Policy Framework for Exploration and Exploitation of Unconventional Hydrocarbons

Why in News?

  • Union Cabinet has approved policy framework to permit exploration and exploitation of unconventional hydrocarbons such as Shale oil/gas, Coal Bed Methane (CBM) etc.
  • It will be carried out under the existing Production Sharing Contracts (PSCs), CBM contracts and Nomination fields to encourage the existing Contractors in the licensed/leased area to unlock the potential of unconventional hydrocarbons in the existing acreages.

Provisions of the new policy:

  • The fiscal and contractual terms of the policy provide for ring-fencing of Petroleum Operations and cost recovery of new hydrocarbon discoveries in PSC block.
  • Additional 10% rate of Profit Petroleum/ Production Level Payment (PLP) in case of CBM contract, over and above the existing rate of Profit Petroleum/PLP is to be shared with Government on new discoveries.
  • For nomination blocks, NOCs will be allowed to explore and exploit unconventional hydrocarbons under the existing fiscal and contractual terms of exploration/lease license.

Benefits of this Policy Framework

  • This policy will enable the realization of prospective hydrocarbon reserves in existing contract areas which otherwise would have remain unexplored and unexploited.
  • It will give impetus to new investment in exploration and production (E&P) activities and chances of finding new hydrocarbon discoveries and increasing domestic production.
  • It will also spur exploration and exploitation of additional hydrocarbon resources giving impetus to new investment, economic activities, additional employment generation and thus benefitting various sections of society.
  • This will also lead to induction of new, innovative and cutting-edge technology and forging new technological collaboration to exploit unconventional hydrocarbons.

Coal Bed Methane

  • Coal Bed Methane (CBM) is an unconventional form of natural gas found in coal deposits or coal seams.
  • CMB is formed during the process of coalification, the transformation of plant material into coal.
  • It is considered a valuable energy resource with reserves and production having grown nearly every year since 1989. Varied methods of recovery make CBM a stable source of energy.

Shale Gas:

  • Shale gas is a natural gas formed from being trapped within shale formations. It is unconventional source of methane, like coal-bed gas (in coal seams) and tight gas (trapped in rock formations).
  • It is colourless, odourless gas, lighter than air. It is cheaper than natural gas, releases 50% less CO2, hence better source for generating electricity.
  • It also provides feedstock for petrochemicals industry, which is turned into fertilizer, plastics and other useful stuff.
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