Union petroleum Minister Veerappa Moily informed that the government would announce policy on exploration and production of shale gas in the next 20-25 days.
The petroleum ministry will finalise the policy once it receives comments from different ministries.
Found in non-porous shale rocks, extraction of shale gas, which is a non-conventional natural gas, requires the fracking technology, similar to the extraction of gas from coal seams in India. The unconventional gas can help India to bolster its energy security.
Once the policy is announced, the government would invite bids from companies for exploration of shale gas blocks. Bidders will be asked to quote a percentage of the output they are willing to share with the government at different production slabs.
According to the draft shale gas policy, government may allow market determined pricing so that operators are aware of the risks before committing themselves to a project.
The draft policy does not allow players to recover cost and, hence there is no incentive for gold plating, which may occur while allowing profit sharing, based on the cost recovery.
Profit sharing came under the criticism of the Comptroller and Auditor General of India during its audit of Reliance Industries’ KG-D6 block.
Output sharing will minimise government intervention and remove complications in accounting. The government’s share of production will be net of all statutory dues.