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India shale gas auction by end of 2011

US assisting India with regulatory framework; ONGC spuds first shale-gas well

A FIRST shale-gas auction in India will be launched by the end of 2011. SK Srivastava, head of the Directorate General of Hydrocarbons (DGH), says the “resource assessment, policy framework and legislative changes are in progress” to make the auction possible.

The DGH, India’s upstream regulator, is fleshing out a new shale-gas policy and identifying blocks for auction, which will be completed by April 2011.

Analysts say the government needs to streamline its tax and royalty regimes if the new shale licensing round is to lure heavy investment. The government has hinted that the US will help India to prepare the necessary regulatory framework.

India joined the US-sponsored Shale Gas Initiative in November 2010 when President Barack Obama visited the country and signed a memorandum of understanding covering co-operation in assessment of India’s unconventional resource potential. The initiative promotes the transfer of technology and shale-gas expertise from North America to hopeful developers elsewhere.

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

Although India’s ultimate shale-gas resources are unknown, the International Energy Agency (IEA) reckons global in-place reserves could be more than 900 trillion cubic metres (cm), with 274 trillion cm in the Asia-Pacific region alone. The US Geological Survey is carrying out studies on shale-gas resources, according to India’s oil ministry.

India’s gas use in 2009 was 59bn cm, up from 43bn cm the year before, according to the IEA. The agency says this “could easily have been 30bn cm higher”, but consumption was capped by supply constraints. Despite having conventional gas 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.

The government has not specified where the blocks up for auction will be located. But state-owned ONGC has begun shale-gas production near Durgapur, West Bengal. The company spudded its first well in September and says it is targeting the Damodar basin in west Bengal and the Cambay basin in Gujarat as “priority areas”. Oilfield services firm Schlumberger announced on 7 January that it had completed drilling the first shale-gas well for ONGC.

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

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