India to move to production sharing contracts ahead of new licencing round

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India needs energy and its stepping up its game to tap into its increasingly attractive-looking domestic resources. According to an official in the Indian Petroleum and Natural Gas Ministry, the country’s government is ready to move from production sharing to revenue sharing contracts in the hope of attracting E&P companies.

Under the newly-unveiled Hydrocarbon Exploration Licensing Policy (HELP), operators would be able to explore and extract any fuel discovered in the licence area – be it coalbed methane or shale gas or oil – without seeking separate approvals for each resource.

The forty-eight small and marginal oil and gas blocks that were put up for auction last month were the first to be allocated under the new revenue-sharing contracts. However, the Indian government is in no rush to release all of the potential blocks. Speaking to Mining Weekly, the Petroleum and Natural Gas Ministry official (who remained unnamed) said that it is important that the ministry “gets it right the first time”, which means that the first round of auction under HELP could be pushed back to the next calendar year.

Many E&P companies are waiting with bated breath for the new HELP policy and guidelines. Less than two weeks ago, India’s biggest unconventional gas explorer, Essar Oil, discovered eight trillion cubic feet (tcf) of original in-place shale gas resources underneath the company’s coalbed methane deposits.

Following the discovery, Essar Oil said that it has plans to develop the shale gas reserves after it gets more clarity on the government’s exploration policy.

“We will develop the shale gas once we get clarity from the government on pricing and other guidelines under HELP,” Manish Maheshwari, CEO-E&P of Essar said.

“Shale gas got covered under the March 2016 HELP policy and the guidelines are under formalisation for blocks which covers both conventional and unconventional under the same acreages. We are looking forward to those guidelines,” Mr. Maheshwari added.

Also, there have been reports of large amounts of hydrocarbons present in the West Bengal basin. This is the belief of Naresh Ghose, a professor of geology of Patna University, who has worked extensively in the eastern part of India.

The presence of hydrocarbons in this region is based on interpretation of fragments of volcanic rocks called ‘pyroclasts’ and sediments deposited between the successive lava flows, composed of shale, mudstone, black shale, siltstone, sandstone, bentonite (altered volcanic glass) and peperite (alternation of lava and unconsolidated sediment).

“My prediction has proved to be correct from the recent announcement of Essar Oil of its discovery of huge reserves of shale gas in the Raniganj area below the coal-bearing strata,” he said.

“The oil and gas resources in the coastal areas of Mumbai, gas fields of the Krishna-Godavari basins in the east coast and almost the entire coal resource (except lignite) and coal-bed methane in the Damodar valley coal-fields (Jharkhand) and Madhya Pradesh are directly related to heat source from these two major volcanic events,” he added.

This is all very good news for India, which currently still relies in more than 85 percent on imports to satisfy its domestic demand on oil and gas.

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