Author : Sunjoy Joshi

Originally Published 2013-05-04 00:00:00 Published on May 04, 2013
Difficult basins with poor prospects like the kind in India will never be explored or developed under fair-returns-cost-plus regimes. Successes such as those of Lundin in Norway or Cairn in Barmer do not come to the faint-hearted.
Drilling deep for success
This month, the possible start of production at the Johan Sverdrup oilfield off the Norwegian shore was cheered in the international press. In 2010, the Swedish Lundin Petroleum had announced that year’s biggest discovery here. Significantly enough, Lundin found oil less than three metres from where the French explorer Elf Aquitaine, now part of Total, had drilled but failed miserably in 1971. We recall something similar happening with Cairn in Barmer, Rajasthan some years ago. Spectacular success after repeated failure is no stranger to the oil and gas industry. If companies take the risk of successive failure and go on sinking millions of dollars tirelessly to make discoveries that only bear fruit eight to ten years later, it is because success when it comes brings the promise of untold fortune. With deep water wells costing over 70 million dollars each, it is only this kind of success that will drive a company to take the extreme risks involved. These are important lessons for policy makers in India that the public must also learn. The country has substantial conventional gas resources stranded in inaccessible and poorly serviced areas such as the North-East. A desperate ONGC has been trying everything from setting up power plants to now signing up for fertiliser plants so it can monetise its gas assets in Tripura. Then there is the difficult frontier of the deep waters where there are literally hundreds of exploratory wells still waiting to be drilled. Given that we have over three million square kilometers of sedimentary basins waiting to be explored, why are we hearing vague assurances about a new shale gas policy? Should not our first priority be to tackle the myriad issues that have arisen in the development of our conventional oil and gas resources; and second, to address the poor state of infrastructure that can get these resources to consumers? Yet, in the frenetic pace of activity that the government hopes will be mistaken for action, it tries to sell new dreams as it chases fresh mirages. Struck dumb by a US shale bonanza which makes that gas guzzling economy dream of energy independence, we feel we must at least put up a pantomime for a show. But for just a moment, let us stop the pantomime and do a quick reality check. Experts have ample reason to believe that Indian shales are not as prolific as the US, China or even Europe. The problem with Indian shales may be their permeability characteristics which are very different from US shales. Current fracking technologies are designed for rigid and brittle shales, rich in organic material and therefore gas. Indian shales may be younger and more likely to be soft and ductile in comparison to these older shales. Physical characteristics apart, most of the resource in the US is in areas with very low intensity of land use - the US has the luxury of the Appalachians. In India, shale resources are found in agriculture intensive areas. In any case, unlike the US where all mineral rights vest with the property owner, we know Indian laws pertaining to ownership of below ground resources lend themselves to inevitable conflicts between landowners, the state and mining companies. Not to mention that fracking has its opponents too - the most vocal being environmental groups who have been constantly attacking industry for polluting ground water resources with fracking chemicals leaching into it. Yet, for all the noise from environmental groups, the US faces few constraints on water availability in prospective areas. Water stress in shale areas in India, on the other hand, is bound to end in an intense battle for both water and land resources. Add to these the Kafkaesque maze of multiple agencies with fickle guidelines which cannot match the fast track procedures and approvals that have led to the shale gale in the US. When we put our ears to the ground, we sense a policy environment in a turmoil of seismic proportions. A government battered and bludgeoned by the CAG frenetically goes about setting up committee after committee to revisit and revise exploration policies. Meanwhile, as first oil and now gas imports mount, a skyrocketing current account deficit all but threatens to push the country back to the early nineties. But can there still be some light at the end of this tunnel? After years of dithering, a recent "decision" merely to allow exploration to continue in mining lease areas has led to two quick discoveries - one in Barmer and the other in KG-D6. Considering that mining leases last for 25 years, why should it have been any other way in the first place? Was the country by law required to lock up its treasures and hide the key for 25 years? The point is that there may be many more such still waiting. But can the momentum be continued? Difficult basins with poor prospects like the kind in India will never be explored or developed under fair-returns-cost-plus regimes. Successes such as those of Lundin in Norway or Cairn in Barmer do not come to the faint-hearted. But then, as we have seen in the needless restrictions imposed on allowing exploration in mining lease areas, have we cornered our policy makers into become too tight-fisted? In which case we might as well send all remaining exploration companies packing. Lock away the pot of gold at the end of the rainbow and there will be no worthwhile explorers left to take the risks. (The writer is Director, Observer Research Foundation) Courtesy: The Times of India, May 4, 2013
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Sunjoy Joshi

Sunjoy Joshi

Sunjoy Joshi has a Master’s Degree in English Literature from Allahabad University, India, as well as in Development Studies from University of East Anglia, Norwich. ...

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