Money Matters

A shale gas frack-up

Money Matters
By Hussain Ahmad Siddiqui
Mon, 01, 20

The long-awaited exploration and exploitation of the non-conventional shale gas resources in Pakistan may not remain a distant dream any more, it seems.

The long-awaited exploration and exploitation of the non-conventional shale gas resources in Pakistan may not remain a distant dream any more, it seems.

The Oil & Gas Development Co Ltd (OGDCL) has commenced drilling on December 14 for the first shale gas well in the Kunnar-Pasakhi field, Hyderabad District (Sindh). The objective of the Shale Pilot Project is to obtain optimum information and data on prospects of shale gas resources in the area, and subsequently to analyse and ascertain its development on commercial basis, though there is no timeline set by the OGDCL. These investigations are expected to eventually help in formulating the guidelines for the proposed shale gas policy said to be incorporated in the Petroleum Policy 2020, which is already on the cards.

It was in November 2015 when Ministry of Energy, Petroleum Division (then Ministry of Petroleum and Natural Resources) had assigned the OGDCL and Pakistan Petroleum Limited (PPL) to jointly launch a pilot project on shale gas resources. The project was to be completed within three months. It was to undertake assessment of potential shale gas reserves through simultaneous drilling of wells in selected areas of Sindh, Balochistan and Khyber Pakhtunkhwa, to ascertain drilling cost and thus economic viability, and to determine corresponding technology needs. However, the government proposals to assess the proven, inferred and probable reserves of shale gas reserves remained in cold storage for a long time.

The nonconventional or unconventional gas resources are natural reservoirs that are difficult to develop, involve state-of-the-art technology and equipment, require comparatively larger investments, and are costly to produce gas commercially. Tight gas sand reservoirs are primary source for unconventional gas; others include shale gas, coal-bed methane and deep gas in geopressurised zones. Sadly, the information about the nonconventional gas resources in the country is still uncertain and unreliable. Initial studies conducted by the international oil and gas Exploration and Production (E&P) companies operating in Pakistan had assessed 33 trillion cubic feet (TCF) tight gas in selected areas.

However, rough estimates of unconventional gas resources are of the size of about 10,000 TCF countrywide, according to a study conducted by the US Agency for International Development (USAID). In the wake of increasing gas demands and declining conventional gas reservoirs, the government had decided to develop these resources on fast track, having announced the ‘Tight Gas Exploration and Development Policy’ in May 2011. This established the policies, procedures, pricing regime and fiscal and financial concessions for exploiting unconventional gas reserves. Nonetheless, the Policy did not bring any conclusive and successful results for the investment in this area.

Talking of the shale gas resources, the US Energy Information Administration (USEIA) has updated in 2013 its earlier estimates of shale gas reserves, from 51 TCF to 586 TCF, including technically recoverable 205 TCF and economically feasible 95 TCF reserves, mostly located in the Lower Indus Basin (in Ranikot and Sember in Sindh). The study however is not considered comprehensive as it was based on data of 1,611 wells, shale formation of 1,312 wells, and analysis of shale cores and cuttings of 124 wells drilled in the selected area. This had necessitated the launching of the Shale Pilot Project by the government in 2015 at the public-sector level.

Shale gas is mostly found trapped underground in layers of sedimentary shale rocks, generally distributed over a large area. It has low permeability compared to conventional reserves and therefore does not flow easily. Shale gas is extracted directly from shale formation reservoir rocks as the reservoirs are mechanically stimulated to create additional permeability, thereby releasing the gas for collection in the well. This technology, though complex has proven successful for many decades, is known as Hydraulic Fracturing (or Fracking) of the reservoir. Deep holes are drilled into the shale rock, followed by horizontal drilling to access more of the gas reserves (that are typically distributed horizontally). Commonly, the shale gas reservoir depths are in the range of 1,500 meters to 3,000 meters below the surface.

Fracking fluids are used in various combinations of sand, water and chemicals depending on geological conditions of the area. The fluids, combinations of which, in particular the use of chemicals, are of proprietary nature to the international exploration and production companies. The fluids are pumped at high pressure into the drilled holes to open up fractures in the rock enabling the trapped gas to flow through the fractures into collection wells. The experts estimate that about 80 tons to 330 tons of a variety of chemicals are used in the four million gallons of fluid for each frack. There are hundreds of toxic chemicals used, including arsenic, benzene, formaldehyde, hydrochloric acid, acetic acid, boric acid, lead and mercury, to name a few.

Annual natural gas production remains static in the face of depleting conventional gas resources, whereas the demand has been increasing at the rate of over eight percent per annum. The gas supply-demand imbalance is expected to grow every year, and the huge shale gas reserves therefore offer a promising potential for supporting future energy needs, though the OGDCL has indicated only 10 percent possibility of success in finding it. Commercial exploitation of shale gas however poses a number of constraints and risks -economic, technical, environmental, and social.

Massive investments are required. Recovery rates are much lower than for conventional gas, involving longer recovery cycles. Thus the production cost and selling price of shale gas is much higher compared to conventional gas. Will the nation be able to afford such high price of gas for domestic and industrial purposes? Then, there are long-lasting negative impacts of technology employed. The process requires relatively large quantities of water. Generally, two to eight million gallons of water is used to frack a well that may be fracked a number of times, resulting in significantly shrinking water supplies in the area. Can we take the risk of employing fracking process in the Sindh province, already a drought-prone area? There will be logistic issues involved in transportation of such large quantities of water to the site.

Use of large quantities of water will generate large quantities of wastewater, which will pose disposal problems, though it can be reused after treatment but for further fracking purpose only. Hazardous waste includes toxic contaminants as large quantities of dangerous chemicals are used in fracking fluid. Also, water contamination by methane is common as 40 percent of water flows back to the surface. Dust from the sand used in the fluid results in air pollution, whereas leakage of methane to atmosphere is also possible. There is risk of seismic activity, of small earthquakes though, due to high pressure used to extract gas from rock.

Controversial long-lasting negative effects of fracking on air, water and soil of the areas, and thus on public health and environment, have raised serious concerns in the developed nations, and drilling for shale gas at exploratory phase in many countries has been discontinued in recent years.

The writer is retired chairman of State Engineering Corporation