By Nidhi Verma
NEW DELHI (Reuters) - India will take at least three months more to draw up a policy framework for shale gas exploration that would allow both private domestic and foreign firms to begin drilling for the fuel, two oil ministry sources said on Wednesday.
India has a chronic power supply shortage and yet many gas-fired electricity plants stand idle as the country lacks the fuel to supply them, or the infrastructure and cash for expensive imports. Shale gas supplies could eventually help meet demand, but India has been slow to open up the sector.
The country could be sitting on as much as 96 trillion cubic feet (tcf) of recoverable shale gas reserves, the U.S. Energy Information Administration estimates, equivalent to around 26 years of the country's gas demand.
India's cabinet will soon approve a policy for shale gas exploration, initially allowing state oil companies holding India's oldest contracts to drill for shale. That would give state-run explorers Oil and Natural Gas Corp
Of the 356 blocks the two companies hold, India's upstream regulator has said 176 of them possibly hold shale resources.
These contracts were awarded when India first started a push to find and produce oil and gas after it got independence from Britain in 1947.
The old contracts refer to activity related to exploration and output of petroleum, which India's government has interpreted as a broad enough term to cover unconventional energy such as shale.
The wording of new contracts for blocks awarded to companies such as Reliance Industries
It is unclear how the government would resolve the issue. It is also unclear if the government would open existing blocks to bidding from companies who want to drill for shale.
BUILDING SHALE EXPERTISE OVERSEAS
Gas demand in the country is expected to jump to 473 million cubic metres a day (mmscmd) by 2016/17 from 286 mmscmd in 2012/13.
India is eager to bring in global energy expertise to help it unlock resources and cut import dependency. It will link local gas prices to global indexes from April 2014 in an effort to incentivise and attract producers and importers.
Reliance Industries, GAIL (India)
ONGC signed a preliminary agreement last year with ConocoPhillips
Indian rules do not permit equity participation in these particular blocks and multinationals are reluctant to be just service contractors, said an ONGC official.
"For (these) blocks we have to rely on consultants and service contractors for drilling," said the ONGC official. (Editing by Jo Winterbottom and Simon Webb)
