage an offer for shale oil / gas overlaps or falls within an existing Oil and Gas Page | 92

Potential of Unconventional Sources of Natural Gas /CBM Block, right of first refusal will be offered to the existing contractor to match the offer of the selected bidder, provided he agrees to al the terms and conditions of the bid. In case they refuse, they will have to enter into a model co development /operating agreement for simultaneous exploration. *) - All areas which are already allotted under nomination /pre NELP/NELP/CBM rounds and where operations have entered the development/production phase shall be excluded from area to be offered for shale oil/ gas exploration.

*) - As financial and contractual regime for conventional oil and gas and shale oil and gas are different, in case of the same contractor operating both the blocks, the policy will be to adequately ring fence the two so that two distinct accounts are maintained, without affecting each other. *) - Assignment of Interest would be permitted, as in NELP. *) - All data gathered during the course of operation shall be the property of the GOI. *) - Safety aspects will be regulated as per existing regulations / OISD guidelines and practices, as in the case of Oil and Gas and CBM operations. New rules / guidelines, whenever notified by competent authority, in this regard, will also become applicable. *) - Ministry of Environment and Forest (MOEF) will prescribed a panel of agencies, competent to carry out the Environment Impact Assessment for the blocks allotted to successful bidder. *) - Govt. of India will seek in-principle approval of the State Governments concerned, for the areas of shale oil / gas blocks, prior to bidding, including facilitation in the matters of land acquisition and water management issues. *) - Govt. of India will ensure all statutory, regulatory and security clearances are obtained before bidding. *) - Exploration of Shale oil / gas will be accordance with the law of the land, including the Water (prevention and control of pollution) act, 1974, Air (prevention and control of pollution) act, 1981 and the overall ambit of environment protection measures.

Fiscal and Contract Terms

*) - The fiscal terms to be offered to the investors need to be adequately balanced in terms of risks and rewards associated with the exploration of shale oil/ gas, being unconventional and cost intensive in nature. It should be globally completive and comparable to terms offered for similar operations elsewhere.

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Potential of Unconventional Sources of Natural Gas *) - Fiscal regime proposed for exploration of shale oil / gas is proposed to be based on royalty and production linked payments, similar to the regime adopted for CBM operations. Advalorem Royally at the prevailing rate for crude oil and natural gas would be applicable to shale oil and gas respectively, and accrue to the State Governments, whereas the production liken payment on ad-valorem basis, will be made of the central government. This is proposed to be linked to different production slabs which will be biddable item. This will minimise Government intervention and remove complications in accounting, and incentive for gold plating, which may occur while allowing profit sharing, based on cost recovery. Government share of production will be net of all statutory dues. *) - A Steering Committee will be constituted under the Contract represented by the Government and the contractor which will decide upon the issue on projects / major work programs, audits and accounts with a view of exploit resources optimally. The Steering st

Committee will be chaired by the 1 Government Nominee. The relevant matters shall be submitted by contractor with the approvals of Operating Committee to Steering Committee.

The District Collector (DC) of the District where the block is situated will be member of the Steering committee, to facilitate the required assistance and coordination from the State Government side. Further, a member of Ministry of Environment and Forest (MOEF) and NEERI may also be included in the committee. *) - As shale gas / oil production is likely to be made in small quantity but over a longer period, it is proposed that the mining lease (ML) may be given for 30 years. Further, extension of ML may be made automatic to all the contractors who do not have any dispute with the State /Central Government, and who do not have any arbitration pending.

Bidding and Approval System *) - Blocks for shale oil /gas would be identified by the MoPNG and the relevant data package and information docket for each block so identified will be made available for interested companies for inspection and purchase. *) - The size of the blocks and sub-surface operational window of depth will be determined by MoP&NG keeping in view the resources â&#x20AC;&#x201C;in-place, the prospectively of shale, location of the resource in relation to human habitations and economics of scale in Shale Gas operation along with other relevant factors. *) - The identified blocks will be advertised for international competitive bidding. Participation of the State will not be mandatory. Requisite promotional exercise would be undertaken to apprise the prospective bidders with the proposed fiscal and contractual arrangement.

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Potential of Unconventional Sources of Natural Gas *) - In addition to the round system of bidding. The Government may adopt Open Acreage Bidding system at any given point of time. *) - Offer of blocks would be open to different categories of investors, i.e. public / private sector and domestic / foreigners. Up to 100% participation by foreign companies and participation through unincorporated Joint Ventures would be permitted; *) - To provide for a transparent bid evaluation system, detail bidding formats would be provided to the interested companies to maintain uniformity in submission of bid documents. *) - Evaluation of bids received by the bid closing date would be done by a team constituted by the MoP&NG, which may include officers having knowledge and experience in technical and financial aspects and fiscal and contractual framework. The report of the bid evaluation committee would be submitted to the MoP&NG.

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Potential of Unconventional Sources of Natural Gas Conclusion NELP has helped in increased and fair participation of private sector, but a separate and independent bidding round is required for the unconventional sources of natural gas, which will help in optimal utilization of resources, as these are not considered practically in the oil and gas exploration blocks. Major oil companies, while drilling for oil and gas, have hit thick structures of coal and shale, but do not show interest in testing and drilling because they are not permitted to do so. A policy that enables oil and gas companies to drill for unconventional oil and natural gas and to extract and produce shale gas along with conventional natural gas. This change may revive old wells too, which have been declared as commercially nonviable and it may also increase the energy capacity of the country. 

The gases also serve as an alternative for cleaner fuel compared to conventional oil and coal.



Acquiring overseas assets for exploring the shale gas structures is very important as it will help the Indian oil and gas companies to gain the technical knowhow and the skills needed to operate the business.



