Two major shale gas opportunities emerge as Algeria seeks to maintain its exporter status by tapping into its unconventional resources and as India prepares to unveil a new shale gas policy and open bidding for some potentially lucrative blocks in at least six major basins.
India: Shale Gas Blocks Up for Auction by December
India thinks it’s sitting on massive shale gas reserves, and while it doesn’t have the necessary hydrocarbon policy in place, we’re nearing the final stage in this and investors may find a block auction by the end of this year.
Shale Gas Reserves: Finding the Big Prizes
The US Geological Survey estimates that India has 1.6 trillion cubic feet of technically recoverable shale gas in the provinces of Bombay, Cauvery and Krishna-Godavari.
Breaking this down a bit, the biggest potential is in six areas: Cambay (in Gujarat), Assam-Arakan (northeast), Gondawana (central), KG onshore (Andhra Pradesh), Cauvery onshore, and the Indo-Gangetic Basin.
The four key basins to keep an eye on based on adequate geological data are:
• Cambay Basin: Upper Paleocene-to-middle Eocene Cambay Shale, whose source rock is believed to contain great amounts of Type II kerogen (oil shale) in the basin’s southern area. Cambay has an estimated 924 billion cubic feet of gas and 31 million barrels of natural gas liquids
• Cauvery Basin: Lower Cretaceous…
Two major shale gas opportunities emerge as Algeria seeks to maintain its exporter status by tapping into its unconventional resources and as India prepares to unveil a new shale gas policy and open bidding for some potentially lucrative blocks in at least six major basins.
India: Shale Gas Blocks Up for Auction by December
India thinks it’s sitting on massive shale gas reserves, and while it doesn’t have the necessary hydrocarbon policy in place, we’re nearing the final stage in this and investors may find a block auction by the end of this year.
Shale Gas Reserves: Finding the Big Prizes
The US Geological Survey estimates that India has 1.6 trillion cubic feet of technically recoverable shale gas in the provinces of Bombay, Cauvery and Krishna-Godavari.
Breaking this down a bit, the biggest potential is in six areas: Cambay (in Gujarat), Assam-Arakan (northeast), Gondawana (central), KG onshore (Andhra Pradesh), Cauvery onshore, and the Indo-Gangetic Basin.
The four key basins to keep an eye on based on adequate geological data are:
• Cambay Basin: Upper Paleocene-to-middle Eocene Cambay Shale, whose source rock is believed to contain great amounts of Type II kerogen (oil shale) in the basin’s southern area. Cambay has an estimated 924 billion cubic feet of gas and 31 million barrels of natural gas liquids
• Cauvery Basin: Lower Cretaceous Andimadam Formation and Lower to Upper Cretaceous Sattapadi Shales, with predominantly Type III kerogen and less significant amounts of Type II kerogen. Cauvery has an estimated 1,123 billion cubic feet of gas and 39 million barrels of natural gas liquids
• Krishna-Godovari Basin: Upper Jurassic to Cretaceous Raghavapuram Shale, with Type III kerogen most common but also with Type II kerogen present. Krishna-Godovari has an estimated 4,080 billion cubic feet of gas and 90 million barrels of natural gas liquids
• Damodar Valley Basin: Part of the Gondawana basin chain, this is largely a non-marine sedimentary fill (Late Permian to Triassic terrestrial sediment) with a significant thickness of Barren measures marine shale. There is an estimated 7 trillion cubic feet of recoverable shale resources here.
Beyond this, there are a number of other sedimentary basins that remain unexplored and for which there is inadequate geological data.

India’s Oil & Natural Gas Corp. (ONGC)—the country’s biggest explorer—has stepped up its study of dada on the country’s shale gas deposits, and so far ConocoPhillips, BG Group Plc (BG), Hess Corp. (HES) and Mitsubishi Corp. have already promised to foot the bill for shale exploration in India.
Policy: Separate Rules for Shale
The new policy currently awaiting final approval is separate government legislation where shale gas and bidding on shale gas blocks will be different than auctions for conventional oil and gas acreage.
