Essar Energy to gain foothold in shale biz | mydigitalfc.com

Essar Energy, the UK listed FTSE 100 oil company from India, is preparing to take lead in the shale gas exploration business in India by keeping a plan ready in the Gondwana region of the country where it already has five coal bed methane blocks (CBM).

The emphasis would be on simultaneous development of the CBM and the shale gas blocks.

A senior Essar Energy official on conditions of anonymity said, with the change in the sentiment and the union secretary of petroleum and natural gas, Saurabh Chandra emphasised on private participation in the development of unconventional energy projects to achieve the real potential ensures that allocation of shale gas blocks would happen soon.

“We expect to get couple of blocks for shale gas that government plans to announce for development by the private players in the Gondwana region out of the six regions identified by the government,” the official said.

It would be even more beneficial since the gas price revision is also expected to happen by the end of September this year. Although the cost of production of shale gas is still to be worked out as the projects awarded to ONGC and OIL are in the initial stages, the price of other unconventional sou­rce of energy such as coal bed methane (CBM) stands at around $3 per mmBtu and with transportation cost included it stands at $4 per mmBtu. The government must ensure that the price revision is at least at arund $8 per mmBtu for the viability of these projects,” said the official.

The government would announce the shale gas blocks under the NELP X round of allocations, under the unified licensing policy.

It is heartening to see that the government is more amenable to change and there are likely policy changes that would address the hurdles that kept the investors away from the segment. The latest government decision to allow methane drainage from the coal mines would add an additional footprint of 400 coal blocks that have estimated 100 tcf (trillion cubic feet) of gas. And this drainage would not be limited to only PSU companies but can be utilised by anyone.

There are only four producers in the CBM segment since the parties have to take at a conservative estimate around 40 approvals after the project is awarded. That takes more than three years even before work at the project could start. This is waste of time and a drag on timely delivery.

There are issues such as subsidy burden that hangs on upstream companies to pay for marketing companies losses. According to estimates the digisets that consume subsidized fuel produce more than double the power produced by nuclear and solar sector in India. All this contributes to the overhang of problems within the sector. The issues need to be resolved through policy makers who have the domain expertise and not be laymen.

India has shale gas prospective reserves of around 2,100 tcf, out which recoverable reserves stand at around 96 tcf. While there are similar reserves in the CBM as well, the amount that has been captured or monetized is less than one per cent of the total.

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