Grand Theft Geology- Report Indicts Reliance Of Pilfering Gas From ONGC Reservoir

Paranjoy Guha Thakurta explains in a detailed article the shenanigans and the disputes over the exploitation of natural gas in the Krishna Godavari basin.

The Krishna-Godavari basin offshore Bay of Bengal composed of Late Mesozoic to Cenozoic deltaic-marine sequences has rich natural gas reservoirs  . Reliance Industries as well as the public sector ONGC are exploring and producing natural gas from adjoining areas. Turns out that in one area the underlying reservoirs are continuous, and ONGC suspected a couple of years ago that Reliance Industries realizing this geological situation drilled wells very close to the common boundary of the blocks. As a result of producing these wells as much as 11 billion cubic meters (bcm) of gas has flowed from the reservoir under ONGC controlled areas into Reliance control. Out of that, Reliance in an unauthorized manner, has sucked out 8.9 bcm of gas worth about Rs 11,000 crore  (~ $1.7 billion).

If fact, the large migration of gas from ONGC controlled reservoir into Reliance controlled reservoir means that it would no longer be economically viable for ONGC  to develop this particular field.

That is the finding of an independent consultant DeGolyer and MacNaughton (D&M) based out of Dallas, Texas, in the US, which was hired to submit a technical report on the ONGC claim which Reliance had disputed.

ONGC has also taken the Government of India to court, naming the Ministry of Petroleum and Natural Gas (MoPNG) and the Directorate-General of Hydrocarbons (DGH) as respondents accusing these agencies of failing to be vigilant in taking precautionary measures.

ONGC claimed in its writ petition:

Pertinently, four wells have been drilled by Respondent No 3 (RIL) within distances ranging within 50 m (metres) to about 350 m from the blocks of (the) petitioner (ONGC) and wells have been so drilled and constructed that there is a pre-planned and calculated slant/angular incline towards the gas reserves of (the) petitioner with a clear idea to tap the same.

According to ONGC, its nomination block, Godavari PML (G4) and discovery block, KG-D5 under the New Exploration Licensing Policy (NELP)-1 are contiguous to the RIL-operated NELP-1 block KG-D6. The public sector undertaking (PSU) had said that it wanted a “truly independent” agency to examine its contention that the Mukesh Ambani-led RIL may have drawn natural gas worth up to Rs 30,000 crore from ONGC’s fields adjacent to the ones in the KG-D6 block where the contracting company controlled by RIL operates.

all this does not reflect well on a government eager to invite foreign investments and collaboration-

Sarma is correctly of the view that management and enforcement of contracts are crucial to good governance in any sector, including the oil and gas exploration industry where the natural resources extracted are not just high in value and also critical to the country’s energy security. A flawed and inadequate PSC between RIL and the MoPNG has been greatly responsible for many of the problems that have been encountered during the exploration and extraction of gas from the KG basin. In the case of alleged theft, the management committee, which included representatives of the ministry, apparently acquiesced in whatever RIL did, and the contractual provisions for joint-management of the gas fields and imposition of penalties were never invoked. This, Sarma points out, does not augur well for a country that is aggressive inviting foreign investments, including investments in the oil and gas industry.

It should also be noted that government-owned companies like ONGC are expected to function independently and safeguard the interests of the shareholders, which include the people of India. The two really “independent” former directors of ONGC persuaded the corporation to approach the Delhi High Court but the ministry under Moily tried to prevent this from happening—it is truly ironic that the government as the major shareholder of ONGC should actively work against its interests and try and cause harm to itself.

The entire article is worth reading.

.. and more on the troubled involvement of Reliance Industries with natural gas exploitation in the Krishna Godavari basin .

Rigged: The Slow Decline Of India's National Oil Company

This article came out last year but I came across it today via twitter. In Caravan magazine Krishn Kaushik  writes about India's flagship oil  company the Oil and Natural Gas Corporation Limited and its failure over the years to live up to its mission of finding and producing fuel for the country.

This failure has many causes as Kaushik explores- institutional inertia is one important one, government interference in company functioning is another. But there are also a host of private interests trying to exploit the company's wealth. Reliance comes under particular criticism for its alleged manipulation of the bidding process.

