Global Fracking Resources
The U.S. Energy Information Administration (EIA) estimates India has approximately 96 trillion cubic feet (tcf) of technically recoverable shale gas resources and 584 tcf of risked shale gas in place. The U.S. Geological Survey, however, estimates there are only 6.1 tcf of technically recoverable shale gas reserves in 3 out of the 26 sedimentary basins located in the country. India’s state-owned Oil and Natural Gas Corporation (ONGC) estimated that India’s Cambay, Krishna-Godavari, Cauvery, Ganga-Assam, and Assam-Arakan basins contain 187.5 tcf of shale gas.
The Ministry of Petroleum & Natural Gas has commissioned a Multi-Organization Team (MOT) to reassess previously identified basins in light of new information private companies have generated under the country’s oil and gas privatization initiative. The MOT was scheduled to complete its assessment by March 2016; however, the effort remains in progress as of September 2016. Additionally, the Ministry has approved a five-year appraisal of 1.5 million square kilometers across 24 sedimentary basins where no geological data is yet available. India’s state-owned ONGC and Oil India Ltd. (OIL) will perform the geological studies from 2015 to 2020, gathering the results under the Directorate General of Hydrocarbons.
India is expected to face a significant shortfall in natural gas production versus demand in coming years. The EIA projects that India’s natural gas consumption will grow by 1.5% annually between 2010 and 2020. Natural gas production, on the other hand, is expected to fall by 1.1% annually over the same period. Ernst & Young has predicted that India will import 47% of its total natural gas supply in 2016-17, while India’s Ministry of Petroleum & Natural Gas reported that it imported approximately 33% in 2014. India imports most of its gas as liquefied natural gas (LNG) under long-term contracts with Qatar.
While there is significant incentive for India to pursue its shale resources to help make up for this projected shortfall, the country faces several significant challenges. First, India does not possess significant, accessible supplies of clean water resources necessary for hydraulic fracturing operations. India also lacks a well-established gas pipeline infrastructure. Land availability is also a potential obstacle. India has a high population density, so the acquisition of land for shale gas exploration will be problematic, particularly given that, unlike in the U.S., landholders in India do not have the right to mineral resources below the surface. There are a number of other difficulties in acquiring land, such as bureaucracy and public demonstrations. For example, in March 2007, protestors opposing the taking of agricultural land in Nandigram, where ONGC planned to drill an exploratory well, were fired on and more than a dozen were killed. Additionally, the cost of drilling in India (and other Asian countries) is reportedly 2.5 to 5 times higher than similar operations in North America, primarily as a result of inadequate infrastructure and limited governmental support. Finally, due to limited historical oil and gas exploration and production in India, there is limited geological data available, which means that considerable investment in surveying will be needed before companies are able to find suitable shale plays. As described above, certain government efforts are already underway to obtain additional geological data necessary to proceed with shale development.
Source: U.S. Energy Information Administration: Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States (June 2013): https://www.eia.gov/analysis/studies/worldshalegas/archive/2013/pdf/fullreport_2013.pdf
Statutory and Regulatory Framework
In September 2013, the Cabinet Committee on Economic Affairs approved a shale oil and gas exploration policy, pursuant to which the Ministry of Petroleum & Natural Gas promulgated implementing regulations in October 2013. The policy permitted the two state-owned companies, ONGC and OIL, to develop 175 and 15 blocks, respectively, in three assessment phases. By the end of 2014, ONGC had only drilled one shale gas well and no shale gas was commercially produced in India. However, the announcement of additional plans to proceed with exploratory wells in various locations across the country in 2016 suggests a renewed effort to exploit India’s shale resources.
As of late 2014, India had not yet allowed private companies to develop the country’s shale gas resources. In January 2015, Petroleum Minister Dharmendra Pradhan announced that India may begin to license resource development blocks under a new Uniform Licensing Policy (ULP) that would, among other things, allow private companies and joint ventures to develop shale gas. In November 2015, the Petroleum Ministry released a consultation paper proposing and soliciting comments on the ULP, certain policies regarding natural gas pricing, and an Open Acreage Licensing Policy (OALP). The OALP would allow parties to submit bids for areas of their choice, rather than blocks the government selects. The consultation paper indicates that the proposed policies, together with the government’s September 2015 approval of the auctioning of 69 conventional oil and gas blocks to private and foreign companies, represents “a framework of progressive deregulations in the hydrocarbon sector.”
In March 2016, the government approved the Hydrocarbon Exploration and Licensing Policy (HELP) to implement these measures. HELP implements:
- A uniform license allowing exploration and production of all forms of hydrocarbon (conventional as well as
unconventional oil and gas resources including CBM, shale gas/oil, tight gas, and gas hydrates);
- An open acreage policy to allow companies to choose blocks from designated areas;
- An easy to administer revenue-sharing model whereby the Indian government will receive a share of the gross revenue from the sale of oil and gas resources; and
- Marketing and pricing freedom for the crude oil and natural gas produced.
In June 2016, the Indian government auctioned off 48 “small and marginal oil and gas blocks” that were the first to be allocated under the new revenue-sharing contracts. Nonetheless, the government is in the process of developing additional policies and guidelines to implement the HELP, and many operators are waiting on these details before fully pursuing the development of shale reserves.
Last updated September 2016.