The draft policy—still undergoing a bit of last-minute tweaking—calls for royalties and production-linked revenue payments to the government. It differs from existing oil and gas production-sharing agreements in that it seeks to avoid investors’ advance cost recovery through profits. Instead, it seeks to arrange policy so that there is immediate profit-sharing with the government.
"This will minimise government intervention and remove complications in accounting, and incentive for gold plating, which may occur while allowing profit sharing, based on cost recovery," the draft policy notes. "Government share of production will be net of all statutory dues.”
The latest from New Delhi is that the new policy will be unveiled later this month.
When bidding opens in December—if all goes as planned—investors will be required to quote a share of total output they will share with the government.
We expect this to all fall into place very soon, and for bidding to indeed be opened up by the end of the year. India is a prime candidate for taking advantage of a potential shale gas revolution on its own territory for a number of reasons. The country has high natural gas prices and is growing increasingly dependent on LNG imports. In short, this will be a great market.
Algeria: Leveling the Playing Field for Shale Gas Exploration
It may be cynical, but this is how it is: A major attack on a foreign-operated energy installation can set things in motion for more investment. Algeria, concerned about the implications of the attack on the BP-operated In Amenas gas facilities earlier this year, is making swift moves to ensure that investors do not grow wary of working in Algeria.
Last month, Algeria passed new laws governing foreign investment in the country’s shale gas, easing the tax regime. It’s hoping to court more investors to some other gas fields by offering more favorable conditions in order to maintain its gas exporter prowess. Investors are already lining up, and so are end clients.

Russia’s Gazprom is the first on the new gas scene—it held talks with Algeria’s state-owned Sonatrach in early February. Next week, high-level talks with Algiers will take place in London as the UK eyes more gas exports from Algeria as a way to lessen its dependence on Qatari imports.
There are great new opportunities here, but with the understanding that Algeria’s unconventional reserves—which are largely in the country’s south--are still far from developed. So far, bidding for unconventional acreage hasn’t attracted nearly the attention that Algeria had hoped.
Algeria is willing to raise the bar for investor incentives because its share of the global LNG market has slumped a bit and Algiers is worried that the attack on Amenas will contribute further to this slump by scaring away potential investors from new shale gas exploration projects.
The fact is that while Algeria has built up its status as an oil and gas exporter based on its conventional reserves, these reserves have already reached peak output. The real opportunity here is in shale gas, which Algeria is only just now thinking about tapping into, and it has more untapped shale gas than it has conventional oil and gas resources.
Exploration could also turn up some unconventional oil plays.
Algeria’s main gas field, Hassi R’mel has already reached peak output, and so has production at its main oilfield, Hassi Mesaoud. New exploration projects have not been started.
So what are the new incentives, exactly? One of the biggest things keeping investors away from Algeria’s unconventional exploration opportunities has been the tax regime—specifically the windfall tax on hydrocarbons. In February, Algiers removed this tax with a new hydrocarbons law. Royalty fees will now be adjusted based on production levels, and taxes on revenues will take into consideration exploration difficulty and risk.
This is a major move by Algiers to render the investment atmosphere more attractive, but there is still some way to go. For instance, state-owned Sonatrach still maintains a majority stake in all JVs under the new law. But we expect more reforms in the works because Algeria is desperate to stake out its unconventional plays as its conventional oil and gas industry slumps.
So far, since Algeria began talking about easing its tax regime for unconventional investors late last year, Exxon Mobil Corp. (XOM) has been in talks with Algiers, while Eni SPA (ENI), Royal Dutch Shell Plc (RDSA) and Talisman Energy Inc. (TLM) have all signed shale exploration agreements.
Eni has begun exploratory fracking, while both Shell and Talisman are planning to drill their first wells.
Competing with Algeria in Africa are Libya, whose reserves are larger, but where the security situation is far less favorable, and South Africa, which has only conditionally approved hydraulic fracturing.
According to geologists, there is vast unconventional potential in Algeria and it has a lot of source rock. The International Energy Agency estimates that Algeria has around 231 trillion cubic feet of recoverable shale gas. To get at it will require the drilling of some 400 test wells to determine commercial viability.