An energy-hungry India looks to its own bounty

Houston Chronicle

April 8, 2006, 9:11PM
 

http://www.chron.com/disp/story.mpl/business/3780593.html
 

An energy-hungry India looks to its own bounty

Natural gas from coal beds holds promise

By LYNN J. COOK
Copyright 2006 Houston Chronicle

Indian Energy Minister Murli Deora doesn't mind admitting that his country has been a laggard when it comes to embracing some of the energy industry's more cutting-edge methods — in particular, the extraction of natural gas from coal deposits.

He just wants to make up for lost time to help deal with India's growing population, which is already facing devastating pollution problems.

"We were late on that," Deora said during an interview while in Houston to drum up foreign investors for 10 coal-bed methane blocks scattered around the Indian peninsula.

"In terms of coal reserves, India is one of the best-endowed countries," Deora said. "India should have been doing more sooner."

Now India is playing catch-up.

Despite the high level of interest in India's traditional oil and gas sector, 2005 was relatively unsuccessful with no major discoveries, according to energy consulting firm Wood MacKenzie.

The seismic search for hydrocarbons will continue on land and in the waters off the coast, but a Wood MacKenzie report said India is also determined to gin up unconventional natural gas production from a resource it knows it has in abundance — coal.

According to the U.S. Department of Energy, coal beds can hold six to seven times as much natural gas as traditional reservoirs and Deora hopes India can make a major foray into coal-bed methane production.

Deora and his team from India's Energy Ministry have been roadtripping through London, Houston, Brisbane, Australia, and Kuala Lumpur, Malaysia, looking for energy companies to fund the exploration and production of this natural gas resource along with two dozen deep-water offshore oil blocks in the Bay of Bengal.

Several U.S. players showed interest in the oil prospects and India's 10 coal-bed methane blocks, according to Deora. They range from behemoth Exxon Mobil to Quest Resource Corp., an Oklahoma outfit with stock traded over the counter.

Bids are due in June, and deals will be in place by July.

Natural gas goals

India, which has to import 75 percent of its oil, is desperate for more homegrown resources, and Deora thinks one of India's best chances to gain some self-reliance is natural gas production.

Deora's goal with the blocks being offered up is to produce 800 million cubic feet of natural gas per day by the end of next year. This amounts to a mere fraction of the gas the U.S. produces from coal-bed methane — some 1.7 trillion cubic feet a day in 2004 — but coal-bed methane production is in its infancy in India. Deora is hoping the technology will catch on fast like it did in the U.S. during the 1990s.

"This is the big league," he said.

In India, 40 percent of natural gas is used as a feedstock fuel to make fertilizers. Another 25 percent is used for other heavy manufacturing, and the remaining 35 percent is fed into power plants that generate electricity.

Enormous growth

With an economy that continues to grow at an 8 percent-a-year clip that's swelling the ranks of the middle class, India needs all the energy it can get, Deora said.

The United States is getting an increasing amount of natural gas through coal-bed methane production in places like Wyoming's Powder River Basin. Other countries bringing significant gas to market using the technology are Canada, the United Kingdom, Australia and China.

The cleaner-burning gas that is pulled from the seams of underground coal beds is not without its problems. Chief among them is the large amount of saline-saturated groundwater that gets extracted along with the natural gas.

That water is unfit for humans or animals and cannot be used on crops. Environmentalists worry that dumping the water into lakes and rivers will harm wildlife habitats, so it needs to be reinjected into the ground.

Deora insists India can deal with the environmental issues responsibly, but the country's focus is squarely on business. India is trying to reduce poverty by ramping up the economy, and that takes fossil fuels.

Energy is crucial area

In 2005 India managed to knock the U.S. out of its second-place ranking on the list of countries most favored for foreign direct investment. Deora thinks China, which holds the coveted first-place spot, could lose that designation in the not-so-distant future.

To accomplish that, Deora said, India has to act on an energy plan that plays to its exploding population. One-third of all Indians are under 15, and the MegaCities Project, a nonprofit organization focused on improving urban life, projects India's population will grow 50 percent to more than 1.6 billion people by 2050. That would give it the biggest population in the world, surpassing even China.

Deora sees energy diversification, including renewables like solar as well as nuclear power alongside more crude oil and natural gas, as the only answer to keep India's quality of life improving as it grows.

But Deora said it also means India has to burn more coal, which already fuels 50 percent of India's energy demand.

According to the Energy Information Administration, India has been slow to set sulfur dioxide emission limits, and coal plants face virtually no nitrogen oxide restrictions.

Smokestacks combined with tailpipe emissions put so much pollution in the air in Mumbai, formerly known as Bombay, that living and breathing there is equivalent to smoking 20 cigarettes a day, according to the Earth Action Net- work.

The pollution doesn't stop there.

The World Health Organization rates New Delhi as one of the world's 10 most polluted cities. Airborne particulate matter, such as soot, has registered at 10 times India's legal limit in the city, according to the Energy Information Administration.

The country is building another 93 coal-fired power plant units between 2005 and 2015, according to Ellen Giles, who tracks the construction for Platts.