Gas-based power generation just picked up some momentum, as the 2,000 km long Dahej-Vijaipur-Bawana-Nangal/Bhatinda pipeline was recently dedicated to the nation by Prime Minister Manmohan Singh. Gas demand has been growing at 14 per cent CAGR. The future of gas, as the PM said on the occasion, lies in newer solutions like coal bed methane (CBM) and shale gas. Notwithstanding the opposition to shale on environmental grounds, the government has been anxious to embrace shale into the energy mix, as it was excitedly reported that India is home to a large amount of reserves. By 2013 (after twice being postponed), shale gas is scheduled to be bid out.However, energy research agency United States Geological Survey (USGS), which is double-checking the availability and predictability of shale in India along with its environmental viability, has now reported that there is not as much shale in our basins as earlier estimated. The original estimates of 63 trillion cubic feet (tcf) by the Energy Intelligence Agency (EIA) were inflated, the agency is now reported to have stated. The postponement of the bid-out, originally scheduled for this year, is because a review was warranted. Availability and other concerns that are new to shale must be carefully and comprehensively addressed in the bid documents.Meanwhile, ONGC has signed an MoU with US major ConocoPhilips, a frontrunner in shale gas, for technical evaluation of shale gas and deep water assets in India and other countries, mainly the US and Canada. ONGC seems to have found the right partner, both in terms of the expertise and experience in the right geography—since the US has been the hotbed of shale gas activity hitherto.Experts tell us that having the right pricing mechanism is the critical rider for driving a healthy growth of the natural gas segment. As the PM rightly says, a regulatory mechanism is needed for all natural resources, including, of course, gas. Our sister publication Infrastructure Today had in January 2012 stressed the importance of a new regulatory framework that encompasses shale gas, especially since it is likely to evoke environmental concerns. ONGC Director SV Rao had then emphasised that shale gas brings forth unique issues such as exploration over large tracts of land, environmental concerns, requirement of enormous amounts of water, and the predictable disputes in case shale and natural gas are found in the same field. So the regulatory framework needs to treat shale differently.How likely is the government to create a new framework that will distinguish the parameters for shale gas from other hydrocarbons or other energy sources found in the same block that may be allotted to a private company? This is the question the gas exploration companies will be asking. The gas regulator would do well to take the production-linked payment (PLP) route. It should also be made mandatory for evacuation to be underwritten. Since evacuation is the infrastructure the government is providing anyway (since it plans a 30,000 km gas pipeline network by 2017), ONGC would like to see the government underwriting the evacuation. But it would be a sufficient condition if evacuation were taken care of at the bidding level.Overall, the KG basin experience should alert the government to the need for such new fortifications in future bidding processes.Your feedback is important to us. Write to us at feedback@ASAPPmedia.com
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