Shale gas exploration likely for only government firms initially

Move pushed by studies that at least 176 nomination blocks would have shale deposits

In a major setback to private sector majors preparing to bid for a piece of the country’s shale gas reserves, the petroleum ministry is thinking of initial allotment of nomination blocks (allotted to state firms before competitive bids were allowed) to only government companies.

A senior petroleum ministry official said: “During the initial stage, we are planning to give the rights to state-run companies only. Those which have NELP blocks (given after bids under the New Exploration Licensing Policy) would have to go for the bidding round after that. This would help us to prove the potential. Otherwise, the policy would affect government’s profit-petroleum (the part of output which in the production sharing contract is not used to recover the company’s costs but is meant to be split with the government, the latter taking the bulk). In nomination blocks, this would be less, as expenses would be lower.”

The government move is pushed by studies that at least 176 nomination blocks would have shale deposits.

Shale gas refers to natural gas trapped within shale formations below the earth’s surface. The government is planning to put at least 100 blocks for bidding in Cambay, Krishna-Godavari and Raniganj.

India has reserves of 12-15 trillion cubic feet (tcf) in these three reserves, with about six tcf considered recoverable. “In these blocks, the cost of exploration of shale would get added to the conventional production. Hence, it was a conscious decision by the government to allow it for nomination blocks by players like Oil and Natural Gas Corp (ONGC) and Oil India,” he added.

The major basins in India with shale gas potential include Cambay in Gujarat, Assam-Arakan in the northeast, Gondwana in central India, Krishna-Godavari in Andhra Pradesh, Cauvery onshore and the Indo-Gangetic basins. According to studies by ONGC, the Damodar basin has an overall reserve of 34 tcf and eight tcf is recoverable.

The policy is set to go before the Cabinet soon. For each area, a steering committee would be there, with representatives from contractors, the environment ministry and the National Environmental Engineering Research Institute. The ministry of environment had raised several concerns regarding the huge water requirement using fracking technology. It had also demanded inclusion of a water cess for explorers to be a part of the coming shale gas policy.