Cabinet okays policy to boost shale, unconventional hydrocarbon exploration

The move is likely to benefit companies like ONGC, Oil India, Vedanta Cairn, Reliance Industries and CBM players like Essar Oil & Gas Exploration and Production

The Union Cabinet has given a approved a policy allowing operators to explore all unconventional hydrocarbons -- including shale, coal bed methane and hydrates -- in existing fields. 

The move is likely to benefit companies like Oil and Natural Gas Corporation (ONGC), Oil India, Vedanta Cairn, Reliance Industries and CBM players like Essar Oil & Gas Exploration and Production (EOGEPL). Through this, exploration of unconventional hydrocarbon can be carried out under the existing Production Sharing Contracts (PSCs), CBM contracts and Nomination fields. Moreover, ‘Uniform Licensing Policy’ which is presently applicable to Hydrocarbon Exploration and Licensing Policy (HELP) and Discovered Small Field (DSF) Policy, will be applicable to all operating fields. 

"We welcome the move since it will open up exploration of all unconventional hydrocarbon resources in existing fields to meet the energy needs of one of the fastest growing economies. Essar is looking forward to expediting the potential of 2 trillion cubic feet of recoverable CBM and Shale gas from Mehsana and Raniganj blocks," said Vilas Tawde Managing Director and Chief Executive Officer of EOGEPL. The company is expecting recoverable reserves of at least 1.5 trillion cubic feet (tcf) of recoverable shale gas reserves in its Raniganj block in West Bengal, which may require an investment of at least $1 billion. 

Similarly, Cairn India had approached the government in 2013 seeking first right of refusal on producing shale from its Rajasthan block. According to sources, Vedanta Cairn has the largest unconventional reserves among existing private sector hydrocarbon players.

In 2015,  Schlumberger had stated that India has between 300 to 2,100 tcf of total shale gas and oil resources. Shale gas and oil are those found trapped within the shale sedimentary formations. Similarly, a recent study by the US Geological Survey states that India has the second largest gas hydrate reserves after the United States — with Krishna Godavari, Cauvery and Kerala basins alone contributing around 100-130 trillion cubic feet of estimated reserves. On the other hand, the Directorate General of Hydrocarbons' estimates indicate the presence of around 92 tcf of CBM spread across 12 states. 

With this policy dispensation, the government is expecting fresh investment in Exploration and Production (E&P) activities and increased chances of finding new hydrocarbon discoveries.

As per existing contractual regime of PSCs, existing contractors are not allowed to explore and exploit CBM or other unconventional hydrocarbons in the already allotted area. Similarly, CBM contractors are not allowed to exploit any other hydrocarbon except CBM. 

Now, an area of 72,027 square kilometres held under PSCs of Pre- New Exploration Licensing Policy (NELP)/NELP regime and 5269 sq. km area under CBM contracts will be opened up for simultaneous exploration and exploitation of conventional or unconventional hydrocarbons.