Govt Mulls Exploration Of Shale Gas In Pre-Owned Nelp Blocks

Govt Mulls Exploration Of Shale Gas In Pre-Owned Nelp Blocks

With oil and gas output showing sharp decline over the past few years in the prime KG-D6 basins, the Government is keen to tap unconventional sources of energy, and is seriously thinking of a possibility where shale gas and oil could be allowed to be explored within the existing NELP blocks. However the owners of these blocks may be asked to ring fence the financial and contractual regime governing shale gas exploration from their existing oil and gas accounts.

Sources within the Government told The Pioneer that the proposal is at a preliminary stage, but it may become a viable option in the near future, considering the fact that crude oil production of the country is not able to match the overall requirement.

With Petroleum Minister Dharmendra Pradhan regularly emphasising on India aiming to achieve self-sufficiency in oil production by 2030, sources said that possibilities of exploring unconventional sources of energy like shale gas and oil, coal bed methane and tight gas need to be seriously looked at.

According to the proposal, ring fencing of financial costs to be inculcated while exploring shale gas deposits in pre-owned NELP blocks containing conventional oil and gas, is being thought of by the Government in order to avoid overlapping of exploration costs of two different types of natural resources.

The Government would like to ensure that the block operator does not indulge in any kind of effort to enhance his or her costs by also adding the expenses incurred in exploring shale gas deposits. This is why the ring fencing option is being thought of, sources said.

Though at the same time, they added that if this proposal is to be implemented, then the production sharing agreements (PSAs) will have to be re-drafted. But then, if the overall exploration jurisdiction needs to be expanded, then all the legal aspects will have to be looked into, said sources privy to the development.

Interestingly though, the ring fencing mechanism had also been thought of by the UPA Government, when it had come up with a proposed policy for exploration of shale oil and gas in 2012.

Under it, the UPA Government had plans to offer acreages through an open international competitive bidding process. The successful bidders were to be required to enter into a contract with the Government, which will be negotiated based on the Model Contract (MC).

However according to the draft note of that policy (which the UPA Government had circulated among stakeholders, for their comments) “all areas which are already allotted under nomination /pre NELP/NELP/CBM rounds and where operations have entered the development/production phase shall be excluded from area to be offered for shale oil/ gas exploration”.

At the same time though, it also had a clause which said that “as financial and contractual regime for conventional oil and gas and shale oil and gas are different, in case of the same contractor operating both the blocks, the policy will be to adequately ring fence the two so that two distinct accounts are maintained, without affecting each other”.


Though that policy could not see much progress, there is a possibility that with the present NDA Government also thinking on similar lines amid growing realisation of tapping unconventional sources of energy, it could see the light of the day, though with some changes.

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