ONGC to start drilling for shale gas in Gujarat next month

New Delhi: A day after government allowed state-owned firms to extract shale oil and gas, Oil and Natural Gas Corp (ONGC) Wednesday said it plans to start drilling for the unconventional hydrocarbon resource in Gujarat next month.

The Cabinet Committee on Economic Affairs (CCEA) on Tuesday allowed ONGC and Oil India Ltd (OIL) to tap shale resources in blocks allotted to them on a nomination basis.

"Next month, we plan to spud a well for shale gas in Cambay basin (in Gujarat)," ONGC Director (Exploration) N K Verma told reporters here.

The company plans to drill four wells this year, result of which would decide its future course of action.

Cambay is one of the basins that has been identified as potentially bearing shale resources, which are hydrocarbons trapped in sedimentary rocks.

"Four wells will cost around Rs 150 to 200 crore; shale oil and gas well are 2.5 times costlier than conventional oil and gas as they involve hydraulic fracturing," he said.

Shale extraction uses hydraulic fracturing, which involves blasting water, sand and chemicals underground to release trapped oil and gas.

Verma said ConocoPhillips is assisting ONGC in the shale gas venture.

The CCEA Tuesday approved the long-awaited shale gas and oil exploration programme to boost domestic output.

In the first phase, state-owned ONGC and OIL have been permitted to explore for and produce shale oil and gas from onland blocks that were allotted on a nomination basis before advent of the New Exploration Licensing Policy in 1999.

The government will offer shale oil and gas blocks to other companies through an auction planned after such a policy is taken to the Cabinet for approval in the next few weeks.

Shale gas, or natural gas trapped in sedimentary rocks (shale formations) below the earth's surface, is the new focus area in the US, Canada and China as an alternative to conventional oil and gas for meeting growing energy needs.

As per available data, six basins - Cambay (in Gujarat), Assam-Arakan (in the North-East), Gondawana (in central India), KG onshore (in Andhra Pradesh), Cauvery onshore and Indo-Gangetic basins, hold shale gas potential.

Various studies have estimated recoverable reserves of shale gas at between 6 trillion cubic feet and 63 trillion cubic feet.

Verma said shale production will be taxed at par with conventional fields.