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India gears up for first shale auction

India plans its first shale-gas auction to go ahead next year

INDIA will launch its first auction for shale-gas acreage next year, a move that should draw investors keen to target one of the world’s fastest-growing natural gas markets.

And with US President Barack Obama due to visit India next month, the country plans to join a US-sponsored initiative that promotes the transfer of shale-gas technology and expertise from North America to hopeful developers elsewhere.

India’s upstream regulator is fleshing out a shale-gas policy and identifying blocks for auction, to be completed by April 2011. Although the country’s shale-gas endowment is unknown, the IEA reckons global in-place resources are above 900 trillion cubic metres (cm), with 274 trillion cm in Asia-Pacific – figures many analysts consider too conservative.

ONGC has already begun production in West Bengal. The national oil company (NOC) spudded its first well in September and is targeting the Damodar basin in West Bengal and the Cambay basin in Gujarat, as “priority areas”. The firm is implementing a pilot shale-gas exploration programme to assess resource potential and learn production techniques. It is working with Schlumberger on the project. ONGC expects the results of the first well by the end of the month.

Adding to the unconventional-energy momentum in India, Murli Deora, the senior energy minister, says the country will sign up to the US’ Global Shale Gas Initiative when Obama arrives in November. The US and China launched the initiative in November 2009 – Poland has since joined – aiming to reduce greenhouse-gas emissions through greater gas use; promote energy security; and create commercial opportunities for companies involved in shale-gas developments.

Shale gas already accounts for 17% of US gas production and this will rise to 35% by 2030, says Wood Mackenzie, a consultancy. Technical expertise developed in the US will be vital to progress in India.

India has previously focused more on development of its coal-bed methane (CBM) reserves, which the government says could amount to 50 trillion cm. But production is limited. Great Eastern Energy, one CBM developer, produces just 100,000 cm/d from its Raniganj project.

And the country’s shale-gas ambitions will meet obstacles. Anne-Sophie Corbeau, a senior gas analyst at the IEA, says the lack of data on the country’s shale-gas resources is one problem; while “a lack of domestic infrastructure and expertise” could also hinder development.

India’s gas use in 2009 was 59bn cm, up from 43bn cm the year before, says the IEA. The agency says this “could easily have been 30bn cm higher”, but consumption was capped by supply constraints. Despite having reserves of 1.1 trillion cm, according to Cedigaz, the IEA says India’s demand looks set to continue outstripping supply as it rises to 132bn cm/y by 2030.

Indian firms will increasingly benefit from their exposure to the US shale-gas sector, where a number have bought into joint-ventures with established producers. Reliance Industries has been particularly active, snapping up acreage in Texas’s Eagle Ford Shale in a joint venture with Pioneer Natural Resources, as well as gaining access to the northeastern Marcellus Shale, under an agreement with Atlas Energy.

State-owned Bharat PetroResources is investing in shale-gas acreage in Western Australia. And Oil India is also eying opportunities. The NOC has shortlisted seven investment banks to explore acquisition opportunities. It may join forces with Gail India to make an acquisition.

Analysts also say the government needs to streamline its tax and royalty regimes if the new shale licensing round is to bring investors to the sector. SK Srivastava, head of the upstream agency, has already announced one change, saying more than one operator will be able to explore for oil, gas and shale gas at the same time in a single block. 

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