Energy security: exploring a new source

By Roopen Roy Oct 09 2012

Tags: Op-ed

It has happened in the last decade but not ma­ny have noticed. The US is now more secure in its energy supplies than ever before. Did they achieve it by tapping renewable sources of energy like solar and wind power and by becoming a more fuel efficient society? A bit of that surely, but not much. The new source of energy, which is a large piece of that delta is shale oil and gas. In the US today, a full 17% of its energy needs are met by “shale”.

What is shale energy? It refers to natural gas that is trapped within shale formations. Shales are fine-grained sedimentary rocks that produce petroleum and natural gas. Are we missing something in India? Chudamani Ratnam, former chief of Oil India, has consistently cl­aimed that India has a reserve of shale energy in Arunachal Pradesh and ot­her parts of the North-east. According to his estimates, the deposits are capable of producing 140 million to­nnes per year for 100 years, making India a net oil exporter. Now that is indeed a big idea worth exploring. But wait! There are dozens of difficulties and challenges.

However, there are challenges. At the heart of extraction of shale energy is a new technology called “fracking”. The US significantly reduced the cost of extracting shale energy by using fracking, wh­ich basically involves horizontal drilling coupled with injection of high pressure water, sand and chemicals. The “fr­acks” open the shale and allows gas to flow. Shale energy will supply about 30 per cent of US needs by 2020.

Today, India is the fourth largest oil and gas consumer in the world after the US, China and Japan. According to the data of the government of India, the nation’s share of crude oil and gas in primary energy consumption is about 40.3 per cent, that is second to coal, which is meeting 53 per cent of the total requirements. We import a large part of this consumption. With the fluctuating dollar, volatile international prices of energy and the ever-increasing demands in India – the imperative for finding new sources of energy to bring a modicum of stability and certainty in our energy scenario planning has never been greater.

A second important economic and political dimension to this alternative source of energy is its concentration in the North East and East. Yes, these regions have security issues. But here is an opportunity to turn adversity into triumph. Leveraged wisely and developed thoughtfully, it could create a burst of development in the backward regions restoring balance to our regional growth and prosperity. Lack of development and poverty, have been the breeding grounds of political unrest.

But there are significant environmental risks that need to be addressed, managed and mitigated. What are these risks?

First, fracking can lead to contamination of groundwater as a result of spills, faulty well construction and inappropriate disposal into underground injection wells.

Second, fracking may ca­use unacceptable levels of emissions into the air of methane, volatile organic co­mpounds, hazardous air pollutants and greenhouse gases. Third, we need plenty of fresh water and precipitation. The use of large volumes of surface and ground water in the fracking process may place unacceptable burdens on our limited water resources.

Fourth, there is a concern on how we treat the wastewater. The wastewater associated with shale gas extraction can contain high levels of dissolved solids, fracturing fluid additives, metals and radioactive materials.

Our scientists ought to st­udy these issues. The US Co­ngress has directed their Environmental Protection Ag­ency (EPA) to conduct a study into the potential impacts of fracking on drinking and gr­ound water. A first report of results is expected by the end of 2012, with a final report to be released in 2014.

But shale energy can be a big solution to a critical problem. It is worth investing research and venture money to overcome the hurdles. India has taken the first two steps. As a first step, we are investing into companies abroad with shale assets. Public sector companies Oil India and Indian Oil Corporation, announced on October 4 this year, the acquisition of a 30 per cent stake in Houston-based Carrizo Oil & Gas’s liquid rich shale assets. The companies will not be able to bring the hydrocarbon from the asset to India immediately. Exports to India would depend on whether the US decides to keep India outside the purview of free trade area/non-FTA framework but one is optimistic. ONGC is seriously looking at shale energy sources both outside India and within (their first discovery has been in Durgapur, West Bengal).

As a second step, we are stepping up exploration. Our prime minister has already announced that, “The mapping of India’s shale gas resources has been undertaken and we are working to put in place a regulatory regime for licensing rounds by end 2013.” We will open the biddings in 2014.

There is a need for our scientists, technologists, environment experts and every stakeholder to look at all the issues in a holistic way. But turning away from shale as a source of additional energy does not seem a sensible option.

(The writer is Managing Director of Deloitte

Consulting, India. These are his personal views)