Cost-benefit analysis of shale development in India: A best-worst method based MCDM approach

1 Introduction

The shale gas is an unconventional source of energy that is trapped inside the sedimentary shale formations deep beneath the earth’s surface. Conventional oil and gas are located between the rock formations and are free-flowing. A rig can be drill straight deep down to the oil pool, and simply natural pressure is needed to pump out the oil and gas from the pool. But in the case of unconventional oil and gas, it is located between the layers and is scattered in small quantities instead of one big pool. To reach into the layers, Horizontal drilling is used, and instead of drilling, method of fracking is used to pump out the oil and gas by creating fractures in the layers, and rock formations around the oil, which makes it easier for oil to move freely and extraction of oil becomes easier (Saniere and Lantz, 2007).

The combination of hydraulic fracturing and horizontal drilling with evolving multi-stage high-pressure fracturing has led to cost-effective oil and gas production in US (Eia et al., 2011). The boom in the US oil and gas due to shale has revolutionized the US energy market with easy access to natural gas supplies. The shale gas development has led to dramatically fall in gas price (Wang and Krupnick, 2015; Lemons, 2014). Once the USA was one of the largest importers of oil and gas, but in the current scenario, the USA is a net exporter of natural gas, all thanks to the shale developments. The USA ranks second in the lowest energy cost, just behind the middle east countries. The spillover effect of low energy cost is widespread in different industries (Wang and Krupnick, 2015). The availability of cheap energy implies higher industrial output at a lower price. The petrochemical industry, manufacturing, and other industries also get benefited from the cheap availability of shale gas. This has increased the USA’s competitiveness and thus has resulted in higher GDP growth. The shale gas development has additionally created a high wage of jobs in the energy sector. The investment in drilling new wells, infrastructure development, pipelines, road, and railway network could generate more jobs in the oil and natural gas sector (Nyquist and Lund, 2014).

As the world has seen the “US shale gas revolution,” many countries are replicating the US model of energy independence and tapping their shale reserves for commercial development of shale oil and gas. The USA experiences a lower import bill, energy independence, job creation through support services, and lower oil price resulted in lower input cost; thus, the competitive gains have been observed in manufacturing, industrial, and other allied services, thus contributing to GDP growth by the shale developments. These positive benefits of shale gas production have influenced other countries for the commercial production of shale.

2 Research motivation and objectives

Multiple studies related to shale gas production development by applying MCDM techniques were carried out on different countries like USA (Yang et al., 2017), China (Ren et al., 2015; Yang et al., 2017; Li et al., 2016), Poland (Adamus and Florkowski, 2016), Australia (Cruz et al., 2018) etc. A brief tabulation of research work on shale development with the method, description, and country of study is presented in Table 1. Studies related to the identification and prioritization of the costs and benefits of shale gas production based on extensive literature review were lacking in previous studies. Also, as per our knowledge and thorough study of literature, no previous study was carried out for guiding the general implementation, identification, and prioritization of factors concerning shale development in India. We have not found any concrete work on the costs and benefits due to shale development in India. So, there is a need to study shale development with respect to its serious and unintended consequences and benefits. This study explores and evaluates a comprehensive and unified criteria framework for costs and benefits of shale development by prioritizing the factors and their categories in the Indian context using a Multi-criteria decision-making approach known as best-worst method (Rezaei, 2015).

The aims of this study are: (1) to identify the costs and benefits of shale production in India via an extensive literature review; and (2) to develop a prioritization-based taxonomy for the identified factors using the Best worst method. Following Research Questions (RQ) have been developed to address the objectives of the study:

RQ1: What are the potential costs and benefits of shale development reported in the literature?

RQ2: How can we calculate the priorities of identified cost and benefit factors and their categories?

RQ3: How we can develop a robust taxonomy of the identified factors and their categories?

The remainder layout of the paper is as follows: Section 3 presents the Research methodology. Section 4 describes the results and analysis of our study. In Section 5, we provide a discussion and summary of the results. Section 6 is about research implications and threats to the validity of this research. Finally, Section 7 is the conclusion and future research directions.

3 Research methodology

The outline of the research methodology approach used in this study is presented in Fig. 1. In the first phase, we have identified the Benefits and Costs criteria (category) and sub-criteria (factors) associated with Shale gas development in India using an extensive literature review. Next, we conducted a questionnaire survey study with experts (researchers) to receive feedback on the identified factors and their categories. The responses are collected based on the requirement of the MCDM technique, i.e., Best Worst Method (BWM). The step-by-step procedure of the Best Worst method is discussed in the next section. After collecting responses, we have used the Best Worst Method to rank the Costs and Benefits. Finally, a discussion of policy implications is presented.

