Cairn India seeks right of first refusal over Rajasthan block

Cairn India, the company which gave the nation its biggest oil discovery in more than two decades, has asked the Oil Ministry for rights to explore for unconventional shale gas in its prolific Rajasthan block.

Oil Ministry's draft policy for exploration of shale gas provides for giving operators of block awarded under New Exploration Policy (NELP) since 2000, the first right of refusal for exploiting the unconventional resource. It however does not confer the same rights to operators of pre-NELP blocks like Rajasthan.

"We believe that the draft shale gas policy which solicited public comments in August 2012 was forward looking when it stated that 'right of first refusal will be offered to the existing contractors'. However, the discrimination between NELP and pre-NELP blocks (in the draft policy now prepared) will defeat the purpose," Cairn CEO P Elango wrote to Oil Secretary on May 24.

Shale gas or natural gas trapped in sedimentary rocks (shale formations) below the earth's surface, is the new focus area in the US, Canada and China as an alternative to conventional oil and gas for meeting growing energy needs.

As per the available data, six basins -- Cambay (in Gujarat), Assam-Arakan (in the North-East), Gondawana (in central India), KG onshore (in Andhra Pradesh), Cauvery onshore and Indo Gangatic basins, hold shale gas potential. Rajasthan block too may hold shale gas potential.

The draft shale gas policy being prepared by the government has a mechanism to give the first right of refusal to existing contractors holding oil and gas blocks. However, this first right of refusal may be accorded to only NELP blocks.

Cairn demanded that the "first right of refusal should be available to all currently operating blocks, irrespective of pre-NELP or NELP, to ensure consistency and uniform implementation of the shale gas policy."

"Existing licences/leases should have the exclusive rights to explore for and develop all hydrocarbon resources encountered in a block and/or shale, which is just another form of hydrocarbon resource," Elango wrote.

The company said the original intent of the draft shale gas policy to give right of first refusal to all operators, irrespective of where the blocks were awarded pre-NELP or in NELP, should be restored as it was "fair and reasonable."

"Overlapping licenses/leases with simultaneous operations will pose significant health, safety and environment (HSE) risks and operational conflicts, leading to conflicting claims to resource ownership, sub optimal utilisation of capital, hampering development of hydrocarbon molecules present in multiple forms," he added.