Here is one example:

Things only got better for Reliance with the introduction of the New Exploration Licensing Policy. The former ONGC director told me that during his tenure under the NELP regime, both the Directorate General of Hydrocarbons and the petroleum ministry—then headed by VK Sibal and the Congressman Murli Deora, respectively—made at least three unconventional decisions that disadvantaged ONGC and awarded contracts to Mukesh Ambani.

Bids for oil and gas blocks are given points according to various criteria, he explained. One of these is meterage, the depth of the wells a company offers to drill. In principle, the deeper the better—but every hydrocarbon field has a natural “basement,” based on its geological ability to retain hydrocarbon fuels, beyond which it doesn’t make sense to go. In the Cambay Basin, the director said, “everybody knows that the depth cannot be more than 3,500 metres.” But Reliance “bid 5,000 metres stroke basement”—whichever came first. “They got marks for 5,000, whereas ONGC couldn’t write more than 3,500 because we knew we would hit the basement below that.”

There are also points for how much territory a contractor will explore with three-dimensional seismic surveys. In another NELP round, Reliance offered to survey more than the total area of the block on offer, the director claimed. “So they got marks on that.”

There are also allegations that Reliance is  sucking out natural gas from adjacent blocks under ONGC control in the Krishna Godavari offshore basin. ONGC has taken the government to court over this! .. and the list goes on..

Between all these shenanigans is a bizarre episode of how Russian geologists helped discover Mumbai High,  India's biggest off shore oil field-

Discussing its aleatory nature, Sunjoy Joshi, the director of the Observer Research Foundation, a Reliance-funded think tank, told me a story he heard from Subir Raha, a former chairman and managing director of ONGC. “I don’t know if there is any record of this story,” Joshi said, before relating how Raha, who died in 2010, used to say that the Russians had been engaged to do the surveys far out to sea, “where geologists thought there was better possibility of finding oil and gas. But they had to justify coming to the shore more and more often, to screw all the girls in Kamathipura,” Mumbai’s oldest and largest red-light district. Moving their operations closer to land, they eventually found India’s most prolific oil field to date. “The discovery of Mumbai High,” Joshi continued, chuckling, “owes a lot to those poor women.”

Its a long read but well worth it.

India Energy Report- Some Rambling Thoughts

The latest from the U.S. Energy Information Administration. For those who follow the energy sector, nothing terribly new here, but it is a useful document to keep bookmarked for quick reference.

Meanwhile, Swaminathan Aiyar takes an optimistic look at the future of methane hydrate deposits which he thinks can provide significantly to India's energy needs. These deposits are formed when methane is trapped within a crystalline cage of water molecules. They occur in cold deep sea sediments and also onshore in permafrost settings.There are estimates that resources in sediments in India offshore basins on both the west and east coast may be around 1800-1900 trillion cubic meters.

My take is that whatever the estimates, we may be decades away from successfully exploiting them. Of more relevance over the short to medium term is onshore shale gas. Estimates for those vary wildly from an earlier EIA estimate of about 63 trillion cubic feet to a revised USGS estimate of only 6-7 trillion cubic feet to a figure often quoted in the India media of about 500 trillion cubic feet to 300-1200 trillion cubic meters! These disparate estimates only underscores the need for a more detailed exploration of Indian sedimentary basins.

Some Good Readings About U.S. Oil In Shale Resources

I go over to the Oil Drum often to catch up on news and analysis on oil and natural gas. A few that caught my eye over the holiday period:

1) Does the U.S. Really Have More Oil than Saudi Arabia? - some fundamentals about the difference between shale oil and tight oil, and resources and reserves cleared up.

2) Bill O'Reilly Is Misinforming Americans About Oil Supplies - U.S oil exports and imports and the link to gasoline prices and jobs.

3) Shale Oil: The Latest Insights -  Development of "shale oil" resources and impacts on the shale gas production.

4) Gas Boom Goes Bust: On the future of the shale gas industry.

