Auction of six shale gas blocks likely this year

KOLKATA: Six shale-gas blocks with estimated reserves of over 50 billion cubic metres are likely to be put up for sale this year, in what will be the country’s first auction of exploratory blocks for this fuel. Two of these blocks are in Ranigunj and have estimated viable reserves of about 50 billion cubic metres, according to the Central Mines Planning & Design Institute ( CMPDIL), a Coal India subsidiary that recently completed analysing data given by the Directorate General of Hydrocarbons ( DGH). The remaining blocks are in Jharia, in the Damodar basin, and in the Cauvery basin.

“We found considerable reserves in Ranigunj and four other blocks. We have recently submitted the data package handed over to us by the Directorate General of Hydrocarbons after it was analysed by CMPDIL,” CMPDIL managing director AK Debnath told reporters on the sidelines of a seminar in Kolkata.

Shale gas is a type of natural gas produced from shale. India is estimated to have 6-63 trillion cubic feet of recoverable reserves of the fuel, according to various studies. Exploration and development of this fuel in India will help it cut reliance on costly fuel imports. The government had said earlier it would auction exploratory blocks for this fuel this year.

According to reports, the Directorate General of Hydrocarbons is likely to recommend auction of the blocks on royalty and production-linked payment basis, similar to the one being followed for coal bed methane contracts.

The draft policy on shale gas exploration does not permit cost recovery, and hence profit sharing — features that came under criticism from the Comptroller and Auditor General ( CAG) in its report on Reliance Industries’ KGD6 block. Person with knowledge of the matter said bidders are likely to be asked to quote a percentage of output they are willing to share with the government at different production slabs. Experts say this will minimise government intervention and remove complications in accounting.

Under the country’s New Exploration Licensing Policy, companies share profit with the government only after recovering their investment. The CAG, however, says this regime reduces the government's share.