The government’s assistance towards public and private sector companies in importing the shale gas, CBM, Gas Hydrates and Tight Sand Gas extraction technology to India by providing incentives.



Proper development of service capabilities. Customization of techniques and methods used in different parts of world according to the topography, blocks present in India.



However, in case of Shale gas It is necessary to address the environmental concerns regarding the shale gas operations. There are studies going on to understand the environmental and public health impact due to shale gas development in the US. India should use them to shape appropriate regulation.



The fiscal policy could include either a royalty tax or severance tax, apart from corporate income tax. The earnings should be shared amongst the State and the Central Government to incentivize the state government’s role in acquiring land. These earnings through taxes will also help the Government to improve the required services and infrastructure. However, the Government should also be aware of highly taxing economic Page | 96

Potential of Unconventional Sources of Natural Gas rent as it may alter the prospects of the interested companies. While considering tax exemptions or tax holiday, the government should be aware of the fact that the shale gas production is the highest in the initial years before the production starts to fall rapidly.

Hence, the tax holidays should be given at the end stage of the shale gas production, while knowing the life span of the formation beforehand. 

Adequate waste water usage as well as disposal/treatment system which should not affect the nearby habitats and residents if any.



Pricing of gas should be market driven with few clauses in special cases.



Site restoration along with further research.

A favorable regulatory framework should also be devised that will invite companies to invest in shale gas activities. A liberal fiscal regime should be considered for shale gas operations as the industry is still in its early stage of development and the cost of operations are going to be higher than conventional oil and gas operations. For low producing wells over a significant period of time or when the production from any particular field is uneconomical for a producer, then back-end exemption should be followed. If the prices are high, then taxes should be paid to the government. The government’s assistance to public and the private sector oil and gas companies in importing the required shale gas technology to India by providing incentives.

Along with regulatory framework a catalyst and supporting favorable pricing mechanism for developers of shale gas, CBM, Gas Hydrates and Tight Sand Gas operations are required which would allow them to invest and produce natural gas in India and at the same time earn profits from the region. Cost of production in India is likely to be higher, given the relatively unknown and unexplored geological terrain, water disposal costs, inadequate domestic service industry and other expenses. Gas gathering and processing costs are also likely to be on a higher side.

However, operational costs have significantly reduced in the US with the application of new and advanced technology. Lowest royalty burden does not make a jurisdiction more attractive for investment. The timing of when royalties are to be paid to governments and high royalty rates impact the investment decisions. The primary objective of India’s Fiscal regime should be to have competitiveness in the shale gas development.

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As the nature and locations of CBM, Gas Hydrates, Shale Gas and Tight Sand Gas vary separate departments and regional organizations should be framed according to the potential of the resources.

Bibliography and References 1. Bustin, R.M., 2005, “Comparative analyses of producing gas shale”, rethinking methodologies of characterizing gas in place in gas shale Bulletin West Texas Geological Society.

2. Jaffe, Amy M., Hayes, Mark H., Victor, David G. Gas Geopolitics: Visions to 2040.

Program on Energy and Sustainable Development at the Center for Environmental Science and Policy.

3. Chandra, Avinash, 2009, Tight Sand Gas : Potential and Prospects.

4. Ojha, Keka, Coal Bed Methane : Difficulties and Prospects.

5. Magon, Y.K., 2008 Natural Gas Hydrates.

6. The Hindu, 26th Aug, 2010 “India-U.S. shale gas exploration initiatives set to advance” 7. World Shale Gas Resources: An Initial Assessment of 14 Regions outside the United States.

U.S.

Energy

Information

Administration,

April

2011.

http://www.eia.gov/analysis/studies/worldshalegas/pdf/fullreport.pdf.

8. Dizard, John. "The shale gas fairytale continues". 18 July 2010. Financial Times.http://www.ft.com/cms/s/0/9e6c7b40-9103-11df-b29700144feab49a.html?referrer_id=yahoofinance&ft_ref=yahoo1&segid=03058.

9.

Money Control, 29 March 2011 “Shale Gas in India – Closer to reality.

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Potential of Unconventional Sources of Natural Gas 10. Kumar, P.M., 2010, Methods of Estimation of Gas Hydrates, Coal Bed Methane Concentration.

11. Tom Alexander, Jason Baihly, Autumn 2011 “Shale Gas Revolution” Schlumberger 12. Natural Gas Facts. About Oil and Natural Gas. American Petroleum Institute, www.api.org/aboutoilgas/natgas 13. Accenture, August 2010 “Charting Energy’s Future to 2015” 14. Anthony Andrews, Peter Folger, Marc Humphries, Claudia Copeland Unconventional Gas Shales: Development, Technology and Policy Issues, Congressional Research Service Report, October 2009 15. Ben H. Welmaker , Jr., Partner “U.S. Shale Plays” Baker & Mckenzie

16. Kumar, P., Geologic Controls on the Occurrence of Gas Hydrates in the Indian Continental Margin: Results of the Indian National Gas Hydrate Program (NGHP) Expedition 01 17. Memorial Bunn Lecture, 2003, Energy from the Sea. 18. H.R. Challenges in the Indian Oil and Gas Sector, Ernst and Young, 2010.

19. Indian Sub-Continent Shale Resource Plays – Regional Characteristics and Play Modeling, Energy and Geo Science Institute, December 2012 20. GUPTA, H.K. and SAIN, K. (2011) Gas-hydrates: Natural Hazard. In: P. Bobrowsky (Ed.), Encyclopedia of Natural Hazards.

21. CBM Blocks in India (Avinash Pratap, 2010). .

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