Close

Fig. 1

Research Methodology.

Export to PPT

4 Result and analysis

The first phase of research methodology is to identify the criteria and sub-criteria of costs and benefits of shale production.

4.2

4.2 Application of best worst method for prioritizing the identified costs and benefits of shale gas production

The Best Worst method has been applied to determine the prioritized order of costs and benefits. The questionnaire has been prepared as per the requirement of the BWM approach. The step-by-step procedure is as follows.

Step-1 (Proposed hierarchy structure of identified factors and their categories)

This step is the identification of the hierarchy structure. By considering identified costs and benefits, the developed hierarchy structure of factors and their categories is presented in Fig. 2. The goal of this current study is to prioritize the identified criteria (category) and sub-criteria (factors) of costs and benefits due to shale development. The hierarchy structure is divided into four sections where the first one is the goal, the second one is costs and benefits, the third is category, and finally, the fourth is factors.

Close

Fig. 2

Hierarchy structure of shale gas production development.

Export to PPT

Step-2 (Conducting the pairwise comparison)

After structuring the hierarchy of costs and benefits of shale production, a questionnaire has been prepared as per the requirement of the Best Worst Method. This questionnaire is circulated among experts to collect the responses. The information is collected in terms of linguistic responses, which are numerically on a 1–9 scale. The linguistic scale along with the numerical value is given in Table 2.

Initially, the expert has to choose the best and worst criterion from the set of criteria. After this, the response for the pairwise reference comparison of best to all other criteria and all other criteria to worst criterion has been collected. The advantage of the BWM approach while collecting responses is that the number of responses is reduced in comparison to the AHP approach. For example, if there are four criteria, then the total responses collected from an expert for BWM is $2n-3$ , i.e., five responses, whereas, in AHP, it becomes $\frac{n(n-1)}{2}$ , i.e., 10. This property of BWM leads to less inconsistency over the AHP approach. After collecting the responses from the experts, the responses are transformed into numerical form for calculating the weights of criteria and sub-criteria. Along with weights, the consistency ratio using step 5 of Section 3.1 for each expert is also determined and found acceptable.

Local Weight (LW) is used to assess the ranking of a factor within its particular category, and the priority of a factor on the overall objective of the study is expressed by Global Weight (GW). GW is used to determine the final priority ranking of a factor in comparison to all the investigated 12 costs and 12 benefit factors beyond their categories, respectively.

Step-3 (Calculating the local priority weight of factors and their respective categories)

To find out the weights from collected data, the mathematical programming model 2, as explained in step 4 of Section 3.1 has been utilized. We have used the BWM solver for obtaining the weights for each expert. At first, the local priority weight of criteria is calculated then the local weights of sub-criteria of categories are calculated. The local weights obtained from responses of each expert by solving the model for criteria and sub-criteria of benefit and cost category are tabulated in Table 5. The local weights with their rankings for both categories are presented in Table 5. The maximum weight value refers to a more important criterion. The ranks are given based on the largest to smallest weight order.

Table 5 Weights and Ranks of Benefit and Cost Criteria and Sub-Criteria

Benefit Criteria	Weight	BSC	Local weight	Local Rank	Global weight	Global Rank
Economic Benefit (BC1)	0.5000	BSC1	0.2498	3	0.1248	3
		BSC2	0.2667	2	0.1332	2
		BSC3	0.3017	1	0.1508	1
		BSC4	0.1818	4	0.0908	4
Social Benefit (BC2)	0.2386	BSC5	0.2017	3	0.0481	11
		BSC6	0.1808	4	0.0431	12
		BSC7	0.3236	1	0.0772	6
		BSC8	0.2939	2	0.0701	8
Environmental Benefit (BC3)	0.2614	BSC9	0.2070	3	0.054	9
		BSC10	0.1921	4	0.0501	10
		BSC11	0.2872	2	0.075	7
		BSC12	0.3138	1	0.082	5

Cost Criteria	Weight	CSC	Local weight	Local Rank	Global weight	Global Rank
Economic Cost(CC1)	0.2446	CSC1	0.4911	1	0.1201	2
		CSC2	0.2246	3	0.0549	12
		CSC3	0.2842	2	0.0695	8
Social Cost (CC2)	0.4069	CSC4	0.2621	2	0.0641	10
		CSC5	0.2415	3	0.0982	3
		CSC6	0.336	1	0.1367	1
		CSC7	0.1602	4	0.0651	9
Environmental Cost(CC3)	0.3483	CSC8	0.1795	4	0.073	6
		CSC9	0.1619	5	0.0563	11
		CSC10	0.2448	1	0.0852	4
		CSC11	0.2111	2	0.0735	5
		CSC12	0.2025	3	0.0705	7

Step-4 (Calculating the global priority weights.)

