Friday, May 12, 2006

India to export oil?

Amidst the rising oil prices, it is interesting to note that India has a lot of oil-convertible reserves that can potentially be converted to commercial usage. The sources might not be commercially viable when the oil price was steady, but with a price tag of over $70 a barrel and immediate US conflict with Iran on cards, Indians might think twice.

The two major oil-convertible resources India has, are Coal and Oil-Shale. The former one is known to all, I'll discuss about the latter. Oil Shale is a rock containing significant proportions of organic carbon "Kerogen" which can be broken down by application of heat into smaller molecules to form a liquid similar to natural crude oil. It is mined and transported in a manner similar to coal and is being used on an industrial scale at present all over the world to be converted into oil. The oil shale reserves in Assam are estimated at 137 billion tonnes with a recovery factor of 20-35% and the crude oil potential is 14 billion tonnes. This can sustain production of 140 million tonnes of crude oil for 100 years. The United States Office of Naval Petroleum and Oil Shale Reserves estimates the world supply of oil shale at 1.6 trillion barrels of which 1–1.2 trillion barrels are in the United States.

However, during the oil crisis of the 1970s, people thought that oil supplies were peaking, expected oil prices to be around seventy dollars a barrel for some time to come, and invested huge amounts of money in refining oil shale - money that they lost. Because of the astronomical sums that were lost last time around there is considerable reluctance to invest in oil shale this time around. Investors are waiting to see if oil prices really will remain this high. Prices are rising because of increased demand in developing countries, particularly China. Will high prices result in the discovery of more oil, as happened in the seventies, or will alternatives to drilling for oil have to be developed? Investors, burnt badly in the 1980s for their enthusiasm of the seventies, are in no hurry to develop oil shale. Those who lost money then are inclined to believe that more oil will be found by and by. Some others are thinking of it once more, as reported by WorldOil.

The whole scenarion has been articulated in the article by Swaminathan Aiyar. He noted :
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.Given the potential benefit, the risks are worthwhile.

Assam coal is, technically, a sort of solid petroleum deposit (it is a marine sediment like oil, not a carbonised 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 fertiliser manufacture.

The other option, Coal, is also discussed in the article.
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. China already plans to invest over $15 billion in extracting oil from coal. India has not even started thinking about this.
The Coal-to-Oil conversion is discussed in the blog of The Indic View. The comments were though not very encouraging. The techno-leader USA also might come into business with its' huge coal-reserves.

It is often said that India has all resources except the energy resources. But, after studying these, I conclude that we need to understand that there are a lot to come in energy market, and only a research oriented approach can take us to the place where a big country like India deserves to be.

The other conclusion might be a bitter truth. It's very difficult to dry out USA, even if the entire Gulf goes against them. It might lead Iran to think twice before they start talking about war and possible shortage of oil. If the gulf-oil is cut, it will probably strengthen the US grip on the world, because, it will then invest in these areas where they haven't done earlier.

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