The Indian oil and gas industry is heavily dependent on imports. As per data from the Petroleum Planning and Analysis Cell, domestic crude production declined from 6 million tonnes (mt) in April-May 2017 to 5.9 mt in April-May 2018. During the same period, India’s crude imports increased from 36 mt to 37.1 mt. Thus, import dependency of crude increased from 83.5 per cent to 83.8 per cent over the period.
India’s domestic natural gas production increased from 5,302 million metric standard cubic metres (mmscm) during April-May 2017 to 5,392 mmscm during April-May 2018. Liquefied natural gas (LNG) imports also showed an increase from 1.1 mt in April-May 2017 to 1.5 mt in April-May 2018. This significant increase in imports is indicative of the need for increasing domestic production.
As per the Ministry of Petroleum and Natural Gas (MoPNG), India plans to cut its dependence on crude oil imports by 10 per cent by 2022 to ensure energy security. This entails the development of unconventional energy sources in addition to conventional sources. Two such unconventional sources are coal bed methane (CBM) and shale gas.
The government has been providing adequate policy support for this growth. CBM production increased from 94.7 mmscm during April-May 2017 to 125.6 mmscm during April-May 2018. As per data available with the Directorate General of Hydrocarbons (DGH), India holds about 91.8 trillion cubic feet (tcf) of CBM. Till date, four CBM bidding rounds have been undertaken by the MoPNG and 33 blocks have been awarded. Of these, 18 blocks have either been relinquished or are under relinquishment.
India holds about 45 tcf of shale gas in six sub-basins – Jharia, Bokaro, North Karanpura, South Karanpura, Raniganj and Sohagpur – according to the Central Mine Planning and Design Institute. As per policy guidelines, the Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) will carry out shale gas and oil exploration in 50 and five blocks, respectively, for assessment under Phase I. During 2015-16 and 2016-17, ONGC and OIL made an expenditure of Rs 1.99 billion on shale gas exploration.
Policy support and investment scenario
As a gaseous hydrocarbon, CBM is covered under the Oil Fields Regulation and Development Act, 1948, and the Petroleum and Natural Gas [P&NG] Rules, 1959. The CBM Policy, 1997, was the first framework for offering CBM blocks through a competitive bidding process. Subsequently, the cabinet issued a notification in March 2017 and allowed marketing and pricing freedom for CBM extracted from existing blocks. This supportive policy environment along with the freedom to define selling prices has attracted major investments into the CBM industry.
Further, the cabinet issued a notification in April 2018, allowing Coal India Limited (CIL) and its subsidiaries to explore CBM resources under their existing coal mining leases. The notification mentioned that CIL and its subsidiaries would not have to apply for the grant of a licence/lease under the P&NG Rules, 1959, for the extraction of CBM from their coal-bearing areas. This move will enable CIL to freely explore CBM opportunities in areas for which it holds a mining lease. CIL is planning to invest Rs 30 billion for this purpose.
The MoPNG also allowed the exploration of shale in onland nomination blocks by national oil companies (NOCs) in its October 2013 notification, that is, blocks awarded to the NOCs on a nomination basis before the start of the Pre-New Exploration and Licensing Policy (NELP) and NELP production sharing contracts (PSCs). The government released a draft notification in May 2018 to change the definition of petroleum in the P&NG Rules, 1959, to include shale. The proposed amendment is expected to motivate private players such as Nayara Energy and Great Eastern Energy Corporation Limited to explore shale reserves in the country. As per reports, the two companies are considering investments of $1 billion each for shale gas extraction, once they get the licence to explore shale reserves in India.
The way forward
Given India’s considerable dependence on oil and gas imports, it becomes important that the available CBM and shale reserves are exploited in addition to conventional reserves. This would boost domestic production significantly and will also be in line with the government’s vision to reduce import dependency by 10 per cent by 2022.