The Oil Drum has generally been giving a more cautious and conservative long term perspectives on the recent elation over shale gas and new discoveries of "shale oil".

Natural Gas: Expectations Fulfilled?

Couple of articles on the expectations surrounding natural gas -

Over at the Barrel, John Kingston points to an article by Mriganka Jaipuriyar on the delays and production problems at India's giant natural gas field KG-D6 in the east coast Krishna Godavari basin.

Across the continents, Ian Urbina of the New York Times dives into industry memos and internal emails expressing skepticism about the potential of shale gas in the U.S to remain a vast and profitable source of energy in the future. 

India Basin-Wise Shale Gas Estimates

Sometime back I had posted a graphic of Indian sedimentary basins and the potential of shale gas from these basins. Currently India has reserves of about 38 trillion cubic feet (Tcf) of conventional natural gas i.e. gas stored in pore spaces of coarser permeable sedimentary rocks like sandstones.

I had mentioned that shale gas i.e. natural gas trapped in very fine grained, impermeable shales might add substantially to the existing conventional natural gas reserves. I did not have any numbers to put out at that time.

Now the U.S Energy Information Administration (EIA) has come out with a report (51 mb) on global shale gas potential that includes some Indian sedimentary basins as well. The report has been prepared for the EIA by Advanced Resources International, a company based in Virginia, U.S.

About 70 shale formations from 48 basins in 32 countries were studied. Here is the global summary in terms of shale gas potential. The report only partially estimates shale gas resources since it excludes Russia and the Middle East. It also excludes offshore basins and many other onshore basins for which data is not available:

Although the shale gas resource estimates will likely change over time as additional information becomes available, the report shows that the international shale gas resource base is vast. The initial estimate of technically recoverable shale gas resources in the 32 countries examined is 5,760 trillion, cubic feet, as shown in Table 1. Adding the U.S. estimate of the shale gas technically recoverable resources of 862 trillion cubic feet results in a total shale resource base estimate of 6,622 trillion cubic feet for the United States and the other 32 countries assessed. To put this shale gas resource estimate in some perspective, world proven reserves of natural gas as of January 1, 2010 are about 6,609 trillion cubic feet, and world technically recoverable gas resources are roughly 16,000 trillion cubic feet, largely excluding shale gas. Thus, adding the identified shale gas resources to other gas resources increases total world technically recoverable gas resources by over 40 percent to 22,600 trillion cubic feet.

Global consumption of natural gas was estimated to be about 100 Tcf in 2009 and is projected to increase to about 156 Tcf by 2035.

Do read the summary and the report (51 mb) to get an idea about the methodology for estimating shale gas resources. 

For India, data adequate enough to generate estimates of shale gas was available from 4 sedimentary basins. These were from the Cambay Basin, the Krishna Godavari Basin, the Cauvery Basin and the Damodar Valley Basin. These basins are estimated to contain about 63 Tcf of recoverable shale gas.

There are many other sedimentary basins which remain relatively unexplored for their shale gas potential.

Image below shows the assessed sedimentary basins along with other basins which are though to contain shale gas but for which adequate data is not yet available.

Below is a basin-wise breakdown of the shale gas estimates along with graphics of the basin structure and prospective blocks within the basins.

Cambay Basin:

This is an elongate intra-cratonic rift basin of late Cretaceous-Cenozoic age situated in western Indian state of Gujarat. The formation of interest is the Palaeocene-Eocene Cambay black shale. Technically recoverable shale gas is estimated to be about 20 Tcf.

Krishna Godavari Basin:

A Late Permian to Tertiary age basin in eastern India consisting of a series of horst and graben. The prospective formation is the Permian age Kommugudem shale. Technically recoverable resources are estimated to be about 27 Tcf.

Cauvery Basin:

The Cretaceous-Cenozoic Cauvery basin in south eastern India is another basin with horst and graben structures and prospective shales. The formations of interest are the early Cretaceous Andimadam Formation and the Sattapadi shale. Technically recoverable resources are about 9 Tcf.

