DRILL TIME

New Delhi, Sept. 18: Shale gas blocks are likely to be auctioned in early 2012-13, with the government planning to finalise the regulatory norms, including a production-sharing contract, before the end of this fiscal.

“Shale gas blocks will be auctioned early next year. The blocks will have new regulatory norms, including the production-sharing contract, taking into consideration the objections raised by the Comptroller and Auditor General (CAG) for the Nelp (New Exploration and Licensing Policy) contracts,” a senior oil ministry official said.

The government has identified six basins for exploring the unconventional fuel, which will help to reduce the country’s energy shortfall.

India has signed a shale gas accord with the US to determine reserves and help in auction preparations.

The United States Geological Survey (USGS) is identifying the potential areas and the amount of gas available. “While the USGS is likely to submit its report in the next three months, the oil ministry and the Director General of Hydrocarbons are working on the regulatory framework,” officials said.

They said the production-sharing contract would provide enough incentives for the exploration firms and would take care of the interest of the government in getting a higher share of profit petroleum.

Criticising the existing profit-sharing mechanism in Nelp, the CAG in its recent report said the slabs for profit-sharing between the operator and the government were designed in a way that a more capital-intensive project would lower the government’s share of profit petroleum.

The CAG has recommended the removal of the norm from future contracts.

“Instead, the biddable profit-sharing percentage should be a single percentage. This will reduce the incentive for skewed volume and timing of capital expenditure resulting in very low government’s share of profit petroleum.

“Further, to ensure a little bit of control, high value procurement decisions above a specified limit should be subject to approval by the management committee, more specifically the approval of the government representatives,” it said.

The DGH has identified six basins — Cambay, Assam-Arakan, Gondawana, KG onshore, Cauvery onshore and Indo-Gangetic basins — to carve out shale blocks.

Shale gas is a non-conventional natural gas found in non-porous rocks and requires the fracking technology for extraction.