Shale gas policy on cabinet agenda

New Delhi, March 24: The cabinet is likely to discuss the shale gas policy, which favours market-determined pricing of the fuel, in the next two weeks, petroleum minister M. Veerappa Moily today said.

"A draft shale oil/gas policy was placed in the public domain. The policy will be announced shortly. We will take it to the cabinet for approval in the next two weeks," Moily said at an editor's conference here.

Moily pointed out how shale gas had changed natural gas availability in the US, adding "they have done it in six years, we can also do that".

Shale is a non-conventional natural gas found in non-porous rocks and requires fracking technology for extraction.

The unconventional gas has been a game-changer in the US, significantly reducing the country's dependence on imported LNG.

According to the schedule, after the policy is finalised this fiscal, gas blocks will have to be identified for auction. This will be followed by the roadshows and the first round of auction will be held before the end of the calendar year.

The government has identified six basins ' Cambay, Assam-Arakan, Gondwana, KG onshore, Cauvery onshore and the Indo-Gangetic basins ' for carving out blocks to tap the unconventional fuel.

The draft policy favours market-determined pricing of shale gas. It does not permit cost recovery and profit sharing ' the two features that came under the criticism of the Comptroller and Auditor General of India during its audit of Reliance Industries' KG-D6 block.

Bidders will be asked to quote a percentage of output they are willing to share with the government at different production slabs.

"This will minimise the government's intervention and remove complications in accounting and incentives for gold plating, which may occur while allowing profit sharing, based on cost recovery. The government's share of production will be net of all statutory dues," the draft policy of the directorate general of hydrocarbons said.

Demand for natural gas in India is expected to increase from 179 million metric standard cubic metres per day (mmscmd) in 2010-11 to 473 mmscmd in 2016-17.

Oil block clearance

Moily said the Cabinet Committee on Investment (CCI), headed by Prime Minster Manmohan Singh, would take up the issue of clearance of 31 oil and gas blocks in "two weeks". These blocks are stuck at different stages of exploration because of not getting approval from the Defence, Navy or the Air Force.

Petroleum secretary Vivek Rae said the ministry had arrived at mutual agreements with the defence ministry and the Defence Research and Development Organisation for these blocks.

The CCI had last week cleared five oil and gas blocks and had marked three blocks as "no-go" areas, where exploration would be restricted.