Both the Government owned corporations like the ONGC and the private sector Reliance Industries Ltd have carried out important talks with the US companies and the Indian industry as a whole feel that this new opportunity in exploiting the gas reserves in India can be properly exploited with the help of the US technology which the leading companies like Exxon, Chesapeake, Davon and Pioneer have got. The proposed India-US pact will help India to assess the resources in the country and help in the exploration with the help of US technology and expertise including training to be given by the US companies to the Indian engineers.

Shale gas is an unconventional natural gas found in non-porous rocks and the extraction involves tapping the gas trapped between the layers of rocks, similar to the extraction of gas from between coal seams. Due to shale's low permeability, gas flow from the rock is prohibited. Hence its extraction was viewed as uneconomic. But now technology is available in USA for economic production of shale gas. The technology was first used in US in 1990s.Natural gas was extracted from shale by inducing fracs by water from multi level completion. The US shale gas production is now about one trillion cubic feet per year which is about 14 per cent of the country's production. The large scale production of shale gas led to a gas glut that reduced the US price of natural gas by 75 per cent from its peak in mid 2008.

The directorate general of hydrocarbons which is responsible for studying and identifying potential shale gas blocks in India, plans to draw a detailed road map by March 2011.Exploration laws will be changed and the Government plans to come out with policies and a production sharing mechanism including the sharing of profits with the state governments before the first round of blocks are auctioned in August 2011. ONGC has already ventured into shale gas and it has started drilling while several basins in India like Cambay, Assam-Arakan and Gondwana are reported to have huge deposits of shale gas. In the US, shale gas has significantly reduced the country's dependence on imported LNG and India also wants to make full use of its shale gas deposits to reduce its import dependence in respect of gas.

The government will put in place a set of new environment protection guidelines as part of its proposed shale gas policy, which companies venturing into exploration of this new fuel source in India will have to compulsorily follow. The proposed guidelines are likely to force oil explorers to disclose the chemicals they use, which are increasingly being linked to groundwater contamination globally.

The idea is to adopt environment protection norms followed in countries where shale gas production has flourished, without going to the opposite extreme of overregulation that could push up costs and make shale gas an uneconomical source of energy.

While definitive environmental norms for shale gas are being mulled, exploitation of this resource could also require a compatible land acquisition policy. Horizontal drilling is used for shale gas exploration, which requires large tracts of land. In countries like the US, the government acquires land for this purpose, but in India, even the proposed land acquisition bill speaks of limited government role in this regard.

India's private energy companies like Reliance Industries are keen on shale gas and are going overseas for this potentially lucrative business, but they would need to be helped by the government if the deposits of this fuel along the Vindhya range are to be explored, informed sources said.

Meanwhile, India's largest energy explorer Oil & Natural Gas Corporation (ONGC) foreign arm ONGC Videsh is set to acquire shale gas assets in the US.

The company is pursuing several leads. OVL will enter into partnership instead of going for complete buyouts. Prospective partners will be experienced local players.

America's shale gas assets have drawn domestic energy firms' attention after Reliance Industries (RIL) invested in the unconventional energy resources early this year. In April, RIL announced its decision to invest around $1.7 billion in developing Marcellus shale in southwestern Pennsylvania in a joint venture with Atlas Energy of USA. The asset has estimated natural gas resource of 13.3 trillion cubic feet reserves, larger than RIL's KG-D6 property.

Following RIL's footsteps, state-owned Indian Oil (IOC), Bharat Petroleum (BPCL) and Oil India (OIL) are also planning to acquire shale gas assets in the US and Australia.

Reliance Industries Ltd, which has struck three shale gas joint ventures with US firms this year, may make a full buyout next, as the cash-rich firm builds the knowledge it needs to run such operations.

Bankers say potential targets include Fort Worth, Texas-headquartered Quicksilver Resources Inc, Denver, Colorado-based Enduring Resources and companies with assets in the Horn River shale formation in Canada. Another firm on Reliance's radar may be Houston, Texas-based EOG Resources, which said in early August it plans to sell about 180,000 acres in US shale plays. (IPA Service)