Deep Industries Limited

1. Technical and Environmental Challenges for CBM Resource Development in India Deep Industries Limited 3rd India Unconventional Gas Forum Conference (IUGF) 2013 18th January 2013

2. CBMAn Overview Pumping methane gas from a coalbed Introduction • Trapped in the middle of coal, CBM is naturally occurring methane gas with traces of other hydrocarbons and non-hydrocarbons • The global estimate for potential CBM production is expected to be more than 7000 Tcf • The countries that are currently significant producers of CBM are Australia, Canada, US, India, China and a few western European countries • Close to 10% of the natural gas produced in US is contributed by CBM CBM Resources across the Globe (Tcf) 229-2697 469-2598 449-900 579-1200

3. India CBM- Update • 33 Blocks CBM Resource potential 62 TCF • Main operators are DIL, Essar, RlL, ONGC, GEECL, RNRL, BP & Dart Energy CBM Blocks awarded till date * Source: DGH

4. DEEP INDUSTRIES LIMITED: OVERVIEW • Diversified oil & gas company serving the industry in India since 1991. • Business interests: • Gas Compression • Drilling and Work over Rigs • Oil & Gas Exploration & Production • CBM Exploration & Production • Largest natural gas compression service provider in India in the private sector, with over 90% market share. • E&P portfolio includes domestic & overseas blocks.

5. DIL- Exploration & Production Assets DIL Indonesia operations DIL India Operations Marginal Gas fields Total Acreage: 94.26 sq. km Total Resource: 1.42 BCM VN-ONN-2010/1 Acreage: 3776 sq. km CB-ONN-2010/3 Acreage: 534 sq. km SR-ONN-2005/I Acreage: 789 sq. km SR-CBM-2005/III Acreage: 338 sq. km Resource: 31.32 BCM VN-ONN-2010/2 Acreage: 4909 sq. km Total Acreage holding: GV(N)-CBM-2005/III Acreage: 386 sq. km Resource: 29.6 BCM

6. Singrauli CBM Block At a Glance

7. Singrauli CBM Block Prospective Area • Core Program: 9 coreholes • Coal thickness (Core & Log) • Gas Content, Adsorption Isotherm • Injection/ Falloff Permeability Test SC-06 SC-05 Five Spot SC-03 SC-08 SC-04 • Production Wells: 5-Spot pilot • Production Test • Completion Effectiveness • Relative Permeability • Reserve Certification • Reservoir Simulation • Spacing & Pattern • Production Forecast • Field Production Potential • Field Development Program • * to be completed SC-07 SC-01 SC-02

8. 12 1/4” hole X 9 5/8” casing Water Well Mud Drilling 350 M (Approx) 8 ½” hole X 7” casing Air Drilling Open Cleats Around Wellbore 850 M (Approx) Air Drilled Well CBM Well Drilling • Drilling large number of wells at low cost is a big challenge in CBM. • The innovative combination drilling of surface section using small rigs and Coal section to the target depth drilled using Air Drilling rigs resulted in reduction of drilling time and cost up to 30-35% • Benefit of using Air as drilling fluid • Minimum formation damage • Faster penetration rates, longer bit life and fewer trips Damage Zone Around Wellbore Mud Drilled Well

9. Dewateringthe CBM Wells • CBM Well Production Challenges • Dewatering time - Optimum speed of pumps need to be maintained to achieve desired dewatering • Sand flow back and workovers- Sand flow back and frequent pump repairs during the initial phase requires workover rig all times • Produced Water Quality • CBM Projects in India generally have good quality of water produced from the CBM wells which requires no or very little water treatment before disposal. But disposal of large quantity of water is a challenge. Relative Permeability 1 0.8 krw krg 0.6 0.4 0.2 0 0 0.2 0.4 0.6 0.8 1 Saturation Well STW # 3

10. Typical Coalbed Methane Well Production Profile 1,000 Peaks Flattens Somewhat Decline Depends on Well Spacing 100 Gas Production Rate ( Water - BBL/ Day), Gas (MSCFD) 10 Water 1 0 5 10 15 20 TIME, years

11. Multiple Seam Completion

12. Surface Facility and Compression of Gas

13. Large Land Sites for drilling CBM Wells Directional Wells from a single well site • 1 vertical well and 4 directional wells at 90 Deg phasing with horizontal reach of about 500 -600 m drilled from a pad. • Many benefits of this approach: • Land Requirement reduction up to 60% • Land cost savings and Civil work savings • Savings on ILMs of drilling rigs, logging trucks, cementing units, HF Units , completion & workover rigs • Savings on in-filed pipelines, instrumentation and surface facilities • Logistics, security, etc. 500 m

14. Logistical, Environmental & Social Challenges • Logistical: Very less logistic support available as generally all CBM assets occur in the remote areas • CBM requires drilling of very large number of wells and setting up required surface facilities • Extensive logistics support need to be created • Environmental: As CBM reservoirs are low pressure operations, environment impact is very less • Need amendment in the existing rule and regulations • Social: Effect on local community and their resistance • Need the follow good and effective CSR plan

15. CBM Evacuation Challenges • Almost all the CBM blocks in India are located in frontier areas • No CBM gas transportation infrastructure developed

16. Conclusion • Coalbed methane is a technology play that requires reservoir understanding and appropriate technology for all phases of prospect evaluation and field development. • Drilling, completing and producing of large no of wells at low cost using innovative techniques always remains a challenge. • CBM Reservoirs are generally water saturated & require dewatering and gas production takes time to commence.

17. Thanks