After receiving comments from the industry on the draft shale gas policy, the union oil ministry is expected to move a cabinet note on this.
Reports suggest that the policy might be finalised later in the financial year. The oil ministry would also discuss issues related to water and land in shale gas exploration with the environment ministry.
Shale gas production is expected to bridge the demand-supply mismatch in the country for natural gas. State-owned Oil and Natural Gas Corporation has launched an experimental project to test-flow shale gas and learn about proprietary technologies in the Damodar Valley basins. Several Indian basins such as Cambay (in Gujarat), Assam-Arakan (in the northeast) and Gondwana (in central India) are known to hold shale gas resources.
The key features in the draft policy related to cost recovery are being retained in the cabinet note. The draft had proposed a royalty and production-linked payment for auction of shale gas acreage.
Cost recovery in blocks offered under the New Exploration Licensing Policy (Nelp) has been at the centre of the dispute between the government and Reliance Industries.
The draft policy suggested a fiscal regime similar to the regime adopted for coal bed methane (CBM) operations, where cost recovery is now allowed.
Hydrocarbons found in the form of shale gas have, over recent years, transformed the scene for the world’s biggest energy consumer, the US. Last month, China launched a second round of shale gas auctions and is targeting 6.5 billion cubic metres of annual production by 2015, from close to none this year.