Petroleum and Natural Gas

Environmentally Clean:

Natural gas as a fuel source is much “greener” than alternative fossil fuels. According to the Environmental Protection Agency (EPA), natural gas produces roughly half as much CO2 as coal and 32% less than oil.

Increased gas utilization is also expected to help India meet its intended nationally determined contributions (INDC) commitments under the Paris Agreement

In addition to emitting lower levels of CO2, natural gas emits far fewer pollutants into the air. For example, burning natural gas produces less than 1% of the amount of Sulphur dioxide compared to coal or oil.

•  Economical/ Cost Efficient:
• • Compressed Natural Gas (CNG) is 40% cheaper than Liquefied petroleum gas (LPG), 60% cheaper than gasoline and 45% cheaper than diesel.
  • A 10% replacement of liquid fuel into gas will reduce India’s import bill by nearly $3billion every year.
• Convenience:
  • Gas is continuously fed into the system so there are no hassles of refilling. Further, it is piped, thus does not require any space to store, hence handling is easy, safe and secure
• Possibility of Energy Independence:
  • A gas-based economy would help India be less reliant on crude oil imports by substituting the use of oil products in industrial and residential applications.
• Improved Access:
  • Gas utilization would also help improve access to electricity and clean cooking for India’s growing population with unmet energy needs.
  • According IEA, 2017, A total of 244 million Indians do not have access to electricity and 819 million do not have access to clean cooking fuel.

Reserves:

India has 26 sedimentary basins covering 3.14 million sq. km of area. About 44 % of India’s total sedimentary basin area is on-land 56% is offshore. Only 22 % of the total area falls under the category “Moderately to well explored”. Exploration efforts have been initiated in 44 % of the area and the balance 34% remains poorly to completely unexplored.

Various Government initiatives:

• India’s quest to increase the share of natural gas in the overall energy mix hinges crucially on two factors:
  • Development of pipelines
  • Hassle free exploration.
• In this regard, the govt. has taken several measures.
• The Hydrocarbon Exploration and Licensing Policy (HELP) is a policy indicating the new contractual and fiscal model for the award of hydrocarbon acreages towards exploration and production (E&P).
• The Government has envisaged developing and expanding the National Gas Grid. At present about 16,788 Km natural gas pipeline is operational and about 14,239 Km gas pipelines are being developed.
• The Pradhan Mantri Urja Ganga (PMUG) pipeline project currently under will provide connectivity to another flagship project, the North-East Gas Grid.
• The Pradhan Mantri Ujjwala Yojana, which aims to provide free cooking gas connections to poor families is also a roaring success.
• Moreover, India is constantly moving to revive the 1,814-kilometre-long Turkmenistan-Afghanistan-Pakistan-India (TAPI) transnational gas pipeline which is in shamble for years.
• The government brought a series of reforms in the Gas sector and as a result investment of more than Rs. 70,000 crores are being made on the East coast very recently.
  • Gas production from the East coast will contribute to Atmanirbhar Bharat by meeting the increasing energy needs of the country.
• The domestic gas production has complete marketing and pricing freedom. All discoveries and field development plans approved after 28 Feb 2019 have a complete market and pricing freedom.

• Government is adopting clean mobility solutions with greater use of LNG (liquefied natural gas) as a transportation fuel, including long-haul trucking. 1,000 LNG fuel stations have been planned across the country.

Lack of infrastructure: India has enough storage capacity of the current state of domestic consumption of natural gas. However, to fill the entire energy bucket, we need to increase energy storage.

Import dependence: Energy consumption in India is growing at 4.2 per cent per annum, which is the fastest among major economies of the world. Presently 52% of our domestic consumption relies on imported LNG. Moreover, the global disruptions in the import supply-chain can wreak havoc as the general hikes in Diesel prices do.

Safety concerns: The global oil and gas market remains vulnerable to a wide range of risk factors, including natural disasters, major technical accidents, and geopolitical tensions among others.

Domestic issues and delays: Petroleum including gas falls under the Union List. Pipeline laying has faced land acquisition challenges due to local farmers’ protest and unviable routes causing major project delays.

Underutilization: GAIL is getting hit over the scarcity of domestic natural gas leading to underutilization of its 11,500 km of the pipeline network. Its network is operating at an average of 47% capacity.

Less-feasible power alternative: Within the power sector, natural gas has received little traction primarily because the per-unit cost of electricity generated by a gas-fired power plant in India is higher than that from fossil fuels such as coal.

Ecological concerns: Offshore drilling operations can possibly affect fish, lead to a build-up of heavy water contaminants, disorient whales and sea life that rely on sonar for navigation and exacerbate the risk of oil spills.

