Oil India bets big on shale assets, to raise US output

MUMBAI: India's second-largest state-run energy explorer Oil IndiaBSE -2.32 % is now betting big on its prospects in the shale oil and gas arena.

Globally, it is on the cusp of raising shale oil production in its acreage in the US, and it will alsobe appointing a newconsultant to advise on its shale exploration strategy in north-east India.

"Our team just visited the US two weeks ago and came back very impressed with the work there. We plan to increase oil production by 8,000-10 ,000 barrels before the end of this year in that acreage. We have charted out a monthly investment plan for this acreage, the full details I can't share right now," said T Ananth Kumar, CFO, Oil India.

Oil India and the Indian Oil (IOC) jointly bought a 30% stake in Houston-basedC arrizoO il &Gas' shale assets in Colorado for $82.5 million in October 2012. Oil India acquired a 20% stakewhileIOC pickedup 10% in this acreage, making it their maiden investment in the shale arena in the US.

Shale oil and gas production in the US is now booming, propelling it todislodgeRussia for thefirsttime in decades and becoming the world's largest liquid fuel producer, said Paris-based energy watchdog InternationalE nergy Agency lastweek.

This has allowed the US to challenge Opec's hegemony in global energy trade ,said the agency.

"We have recently openedour office and posted some personnel in Colorado, our chairman has also visited the Carrizzo office recently. So, we are very excited about the prospects in this acreage ," said another senior Oil India executive.

As a part of this deal, Oil India and IOCBSE -0.62 % have also gained a 30% participation in Carrizo's existing production of 1,850 barrels of oil equivalent to a day from 24 gross acres. Carrizo holds 61 ,500 gross acres in the Niobrara basin, of which ,theOilI ndia-IOCconsortium have access to 18,450 acres, spread over three counties in Texas.

In India, after Schlumberger's initial findings regarding the presence of shale formations in its blocks in the north east were not encouraging, Oil India is planning to hire another consultant to chart its exploration and production strategy in its acreages in the north east.

"Earlier, because we had not done any shale-specific work in our acreages, our data was not very reflective of the presence of shale formation. So Schlumberger was not able to give us a correct picture. Now we are doing specialised logging and also looking to hire a new consultant specifically to design a comprehensive shale strategy for us," said the executive.

"We are in the market to hire a new consultant who can give us a clear plan to exploit existing shale resources in our acreages across the North East ," added Ananth Kumar. Last week, the government approved the much-awaited shale gas and oil exploration policy.

In the first phase, the policy only permits staterun energy companies like ONGC and Oil India to explore shale resources in acreages that were allotted to them on a nomination basis.