Cabinet note soon on shale gas policy

The petroleum ministry is to soon move a Cabinet note for the country’s first shale gas policy; this might be finalised later in the financial year. The ministry has got comments from the industry on a draft policy it had circulated earlier this year.

A ministry official said, on condition of anonymity, the policy could be finalised as early as December-January. “We need to coordinate with the environment ministry on issues related to water and land in shale gas exploration. We will then circulate a Cabinet note,” he said.

The key features in the draft policy related to cost recovery are being retained in the Cabinet note. The draft had proposed a royalty and production-linked payment for auction of shale gas acreage. Cost recovery in blocks offered under the New Exploration Licensing Policy (Nelp) has been at the centre of the dispute between the government and Reliance Industries Ltd. The draft policy suggested a fiscal regime similar to the regime adopted for coal bed methane (CBM) operations, where cost recovery is now allowed.
 

NEW POWER

• Policy could be finalised as early as December-January
• Key features in the draft policy related to cost recovery are being retained
• The draft proposed a royalty and production-linked payment for auction of shale gas acreage
• India is aiming to bridge the gas demand-supply mismatch by encouraging shale gas production

Hydrocarbons found in the form of shale gas have, over recent years, transformed the scene for the world’s biggest energy consumer, the US. Last month, China launched a second round of shale gas auctions and is targeting 6.5 billion cubic metres of annual production by 2015, from close to none this year.

India is looking to bridge the gas demand-supply mismatch by encouraging shale gas production. State-owned Oil and Natural Gas Corporation has launched an experimental project to test-flow shale gas and learn about proprietary technologies in the Damodar Valley basins. Several Indian basins such as Cambay (in Gujarat), Assam-Arakan (in the northeast) and Gondwana (in central India) are known to hold shale gas resources.

Indian companies have already gained exposure to the business through investments outside the country. Last month, Oil India and Indian Oil Corporation together bought a 30 per cent stake in Houston-based Carrizo Oil & Gas’ Niobrara shale gas asset in Colorado for $85.2 million. GAIL had, last September, acquired a 20 per cent stake at Carrizo’s Eagle Ford shale acreage in south Texas for $95 mn (Rs 490 crore). The acquisition was GAIL’s first shale gas asset in the US.

The Mukesh Ambani-promoted Reliance Industries holds 45 per cent in Eagle Ford and 60 per cent in a Marcellus Shale gas field through a joint venture with Carrizo. RIL’s shale gas business in the US comprises three upstream joint ventures, with Chevron, Pioneer Natural Resource & Carrizo Oil & Gas, and a midstream joint venture with Pioneer.