Energy Trilemma: In order to build a strong basis for prosperity and competitiveness, India must balance the three core dimensions of the energy trilemma: affordability and access, energy security and environmental sustainability.

Realising the Opportunity: At present, when the prices are low for importing natural gas, India should take advantage and enter into contracts with the countries rich in natural gas resources such as Iran, Turkmenistan and Myanmar to bring gas to India through pipelines.

• More aggressive and dynamic reforms is what is needed in the field.
• To go ahead, need to reform our whole structure (subsidies) to improve the production.

Putting the producers and buyers in charge: Government should allow the producers and buyers more control of the price. ONGC shall undergo reforms in terms of its marketing and pricing freedom, E-bidding etc.

Alternative: No doubt natural gas is a cleaner fuel but cannot be called a green fuel, that’s why more inclination should be there towards electricity; more dependence on electricity should be there as compared to natural gas or any other fuel.

Government as a facilitator: The government should act as a facilitator and improve quality and quantity of the resources available.

Self-reliance: Infrastructure and facilities should be provided within the country. The import dependence of 55% should be taken on a serious note and should be brought down.

Subsidy in fertilizers: The government should take action accordingly so that fertiliser subsidy goes directly into farmers account and fertilizer industry doesn’t get subsidized so that they too could have their freedom in marketing and pricing.

Extend to the entire gas sector: The policy should be extended to the entire gas sector; the government should move away from administrative price mechanism (APM).

It is evident that clean energy transitions are underway – and it’s also a signal that we have the opportunity to meaningfully move the needle on emissions through more ambitious policies and investments. But the proof of the pudding is in the eating, as governments do play an important role in the growth of the energy sector in any country. Given the fact that the market in India is still nascent, there is always this concern of how effective these measures can be. With domestic production of gas stagnating and consumption growing at a CAGR of 4.5 per cent, there’s still a long way to go for transforming the economy to a gas-based one.

Objective – To prescribe standard procedure to discover market price of gas to be sold in the market by gas producers, through a transparent and competitive process, permit Affiliates to participate in bidding process for sale of gas and allow marketing freedom to certain Field Development Plans (FDPs) where Production Sharing Contracts already provide pricing freedom.

Aim-  to provide standard procedure for sale of natural gas in a transparent and competitive manner to discover market price by issuing guidelines for sale by contractor through e-bidding.

This will bring uniformity in the bidding process across the various contractual regimes and policies to avoid ambiguity and contribute towards ease of doing business.

1. Affiliate companies permitted to participate in the bidding process This will facilitate and promote more competition in marketing of gas. However, rebidding will have to be done in case only affiliates participate, and there are no other bidders.

2. Freedom to the Field Development Plans (FDPs) of those Blocks in which Production Sharing Contracts already provide pricing freedom.

It will deepen following areas:-

• The whole eco-system of policies relating to production, infrastructure and marketing of natural gas has been made more transparent with a focus on ease of doing business.
• These reforms will prove very significant for Atmanirbhar Bharat by encouraging investments in the domestic production of natural gas and reducing import dependence.
• These reforms will prove to be another milestone in moving towards a gas based economy by encouraging investments.
• The increased gas production consumption will help in improvement of environment.
• These reforms will also help in creating employment opportunities in the gas consuming sectors including MSMEs.
• The domestic production will further help in increasing investment in the downstream industries such as City Gas Distribution and related industries.

The Government has taken transformative reforms in the upstream sector with a view to make investment easier focusing on ease of doing business. The Open Acreage Licensing Policy (OALP) which is investor driven acreage auction process, has increased substantial acreages in the country. Government brought a series of reforms in Gas sector and as a result investment of more than Rs. 70,000 crore is being made in the East coast. Gas production from East coast will contribute to Atmanirbhar Bharat by meeting increasing energy needs of the country.

In February 2019, Government implemented major reforms in upstream sector and brought paradigm shift by focusing on production maximization. Acreages under OALP rounds are being allocated based on work programme only in Cat II and Cat III basins.

The domestic gas production has complete marketing and pricing freedom. All discoveries and field development plans approved after 28 Feb, 2019 have complete market and pricing freedom.

Ministry of Road Transport and Highways has allowed use of H-CNG (18% mix of hydrogen) in CNG engines.

A notification for amendments to the Central Motor Vehicles Rules 1989, for inclusion of H-CNG as an automotive fuel has already been published.

Background:

The Bureau of Indian Standards (BIS) has also developed specifications (IS 17314:2019) of Hydrogen enriched Compressed Natural Gas (H-CNG) for automotive purposes, as a fuel.

What is HCNG?

The blending of hydrogen with CNG provides a blended gas termed as HCNG. It can be used in place of gasoline, diesel fuel and propane (C3H8) / LPG and its combustion produces fewer undesirable gases.

