India needs strong service and infrastructure capabilities, along with a favourable regulatory regime, to promote its shale gas industry, said a professional services firm in a report it released here Friday.
The report "Shale gas - global experience and key learning", released by Ernst & Young (EY) at the International Congress on Shale Exploration India 2013, says that to fully exploit its shale gas potential, India will need to address several factors that have helped the US achieve a shale gas revolution.
The factors include industry-friendly regulations, a favourable pricing regime, a developed onshore oilfield services (OFS) sector, and an extensive gas-distribution network.
According to the report, as per the Indian government's draft policy on shale oil and gas, initial permission for exploration on existing acreage will be restricted to national oil companies (NOCs). The policy proposes several financial incentives for NOCs, including income tax and customs exemptions and reduced royalties to be paid on shale gas.
While the shale gas policy is expected to be announced this year, the petroleum ministry plans to formulate a separate policy for private and foreign companies at a later date.
The EY report emphasises the need for India to expand its natural gas pipeline infrastructure. Currently there are around 11,500 kms of natural gas pipelines across the country, with another 12,650 km of pipeline being under construction.
Natural gas consumption in India during the current fiscal is expected to be around 104 billion cubic metres (bcm), against a production of 40.7 bcm.
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The government has been taking steps to address the supply-demand gap, which includes the recent major decision to increase gas prices effective from April 2014.
The report suggests that the Indian government should ensure that adequate incentives and a level playing field are made available to both domestic private and foreign companies to encourage investments in this important hydrocarbon resource.
Domestic state-owned and private companies are also acquiring stakes in foreign shale assets. State-run explorer ONGC has signed an agreement with ConocoPhillips for exploration and development of domestic shale gas resources. Also state-owned Oil India and Indian Oil have jointly acquired a 30 percent stake in Carrizo's shale assets in the Niobrara basin in the US.
Two-thirds of technically recoverable shale gas resources are concentrated in seven countries - China, Argentina, Algeria, the US, Canada, Mexico and Australia, the report said.