The global weights of factors are obtained by multiplying the local weight of factors with the weight of the respective category. For example, In Table 5, the weight of Social benefit is 0.2386 and of BSC5 is 0.2017, then the global weight of BSC5 will become $0.2386*0.2017=0.0481$ .

Step-5 (Final ranking) The final priority order is determined to rank the identified costs and benefits concerning their significance for the development of shale production in India. To determine the final ranking order in costs and benefits categories, the global weights are utilized and presented in Table 6.

Table 6 Global Weight and Rank order of Benefit and Cost Sub-Criteria (CSC)

Benefit Sub-Criteria		Weight	Rank
Reduction of Oil import bill	BSC3	0.1508	1
The decline in fuel price	BSC2	0.1332	2
Improve in energy security	BSC1	0.1248	3
GDP growth due to Shale Gas production	BSC4	0.0908	4
The benefit of Shale Gas as a Clean energy	BSC12	0.082	5
Job Creation	BSC7	0.0772	6
Less Greenhouse gas emission due to shale gas production	BSC11	0.075	7
Socio-economic development of shale available region.	BSC8	0.0701	8
Less Carbon dioxide emission due to Shale gas production	BSC9	0.054	9
Less water consumption as compared to consumption in Oil and Coal extraction	BSC10	0.0501	10
Skill development in manpower	BSC5	0.0481	11
Generation of High salaried jobs.	BSC6	0.0431	12

Cost Sub-Criteria		Weight	Rank
Disturbance in local ecosystem as well as the life of local communities	CSC6	0.1367	1
The high initial cost of setting up Infrastructure.	CSC1	0.1201	2
Less land for farming and agricultural activities	CSC5	0.0982	3
Reduction in availability of groundwater due to fracturing	CSC10	0.0852	4
Air Pollution	CSC11	0.0735	5
Disturbance of Wildlife habitat	CSC8	0.073	6
Water Pollution	CSC12	0.0705	7
Cost on Research and Development.	CSC3	0.0695	8
More Traffic jams	CSC7	0.0651	9
Health hazards	CSC4	0.0641	10
Increased earthquake possibilities due to Drilling activities	CSC9	0.0563	11
High drilling cost	CSC2	0.0549	12

5 Discussion and summary

This work sheds light on the costs and benefits due to development activities of shale production. This work will help the researchers, government, and policymakers to implement the development project in a more effective way by considering the identified factors based on their respective priorities. Moreover, The application of the MCDM technique provides the prioritized costs and benefits factors. A taxonomy of the costs and benefit factors by considering their global and local priorities is also presented. The identified cost and benefit criteria were classified in three sustainable categories, namely economic, social and environmental. Also, In each category, factors are identified. The local and global weights of these factors were determined based on the weights of their respective category. A summary of findings of this study are as follows:

Research Question 1 (Identification of costs and benefits of shale development)

We have conducted an exhaustive review of the literature to explore and identify the cost and benefit factors along with categories due to shale development. A total of 24 factors (12 cost and 12 benefit factors) that are critical to address before setting the production plant were identified. We have classified these costs and benefits in three sustainable categories, i.e., economic, social, and environmental.

Research Question 2 (Prioritization of identified criteria and sub-criteria)

We have used the protocols of the Best Worst method in step by step manner to prioritize the identified costs and benefits criteria (category) and their sub-criteria (factors). A questionnaire survey based on BWM has been conducted for collecting information in terms of pairwise comparison from experts to determine the local and global ranks of identified costs and benefits criteria and their sub-criteria. By considering the calculated weight, i.e., priorities using Best Worst Method, we have ranked the identified criteria and their sub-criteria. The selection of the Best Worst Methodology is because of its better understanding of the experts and decision-maker along with less inconsistency in results.

The weights and ranks of Benefit criteria and sub-criteria are presented in Table 5. It shows that the most important benefit criterion is economical, whereas the least important is the social benefit criterion. Among the sub-criteria of economic, social, and environmental benefits, in local ranking BSC3 (Reduction of Oil import bill), BSC7 (Job Creation), and BSC12 (Benefit of Shale Gas as Clean energy) are the highest-ranked factors, respectively. Whereas BSC4 (GDP growth due to Shale Gas production), BSC6 (Generation of High salaried jobs.), and BSC10 (Less water consumption as compared to consumption in Oil and Coal extraction) are the least important factors, respectively. In the global final ranking, BSC3 (Reduction of Oil import bill) is highest ranked followed by BSC2 (Decline in fuel price), BSC1 (Improve in energy security), BSC4 (GDP growth due to Shale Gas production), and other factors as shown in Table 6. The lowest ranking factor is BSC6 (Generation of High salaried jobs). The results indicated that the experts strongly acknowledged the reduction of import bills as a most important benefit due to shale gas production.

