India to Launch First Shale Gas Auction by 2013

The Indian federal government has plans to launch its first auction of a shale gas block by the end of 2013, reports The Economic Times.

According to the report, the auction of shale gas will be on terms that are likely to be remarkably different from those offered in bid rounds for oil and gas blocks.

Reports suggest that apart from going in for the open acreage system for auction of the shale gas blocks in various parts of the country, the federal government is likely to allow 100 percent participation of foreign companies in the proposed auction.

The ET report says that the Directorate General of Hydrocarbons (DGH), the technical arm of the Indian Petroleum and Natural Gas Ministry, has proposed to offer areas for exploration of gas trapped in sedimentary rocks — shale gas — on royalty and production-linked payments to the government.

It is believed that under the proposed new shale gas policy, the Ministry for Petroleum and Natural Gas will hold consultations with other ministries such as Law and Justice, Finance, Environment and some others before finalizing a model contract.

Media reports suggest that the contractor will be exempted from payment on shale oil and no cost recovery will be initiated.

However, bidders would be asked to quote a percentage of output they are willing to share with the government at different production slabs.

The DGH has identified six basins under Phase 1 — Cambay, Gondwana, Assam, KG onshore, Cauvery onshore and Indo-Gangetic basins.

The DGH has said in its note that preliminary estimates suggest that fairly thick sequences with high shale gas potential are present in the oil, gas and coal sedimentary basins such as Cambay, Gondwana, Krisha-Godawari on land and Cauvery on land.

ONGC and the Central Mine Planning and Design Institute (CMPDI) are in the process of identifying 11 more basins for shale gas.

Currently, India offers oil and gas blocks under the New Exploration Licensing Policy (NELP). So far, India has completed nine rounds of NELP; the federal government, through international competitive bidding, has awarded 249 oil and gas blocks.

NELP was introduced by India’s government in 1997-98 to provide an equal platform to both public and private sector companies in exploration and production of hydrocarbons with the DGH as a nodal agency for its implementation.

Bidders are facing problems for clearance in various ministries for the blocks offered under NELP.

According to sources in the Petroleum Ministry, out of the 194 blocks under operation, 79 blocks were having clearance issues. Out of this, 74 blocks have been taken up with the Ministry of Defense.

Under NELP, companies share profit with the government only after recovering all their investment. However, DGH proposed a fiscal regime for shale gas and oil on lines that exist in coal bed methane (CBM) contracts where the government gets royalty and production-linked payment.

Shale oil and gas are unconventional hydrocarbons reserves found in non-porous rock and require fracking technology to extract them from shale.

Some surveys and studies have put recoverable reserves of shale gas between 6 trillion and 63 trillion cubic feet.

TC Malhotra contributes to MetalMiner from New Delhi.

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