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Shale in India - Exploring Its Potential & Challenges That Lie Ahead

The 6 Keys To Securing India’s Oil Future

Gaurav Agnihotri
Contributor: Gaurav Agnihotri
Posted: 02/05/2014

With rapid strides in the field of unconventional oil, new oil and gas technologies and IT solutions, countries world over have started taking effective measure to safeguard their energy needs as the crude oil prices and its availability have been highly volatile in past few decades.

As per International Energy Agency (IEA),
India, Chinaand west Asia will account for 60% of the world’s total energy demand by 2035. So what does this mean for India?

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The nation is currently amongst the top 5 oil consumers in the world with a consumption of more than 3mb/day and is currently importing about 80% of its total crude oil requirement.

READ MORE: Decoding The Myth Of Oil Pricing - With An Indian Perspective

Apart from intensifying its exploration and production activities in India and abroad some of the other steps that India needs to take to secure a safe future with respect to the availability of oil are:

1. Improve the recovery factors for existing reservoirs

Out of the total oil in the reservoir only 40% is extracted through the primary and secondary recovery techniques. Enhanced Oil Recovery (EOR) technology is specifically designed to extract the remaining immobile oil trapped in the reservoir.

Oil and Natural Gas Corporation of India (ONGC) has recently approved an Enhanced Oil Recovery project for its Rajasthan fields along with Cairn India which holds 70% in the Rajasthan block. The proposal is pending approval from the Directorate General of Hydrocarbons (DGH).

2. Promote exploration and production of shale oil and shale Gas : A great alternative to the conventional crude oil

The Directorate General of Hydrocarbons (DGH) had identified the prospective areas for Shale gas exploration and found several shale formations in Cambay, Gondwana, Krishna Godawari and Cauvery Basin. As per EIA (Energy Information administration), India has approximately 96 trillion cubic feet (tcf) of recoverable shale gas reserves.

India has taken some early steps by introducing a Shale gas and oil exploration policy in September 2013. As per the policy the national oil companies (NOCs) like ONGC and Oil India Limited will be initially permitted to explore for Shale from the on land blocks awarded to them before the New Exploration Licensing Policy (NELP) of 1999.

They are permitted three assessment phases for a period of three years and the royalties and taxes will be the same as for the conventional production in that particular area. The private companies like Reliance Industries Limited and Cairn India are currently kept out of this. A huge amount of water required for shale extraction (about 4 million gallons per well) could however pose a challenge for the nation.

India need to effectively tap the tremendous Shale potential as it can reduce the import dependence of Oil and Gas (India import nearly 80% of its crude oil requirement currently) and reduce the import bill.



3. Increase the pipeline network and minimise spillage of oil

In 2011, approximately 48% of the total crude oil was transported through pipelines. Companies such as Hindustan Petroleum Corporation Limited, Cairn India, Oil India Limited and Bharat Petroleum Corporation Limited have invested heavily in the expansion of pipeline networks across the country in recent times.

READ MORE: The 10 Biggest Oil Spills In World History

4 .Build smarter refineries with higher complexity

India today has become one of the top contributors to the growth of the refining sector. From just one refinery in 1947 to more than twenty refineries with a combined production of more than 200 million tonnes of oil per year, the country has come a long way. The amount of crude oil processed by refineries in India in 2012 stood at around 4.1 mb/day.

LEARN MORE: A Brief History Of Oil

The private refineries of Reliance Industries Limited and Essar Oil Limited located in Jamnagar process more crude oil than any other single location in the world. However, if the rate of consumption of petroleum products increases by 5% annually, then within the next 10 years the demand would stand at 4.8 mb/day.

India, therefore, requires more refineries in order to meet the growing demand in the coming years. The new refineries should be more complex (Nelson Complexity Index) with cracking and coking units capable of processing sour and lesser expensive crudes. There is also a need to upgrade the existing refineries for obtaining better ‘Gross Refining Margins’. India is currently a net exporter of refined products, but the numbers can still improve.

5. Utilize the country's vast skilled manpower

India has a vast skilled manpower resource as more than 50 % of its population is less than 25 years of age. Oil and gas companies based in India must hire young as well as experience graduates and impart them with the necessary technical and managerial skills. Emphasis needs to be given to research and development, in which the country is lagging behind China.

In 2011, the number of domestic workforce serving Oil and Gas Industry stood at 141929. Out of this total manpower resource, the majority were employed in marketing sector followed by E&P (exploration and production) and Refining sector.

6. Issue clearances within the time lines and introduce better policies and data

One of the biggest hurdles that Oil companies today face is getting ‘clearances’ from many agencies and ministries of India. In fact, progress in exploration work of over 50 oil blocks awarded under NELP has been slowed down due to pending clearances.

Moreover, the crucial data pertaining to the nation’s hydrocarbon reserves is currently not available. Sources state that the Directorate general of hydrocarbon is geared up for generating a ‘National Data Repository’ (NDR) by 2015.

This data would be crucial for
oil & gas companies. Also, the oil ministry of India is planning to introduce ‘Open Acreage Licensing Policy’ (OALP) where the companies can apply for exploration permits at any time of the year, unlike the current NELP.

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Gaurav Agnihotri
Contributor: Gaurav Agnihotri
Posted: 02/05/2014