Damodar Valley Basin:

This basin is part of the "Gondwana" basins of India characterized by their mostly non-marine sedimentary fill and narrow graben structures. Although filled with mostly Late Permian to Triassic terrestrial sediment, there is a significant thickness of a marine shale known as the Barren measures, so called as it is barren of coal. The technically recoverable resources from this shale are estimated to be 7 Tcf.

Below is a table summarizing the geological and shale gas attributes of the basins of interest.

As the report makes clear, these are initial estimates (not proven reserves) based on available data on shale formations from basins that already have seen substantial exploration for oil and conventional natural gas. As more focused exploration for shale gas continues from these basins and as more basins are explored these estimates of shale gas resources will likely change.

Update [ May 17 ]: [ Just a quick clarification on terminology. In the table above three estimates of gas are given. GIP is Gas in Place and it refers to the total gas content of the shale formation as estimated from geological attributes. Risked GIP is a fraction of GIP after applying certain success factors i.e. using information available of the productivity of the formation and other factors that might limit its development. Finally, Risked Recoverable is the fraction of Risked GIP that can be technically recovered. That is the amount - 63 Tcf- I have used in this post.

There are reports in the media claiming for example that shale gas in India has been estimated to be about 600 - 2000 Tcf. These refer to Gas in Place estimates and are comparable to the GIP estimates in the EIA report. They are sometimes improperly referred to as reserves (amount of resource that can be exploited economically at any given time). These large amounts mentioned in some media reports are not proven reserves but an estimate of the total gas content stored in the formation. Out of that only a fraction will be technically recoverable.]

India produced about 1.4 Tcf in 2009 and consumed about 1.8 Tcf.  These shale gas resources as they are realized will add significantly to India's hydrocarbon reserves.

Some broad issues to think about:

1) Will a shale gas policy allowing for exploration and exploitation be put in place quickly?

2) Will concerns about leakage of fracking fluids and methane into groundwater be addressed thoroughly and transparently.

3) Besides contamination of groundwater, there is also a concern of water usage. Wells drilled into shale require large amounts of water to be pumped in during the process of fracking i.e hydraulic fracturing of the rock.  How will conflicts of water use with farmers and affected communities be resolved?

Update Jan 5 2012: In a recent assessment (USGS Fact Sheet India Shale Gas 2011) of the Cambay, Krishna Godavari and Cauvery provinces of India, the United States Geological Survey has downgraded shale gas resources from 63 tcf estimated by the Energy Information Agency to 6.1 tcf. Downgrading shale gas resource estimates is not unique to India. Revisions are going on all over the world and is probably due to the observation that production from shale gas wells falls significantly after the first year or so of extraction. So their performance over the long term may not be able to match up the initial surge.  For example, the prolific Marcellus Shale from eastern U.S initially estimated to contain 410 tcf of gas again estimated by the EIA has been downgraded to contain about 84 tcf of technically recoverable gas by the USGS.

The India revision is analogue data and was developed using estimates of ultimate well recovery and success ratios from various U.S. data. This figure might itself be open for revision as more focused exploration is undertaken in these various basins.

Indian Natural Gas: Policy And Governance Issue

I wrote a post a couple of weeks ago on the geological context of Indian shale gas potential. Indian sedimentary basins have considerable potential in both conventional natural gas as well as shale gas. These resources are being hailed as critical to India's future energy needs.

But geological presence has to be translated into effective use of this resource and how the produced natural gas is to be most efficiently allocated to various sectors is a question that has not been satisfactorily fleshed out at the policy level. The big users of natural gas are 1) Feed stock for fertilizer 2) Power generation 3) Transportation.

Here is an example of the kind of thinking and debate going on within policy and energy expert community regarding best utilization of the gas resources keeping in mind India's food security, need to reduce oil imports, and achieving a cleaner emissions profile. These have been written by energy experts of Prayas Energy Group based in Pune.

Towards a rational, objective natural gas utilization policy, Ashok Shreenivas and Girish Sant, June 2009

Shortcomings in governance of natural gas sector, Ashok Sreenivas, Girish Sant, July 2009

Worth a read to get a flavor of the debates concerning policy and governance issues regarding these resources.