The weights and ranks of Cost criteria and sub-criteria are presented in Tables 5 and 6. It shows that the highest-ranked cost criterion is a social cost, followed by environmental cost and economic cost. Among the sub-criteria of economic, social, and environmental costs, in local ranking CSC1 (High initial cost of setting up of Infrastructure), CSC6 (Disturbance in local ecosystem as well as the life of local communities), and CSC10 (Reduction in availability of groundwater due to fracturing) are the highest-ranked factors, respectively. Whereas CSC2 (High drilling cost), CSC7 (More Traffic jams), and CSC9 (Increased earthquake possibilities due to Drilling activities) are the least important factors, respectively. In the global final ranking, CSC6 (Disturbance in local ecosystem as well as the life of local communities) is highest ranked followed by CSC1 (High initial cost of setting up of Infrastructure), CSC5 (Less land for farming and agricultural activities), CSC10 (Reduction in availability of groundwater due to fracturing) and other factors as shown in Table 6. The lowest-ranked factor is CSC2 (High drilling cost). The results indicated that the experts strongly acknowledged the disturbance of the local ecosystem as well as the life of local communities as the highly impacted cost factor due to shale production. Also, the High drilling cost is considered as the least important cost factor due to shale gas production.

Research Question 3 (Taxonomy of identified costs and benefits due to shale development)

The taxonomy of identified criteria and their sub-criteria has been further established by considering their importance for the development of shale. A mapping of the costs and benefits with three key categories, namely, i.e., “Economical,” “Social,” and “Environmental” is presented in Figs. 3 and 4.

Close

Fig. 3

Priority based taxonomy of Identified benefit criteria and their sub-criteria due to shale gas production.

Export to PPT

Close

Fig. 4

Priority based taxonomy of Identified cost criteria and their sub-criteria due to shale gas production.

Export to PPT

The taxonomy developed for Benefits, as shown in Fig. 3, indicates that ‘Economic Benefit’ (weight = 0.5) is the highest-ranked category. Moreover, we noted that the ‘Environmental benefit category’ (weight = 0.2614), and ‘Social benefit category’ (weight = 0.2386) is ranked as the second and third most significant categories of identified benefits due to shale production.

Furthermore, the taxonomy of identified factors in the local and global context with respective ranks is also shown in Fig. 3. This demonstrates the importance of a particular factor within the category and for the categories overall. For example, BSC12 (Benefit of Shale Gas as Clean energy) is ranked as the first significant benefit factor in the environmental category, but in comparison to all 12 benefit factors, it is ranked as the fifth most important benefit. Similarly, we noted that BSC6 (Generation of High salaried jobs.) is declared as the least-ranked benefit in global ranking within 12 factors of all categories, and according to local ranking, BSC6 is also declared as the fourth-ranked benefit within the social category. The highest priority benefits within the category and for overall categories are highlighted (Fig. 3). Fig. 3 shows that the four important benefits in global ranking out of 12 benefits of all categories are from the economic category.

Similar to the Benefits category, the developed taxonomy for identified costs is presented in Fig. 4. It indicates that the obtained hierarchy of priority is social (weight = 0.4069) than environmental (weight = 0.3483) and finally economic (weight = 0.2446) criterion for shale production. The local and global ranks are mapped to the respective sub-criteria of each criterion. A total of 12 factors with 3 in economic, 4 in social, and 5 in environmental criteria are identified and mapped. It has been found that CSC6 (Disturbance in local ecosystem as well as the life of local communities) is the highest-ranked factor locally and globally within 4 and 12 factors, respectively. Whereas CSC2 (High drilling cost) is the least important factor locally as well as globally (Fig. 4).

Therefore, the global and local ranks as presented in Figs. 3 and 4, will assist the researchers, government, and policymakers to draft and implement a policy considering the most and least important cost and benefit factors while setting up the shale development activities successfully.

6 Research implications and threat to validity

This research contributes by identification and priority-based taxonomy of the cost and benefit factors with their respective categories for understanding the impact of shale development in context of India. The priority-based taxonomy of costs and benefits factors will help in pathway choice and policy modeling for the realization of development targets of shale in India and other countries too. Regulatory bodies should formulate an integrated policy while considering the cost and benefit factors. The policies should incorporate the factors which are highly important. The conceptual framework developed in terms of factors and their categories would provide policy implications to be regulated as well as best practices to potential shale development, which eventually accelerate the deployment of projects. The results and conclusions will be helpful for the government, policymakers, and developers to formulate the best policies for the development of shale in a sustainable way. The study is valuable, and therefore deserving of near research attention as well.

