Only ONGC, OIL may get to explore shale resources: Oil ministry

NEW DELHI: The oil ministry has retracted its move to allow successful explorers such as Reliance IndustriesBSE -1.12 % and Cairn India to explore shale oil and gas in their existing blocks without bidding after thefinance ministry said new entrants should also be given an equal opportunity.

The oil ministry, which had said earlier that the existing operators could be permitted to explore shale resources, along with conventional oil and gas, has now proposed that only state-run ONGC and Oil India should be allowed to explore shale in blocks that were given to them without an auction, government officials said. 

The ministry plans to have a separate policy later to deal with exploration of shale resources in blocks awarded to private firms for conventional oil and gas and coal bed methane, officials said. 

The oil ministry has retracted its move to allow successful explorers such as Reliance Industries and Cairn India to explore shale oil and gas.

The ministry has recently finalised a draft cabinet note on the shale gas policy after inter-ministerial consultations, which will be placed before the CCEA soon, officials said. This is the second time the finance ministry questioned the oil ministry's plan. It had earlier asked the petroleum ministry to review the Cabinet decision to adopt the Rangarajan formula, which would double natural gas prices next April, going by current trends. But, oil minister Veerappa Moily ruled out any review saying the finance ministry was part of the cabinet decision. 

But this time, the oil ministry has accepted the finance ministry's view because it raised the issue during inter-ministerial consultations, an important bureaucratic process that precedes any cabinet decision, officials said. 

"It is unclear, whether expertise in shale is with the same companies that are currently engaged (in conventional exploration). The proposed approach would mean that the incumbents would get an expansion of their contracts without offering opportunities for any new entrants. An alternative could be to go in for fresh bids and give the right of first refusal to the incumbent," a finance ministry's note said. 

The proposed policy, which will be placed before the cabinet committee on economic affairs soon, will automatically allow ONGC and Oil India to exploit shale in 176 identified on-land areas where they are exploring or producing conventional crude and natural gas.