India is framing a policy on shale gas, a hitherto unexploited energy area in

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this country. “We have initiated action to develop a framework for an assessment of the resource potential which would lead to exploitation of this (shale gas) resource,” petroleum minister Murli Deroa told an oil industry event in New Delhi on Wednesday.

“Shale gas is an emerging area. It has become an important source of energy in a few countries that have been able to commercially exploit it,” he said.

Earlier, as reported by Financial Chronicle on June 13, the government had asked the directorate-general of hydrocarbons to draft an approach paper for shale gas. The director-general, S K Srivastava, said the policy would take a year and a half to frame. Three basins – Cambay, Assam and Gondwana – are expected to have shale gas reserves.

Asked if any Indian company, private or state-run, had shown initiatives for shale gas exploitation, he said, “They are making enquiries but nothing substantial has happened yet.”

The fact is ONGC has already let it be known that it is interested in shale gas and will spend about Rs 100 on four exploratory wells in the Damodar basin.

In the private sector, Reliance is interested. It has already signed agreements with two American companies for shale gas mining in that country. In one of them, it will have a substantial stake; with the other it will have a joint venture.

By the time the Indian policy is in place, by virtue of the expertise gained from these American ventures, Reliance is sure to have a headstart over all others, including ONGC, in the matter of acquiring shale gas mining technology.

A separate policy is necessary because the present production- sharing contract for oil and gas assets and coalbed methane doesn’t allow a company to exploit shale gas found between rock formations, both offshore and onshore.

A petroleum ministry official, who declined to be named in this report, thought the pricing of shale gas would be the key. “There will be many buyers if shale gas costs less than imported liquefied gas,” he said.

According to reports with the ministry, shale gas may cost between $3 and $7 per million British thermal units, whereas natural gas currently costs that between $4.2 and $7.

Shale gas is now mined only in the US and Canada. A number of companies are in the business. They include Devon, Chesapeake, BP, Shell, EnCana, Anadarko and Range Resources. A few others, like Beach Petroleum, Talisman, EOG, Apache, OMV, ExxonMobil, ConocoPhillips and Statoil are engaged in exploratory work in Australia, Canada and Europe.

China is also getting into the act and has set targets for its oil companies to increase the share of shale gas in gas consumption to half. Last year, president Barack Obama agreed to share US shale gas technology with China.

The US made a similar offer to India at an international energy meeting in Mexico in March. This was discussed between Deora and the US deputy secretary of energy, Daniel Poneman, on sidelines of the meeting. This may eventually lead to a memorandum of understanding between the two countries for technology transfer to India.

Bloomberg News, quoted Thomas Grieder, a London-based analyst at market intelligence firm IHS Global Insight, as saying that “everyone will be looking at places like India with interest. It will depend on whether regulations are solid and implemented consistently.”