Like any other research study, this study also has its own threats and restrictions. The scope of this study is limited to sustainable factors and their categories, i.e., economic, environmental, and social aspects. The inclusion of more or fewer factors and categories will change the results of the study. Although the factors included are not yet studied in any existing work. The factors are included by considering the research gap in previous studies. A thorough and exhaustive literature review was carried out for the identification of factors and their categories by all authors. By using the appropriate keywords and exploring Google Scholar and search engines for relevant studies, we attempted to remove this threat. In addition, this given threat is also minimized by including all the authors in the review process and verifying the findings.

Another threat is the expertise of respondents for data collection. This study involved data collection from 21 experts, but the results are obtained from the responses of fourteen of them. The left expert’s responses are denied because of incomplete information. Due to the lack of available experts in highly specialized shale topics since the shale revolution remains current in India, the results may vary by the inclusion of more experts and their specialty. We have taken care of this threat and included researchers working in the field of economics, commerce, and management based on their research experience.

7 Conclusion and future direction

The overall sustainability of the exploitation of shale is unclear. Shale is a new and unconventional source of energy. Many countries, including India, have started exploring their shale reserves as the economy is driven by energy. Successful shale exploitation would increase energy security and reduce the import bill of India. But, like other energy sources, shale development also has its own benefits and costs. The shale reserves are exploited by hydraulic fracturing and consume a large amount of land and water. The use of hydraulic fracturing technology, the requirement of a huge amount of water and land is controversial in a highly-populated country like India. Also, shale is a clean source of energy, and its exploitation will reduce the energy import bill, decline the fuel price and improve energy security. In the present work, we have identified the factors in terms of costs and benefits. As per our knowledge and research, this is the first work in the context of India and other countries concerning the identification along with prioritization based taxonomy of cost and benefit factors due to shale development. To address the research gap, this paper investigates and evaluates the overall sustainability factors, i.e., environmental, social, and economic categories of shale development. The identification of factors is based on an exhaustive literature review. More specifically, we performed a comprehensive cost-benefit identification and analysis, considering a total of 24 (12 costs and 12 benefits) factors.

Furthermore, these factors are evaluated (local and global weight) and ranked using an MCDM technique, i.e., the Best worst method. The advantage of the best worst method is that it reduces the inconsistency of results due to fewer pairwise comparisons. For evaluation of weights and ranking, responses are collected from experts using a questionnaire survey. Following data collection, the selected responses were coded in numerical form, and the consistency of responses was checked by measuring the Consistency ratio. Finally, a priority-based taxonomy of factors with mapping to their respective local and global ranks has also been presented in Figs. 3 and 4. The obtained results will serve to inform Indian policymakers, researchers, industry, and non-governmental organizations, etc., for better decision making. The obtained results were also of interest to countries considering shale development in the future. Furthermore, it has academic value in terms of enriching the comprehensive evaluation and strategy of shale development research systems. After evaluation and ranking, it has been found that economic benefit is the highly ranked category followed by environmental and social benefit, whereas in cost, the social cost is more important to emphasize, followed by environment and economic cost. In cost and benefit factors, “the disturbance of local ecosystem along with local communities” and “reduction of oil import bill” are the most important factors, respectively. The “generation of high salaried jobs” and “high drilling cost” is the least important benefit and cost factor, respectively.

Future studies may benefit by involving more experts. The selected number of factors and their categories can be further increased or decreased, allowing for researchers and policymakers to evaluate regional or country-specific outcomes for better policy drafting and decision making. Further extension can also be made by analyzing through other MCDM methods such as AHP, ELECTRE, fuzzy-AHP, fuzzy-BWM, Intuitionistic fuzzy-BWM, etc. A comparison of results for different MCDM methods under deterministic and uncertain information may provide more insight into the prioritization-based taxonomy of factors.

Author Contributions: Conceptualization, formal analysis, investigation, methodology, software, validation, visualization, writing–original draft, review and editing by MGH; Conceptualization, formal analysis, investigation, methodology, validation, writing–original draft, review and editing by MRN; Conceptualization, investigation, methodology, validation, writing–original draft, review and editing, funding acquisition by ARAG All authors have read and agreed to the published version of the manuscript.

Funding: The Research Work is supported by the Deanship of Scientific Research, College of Science-Research Center, King Saud University, Riyadh, Saudi Arabia.