Enough shale oil to join OPEC?

India has enough oil trapped in shale and coal deposits in Assam and Arunachal Pradesh to produce 140 million tones per year for 100 years, say former geologists of Oil India Ltd including ex-Chairman and Managing Director Chudamani Ratnam. This is more than India’s entire current consumption, high enough to make India a member of OPEC.You might think this would be a major strategic thrust of our energy policy. Yet there was no mention of shale oil at last week’s meeting of the Inter-Ministerial Energy Coordination Committee, chaired by the Prime Minister. The meeting focused on acquiring oil, gas and coal reserves overseas. Does not domestic shale oil deserve higher priority?

We need an immediate strategy to evaluate shale oil deposits in greater detail, evaluate the best technologies for extracting oil, and then set up a commercial scale plant. Given the huge potential benefits, the risks are very worthwhile. If this works, we can throw open our huge deposits to international exploration, as has already been done for conventional oil and gas deposits.Shale oil deposits are common the world over, but have not been mined because of uncertainties over the future price of oil. Ratnam and his fellow-geologists estimated in 1990 that extracting shale oil would become economic at an oil price of $ 30/barrel. US experts estimate that shale oil would be economic today at $ 35-40/barrel. With the world price touching $ 65/barrel last week, you might think that oil multinationals would be scrambling to produce shale oil in several countries. In fact they are held back by fears that oil prices could drop in a few years below $ 35/barrel.

In the 1970s, expectation of ever-rising oil prices spurred giant shale oil projects in the USA. Exxon built a $ 5 billion facility in the Rockies. This had to shut down in 1982 because of dipping oil prices. Other shale oil projects of Tosco and Unocal are closed down soon after. Multinationals lost all appetite for shale oil after those expensive failures.Environmental issues also dogged these projects. Oil-shale has to be mined, crushed and baked to extract oil. The spent shale is huge in volume, and needs large quantities of water to cool and stabilize it. Shale mining was tried in the USA in arid areas lacking water. However, Assam and Arunachal Pradesh are blessed with ample water. A small dam on a minor tributary of the Brahmaputra could provide enough water, and generate hydel power too. Possibly the dam itself could be a rock-filled one built with spent shale.

The first step needed is to appoint international consultants to assess the deposits and suggest technologies for extraction. Oil India Ltd has long explored for oil and gas in the north-east, and is the obvious candidate for setting up a commercial-scale plant to extract shale oil. Given the potential benefit, the risks are very worthwhile. Over 90% of OIL’s staff are already Assamese, so ULFA and other militant outfits are unlikely to paralyse such a project with bandhs. Coal-mine rejects (containing more shale than coal) already lie piled up at mine-heads in Assam, providing ready-made material for a shale oil project.

If the project yields good results, we can have a New Exploration Licensing Policy for shale oil, throwing open the deposits for competitive bidding. To attract bidders and ensure again a sudden dip in future oil price, the government should guarantee a floor price of $ 35-40/ barrel. In return for such a guarantee, the government could ask for a 50% share of any price hike above $ 60. This would make the project attractive for both bidders and guarantor.Assam coal is, technically, a sort of solid petroleum deposit (it is a marine sediment like oil, not a carbonized forest like conventional coal). This makes it especially suitable for conversion to oil. Assam coal has much sulphur, so it is a high-pollution fuel for thermal power. But coal liquefaction yields ultra-clean oil, leaving behind sulphur as a by-product that can be used for fertilizer manufacture.

Coal can be converted to oil using the direct liquefaction technology of IFP of France, or the indirect liquefaction technology (coal into gas and then gas into oil) of companies like Sasol, Chevron and Shell. OIL already has a technological tie-up with IFP for direct liquefaction.China is planning to set up at least four plants to convert coal to oil. The Shenhua Group is setting up a direct liquefaction plant in Inner Mongolia using IFP technology. However, this has run into technical glitches, and there are reports that the plant will switch to two-stage liquefaction using Shell’s technology.India needs to make a start immediately, experimenting with different technologies. China already plans to invest over $ 15 billion in extracting oil from coal. India has not even started thinking about this.

6 thoughts on “Enough shale oil to join OPEC?

  • 2014.Dec.29 at 16:44
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    Also Read: Tapping massive deposits of ‘fire ice’ methane hydrate can change India’s energy landscape
    Swaminathan S Anklesaria Aiyar, TNN Mar 17, 2013, 08.01AM IST
    “India has long been known to have massive deposits of methane hydrate. These are tentatively estimated at 1,890 trillion cu.m. An Indo-US scientific joint venture in 2006 explored four areas: the Kerala-Konkan basin, the Krishna-Godavari basin, the Mahanadi basin and the seas off the Andaman Islands. The deposits in the Krishna Godavari basin turned out to be among the richest and biggest in the world. The Andamans yielded the thickest-ever deposits 600 metres below the seabed in volcanic ash sediments. Hydrates were also found in the Mahanadi basin”.

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  • 2014.Dec.27 at 19:32
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    Instead of focusing on renewable energy, the author is pressing on ways to destroy the environment even further. These conventional limited energy reserves will run dry in next 80-100 years. Don’t just think about yourself but the future generations as well.
    Why not invest that billions of dollars in solar energy and other nonpolluting options.

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  • 2014.Oct.27 at 17:19
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    USA has started this shale production and from one of the big importers of oil it has now become major exporter . India should also invest in this technology for a safe cushion to spikes in oil price.

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  • 2013.Feb.11 at 16:54
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    Apart from this reserve India has following energy reserve:
    1. More than 4.6 Trillion Cub Meter of Coal Bed Methane.
    2. 527 Trillion Cub ft of Shale gas.
    3. More than 256 Billion tons of coal reserves to produce
    Coal To Liquid.
    4. Moire than 7600 KM of sea to produce wave /tidal
    energy.
    5. India has one of the highest Solar Insolation value to
    produce solar energy.
    6. India has highest reserves of Thorium to produce
    nuclear energy.
    7. With the discovery of huge reserves of Uranium in
    Andhra Pradesh & Meghalaya, we are no longer
    dependent on other countries.
    8. India can produce huge quantity of Bio-Diesel.
    Why must we beg? Time other people should come to us.

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  • 2012.Oct.31 at 18:23
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    Indian govt has to take a proper step about this…..
    If govt takes a right steps means im sure India won’t be having any fuel problem fr another 300 years… And the price may be 25/- petrol and diesel will be 12/-….

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  • 2012.Oct.26 at 16:31
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    Govt of India and its bureacratic set up is a self serving effete outfit. Here attention is given to things which can quickly fetch corrupt money. Vision for a resurgent, self sufficient and powerful India is just in speeches and in books. We would need to invent a corruption free effective system of governance to make India think of such lofty and lifting plans.

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