Step on the gas with shale

Shale gas is catching on with the rest of the world. India needs to frame exploration-utilisation policies for its reserves fast, or it may get left behind

Bruce Nussbaum, in his book 'World after Oil', published in the early 1980s, dealt with the oil crisis of the 1970s, when oil prices had risen from $5 to $30 per barrel, and showed how the world dealt with the crisis by investing more in exploration, especially on the high seas, and severely reduced energy consumption. Thus, oil prices remained stable for many years, and started rising again in the 2000s once new finds reduced.

In Swaminathan Aiyar’s book, “Challenge of Hubbert’s Peak” (ET, May 21, 2005), he said oil prices will rise fast, and the world production will not be able to meet the rising demand of China and India. American geophysicist M King Hubbert had predicted in the 1950s that US oil production would peak (‘Hubbert's peak’, after which production declines in 1970), and it did. The entire world then started looking at the far more expensive options of nuclear and non-conventional power, which would have thwarted growth rates.

Stephen Leeb first attracted world opinion on the issue of energy crises with his book, 'The Oil Factor', published in 2004. In it, he had predicted an outlandish price of $100/barrel for crude by the end of the decade. When prices started rising much faster than anticipated, he wrote another bestseller in 2006, 'The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel.'

Fortunately, the technologists, as always, have come to the rescue again and have won. The world energy crisis has now been postponed by several decades, at least to 100-150 years, particularly for the US, which determines the crude oil price and supply benchmarks for the whole world, owing to its huge consumption. Events leading to the change have taken place at a truly fascinating speed.

In 2009, all US policymakers seemed to suggest that shale gas—the new energy find—would not take off due to its huge environmental implications. The horrifying implications, then, were that one could light up running tap water in some states, where work on shale gas was going on, and this was just not acceptable. Other countries including India also had huge reservations. Come 2013, just four years later, the entire scenario has changed due to newer developing technologies, particularly in the US, where huge work is under way on shale gas development, with huge reduction in environmental effects.

Today, shale gas has become an increasingly important source of natural gas in the US, and the interest in it has spread to the rest of the world. In 2000, shale gas provided only 1% of US natural gas production; by 2010, it was over 20% and the US government’s Energy Information Administration predicts that, by 2035, 46% of the country’s natural gas supply will come from shale.

Some analysts expect that shale gas will greatly expand the worldwide energy supply. China is estimated to have the world’s largest shale gas reserves. A study by the Baker Institute of Public Policy at Rice University concluded that increased shale gas production in the US and Canada could help prevent Russia and Persian Gulf countries from dictating higher prices for the gas they export to European countries.

It is truly remarkable that if these predictions come true, the energy supply basket would also start shifting from the Middle East. According to the Energy Information Administration, reserves of recoverable shale gas exist in many countries (see table), with the largest such reserves in China.

Scientists in India now predict that our shale gas reserves are at 527 trillion cubic feet. We will only find out about the full scale of our shale gas reserves once the policies on exploration are finalised and exploitation starts thereafter.

The US and some developed countries have finalised policies and are already exploiting their reserves. Their policy and implementation follows a five-year cycle. Our policies are still being developed. It is imperative for us to act fast. Any delay in finalisation of policies, and then their implementation—owing to our huge gas demand—may result in a situation where we become shale gas importers first. And then different forces start blocking our efforts of indigenous development, as such forces have done in other energy endeavours like hydel and coal power, which we do not exploit despite huge reserves—in the name of environment and policy—and are prepared to go back to the dark ages.

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