Officials at the oil ministry are going to place the country’s first policy on shale gas in front of the Cabinet in the coming week, according to sources. The policy will be followed by the identification of gas blocks, bidding on gas blocks and the first round of auctions before the end of 2013.

Oil Minister Veerappa Moily has said that India will follow in the footsteps of countries such as the US and others in Europe who have made significant strides in shale gas technology and exploration. The US is set to gain energy self-sufficiency in the coming years as it becomes the biggest success story of the shale gas revolution.

However, experts and advisors feel India should not “over-sell” the shale gas phenomenon and be ready to face the overwhelming number of challenges required to make it a success story.

“Shale will be just another energy source for India and will not lead to any kind of energy revolution,” says a source close to the energy policy corridors on condition of anonymity. “The factors that led to a shale revolution in US are completely different. The policies that helped this to happen have been in place for around a hundred years. Other very important points such as land ownership, technology, availability of water and so on, helped the case in America. Here, it will not be easy,” said the source. Robin Mills, energy strategist and author of The Myth of the Oil Crisis told this newspaper, “Major challenges for new entrants will be understanding the geology, finding “sweet spots” in the shales and devising the “magic formula” for most effective fraccing (all shales are different), overcoming public opposition or community issues, developing the required service industry, building gas pipeline infrastructure to connect fields to consumers, creating solid but practical regulations and enforcement, getting gas pricing or commercial terms right.”

The current shale policy draft does not permit cost recovery or profit sharing. The offer of acreages will be made through an open International Competitive Bidding Process and successful bidders will be required to enter into a contract with the government. It also includes provisions for mandatory environmental impact assessment by the Ministry of Environment and Forest and pre-bidding approval from state governments in matters such as land acquisition and water management. These points are expected to remain same in the final policy document.

Currently, six basins in India – Khambat in Gujarat, Assam-Arakan in the North East, Gondawana in parts of Maharashtra and Madhya Pradesh, KG onshore in Andhra Pradesh, Cauvery onshore and the Indo-Gangetic basin hold potential for shale gas exploration. The disputed territory between India and Pakistan, Sir Creek, also has shale gas potential.

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