Advantages of HCNG:

• HCNG reduces emissions of CO up to 70%.
• Enables up to 5 % savings in fuel.
• First step towards future Hydrogen economy.
• Engines can be calibrated to release lower amounts of NO.
• Engines need minimum modification to run on HCNG.
• Ideal fuel for high load applications and heavy-duty vehicles.
• Better performance due to higher Octane rating of H2.

Disadvantages of using HCNG:

• Determining the most optimized H2/ NG (Natural Gas) ratio.
• It requires new infrastructures for preparing HCNG.
• Many steps need to be taken for commercializing it at a large scale.
• Current cost of H2 is more than the cost of Natural Gas. So, HCNG’s cost is more than CNG.

Shale gas and oil are unconventional natural resources. They are found at 2,500-5,000 metres below the earth’s surface. They are deeper in comparison to conventional crude oil found at 1,500 metres. The process of extracting shale oil and gas requires deep vertical drilling followed by horizontal drilling.

The most common way to extract shale gas is ‘hydraulic fracturing’ (fracking), Shale gas is trapped under low permeable rocks.

Hydraulic Fracturing: Most Common way to extract Shale Gas:

Hydraulic well fracturing (“fracking”) is the process of pumping fluid into a wellbore to create enough pressure to crack or fracture the rock layer. Fractures are created by pumping large quantities of fluids at high pressure down a wellbore and into the target rock formation. The fluid usually contains a “proppant,” like sand, that helps keep the fractures open to allow oil and gas to be produced to the well.

The process requires around 5 to 9 million litres of water per extraction activity, posing a daunting challenge to India’s fresh water resources. Shale oil is an unconventional oil produced from oil shale rock fragments by pyrolysis, hydrogenation, or thermal dissolution. These processes produce synthetic oil and gas which can be used as a fuel or upgraded refinery feedstock

• Shale oil also refers to crude oil produced from shales of very low permeability formations, called as “tight oil”.
• Shale oil is formed by accumulation of mud, silt and organic wastes and, heat & pressure being applied on these biological wastes for millions of years.
• Shale is a fine sedimentary rock that contains high amount of organic matter which can produce a hydrocarbon. But the shale does not have permeability required to extract oil from it. So, processes are required to create fracturing on these rocks to get the gas to the surface.

Shale rock

Shale oil extraction methods:

1. Mined shale oilsare transported to the processing plants, heated to 500^OC, and oil comes out from these rocks.
2. Situ technique:Oil shale is broken by explosion and Kerogen comes out like crude oil from these rocks.

Negative Consequences by using the Shale Gas:

• It requires large amounts of water, on an average, it requires 15,000 m3/well.
• It also requires relatively larger surface area.
• It is bound to impact irrigation and other local requirements.

• In the US, experience out of 260 chemical substances shows that, 58 have been identified to pose a risk to human life and environment, out of them eight are carcinogens and 17 are toxic to freshwater organisms.
• Fracking can cause tremors on the deeper areas of earth

• 25-90% of the fluid is not retrieved and cracks in the shaft are possible, hence there will be a risk of pollution to nearby underground water.
• The instances of underground pollution are reported in US and Canada.
• Fracking has other impacts such as increase in air emissions, including greenhouse gases and seismic activity.

The Government introduced a policy on shale gas and oil in 2013. It permitted National Oil Companies to engage in fracking.

• Under the first phase, shale gas blocks were identified in Andhra Pradesh, Arunachal Pradesh, Assam, Gujarat, Rajasthan and Tamil Nadu.

Even the well-developed western countries like Germany and France and sub-national Governments like Scotland have banned fracking.

Indian households and irrigation thrive on groundwater. Implementation of the fracking processes without a consultative thought through process, especially on ‘water usage policy’, may result in larger issues including water stress, contamination of groundwater, and related health hazards.

But as the process stands today, we are missing an opportunity to comprehensively regulate the fracking process for a sustainable shale gas exploration in India.

As a first step, a sector-specific EIA manual on exploration and production of unconventional hydrocarbon resources may be a good idea.

Table showing EIA Report, 2013 about estimated recoverable Shale Gas resources:

• Methane hydrate is formed when hydrogen-bonded water and methane gas come into contact at high pressures and low temperatures in oceans.
• It is estimated that one cubic meter of methane hydrate contains 160-180 cubic meters of methane.
• Methane Hydrates have been found in KG Basin
• Even the lowest estimate of methane present in the methane hydrates in KG Basin is twice that of all fossil fuel reserves available worldwide.
• the rate of biogenic methane generation in KG Basin hydrates to be 0.031 millimoles methane/gTOC/Day,
• total deposits of methane estimated is around 0.56 to 7.68trillion cubic feet (TCF).