India Plans to Sign Shale Gas Pact with US - Oil Minister

MUMBAI (Dow Jones Newswires), Oct. 18, 2010

India plans to sign an initial agreement with the U.S. in shale gas exploration, as it prepares to auction blocks by the end of next year to tap the fuel source, top oil ministry officials said Monday.

"The agreement with the U.S will be for exchanging data, identifying shale gas basins," Oil Minister Murli Deora told reporters at an event held to invite investors to bid for 34 oil and gas exploration blocks in India.

The South Asian nation's interest in shale gas stems from the fact that the U.S. has attracted heavy investments in the sector from global energy giants such as Royal Dutch Shell PLC and Exxon Mobil Corp. as well as Reliance Industries Ltd., India's largest company by market value. Reliance has spent $3.34 billion since April to buy shale gas assets in the U.S., where the fuel has replaced imported liquefied natural gas and pushed gas prices lower.

S.K. Srivastava, director at the Directorate General of Hydrocarbons, said a shale gas exploration pact with the U.S. could be signed during U.S. President Barack Obama's visit to India.

Obama travels to New Delhi early next month to deepen ties with the world's second-fastest-growing major economy after China.

Shale gas is trapped in geological shale formations and previously had been very difficult to extract. But U.S. companies have developed technologies to crack these tight rock formations, making output of the gas economical, and in so doing transforming the country's energy profile.

India, which is heavily dependent on imported oil and gas, hopes to replicate the success seen in the U.S. with its own shale gas reserves. The oil ministry said March 31 that U.S. expertise in using shale gas to boost its natural gas output could come handy in identifying such resources in India.

Oil Secretary S. Sundareshan said Monday the first auction round for shale gas blocks is expected by December 2011.

The government is evolving a policy framework for shale gas exploration, he said, adding that exploration for shale gas will be more expensive than traditional oil and gas finds. "We will have to have separate parameters and we are working on it," he said.

Separately, India's upstream regulator said the mapping of prospective shale gas areas in India has been initiated.

Shale gas deposits in India are expected in basins in western, central and northeastern parts of the country.

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