New Delhi: The government is planning to bid out blocks of oil shale in India’s north-east by 2012 to reduce its dependence on oil imports, director general of hydrocarbons S.K. Srivastava said.

An oil shale is a fine-grained sedimentary rock containing an organic material—kerogen—that produces oil and gas upon distillation. Properly processed kerogen can be converted into a fuel similar to petroleum.

“We plan to bid out the oil shale blocks around 2012. It will be revolutionary as this resource has not been accessed in India,” said Srivastava, who is also the director of operations at state-run Oil India Ltd.

“The bids will be carried out on the format of new exploration and licensing policy (Nelp),” he told Mint.

Nelp auctions, under which the government allocates rights to explore blocks, started in January 1999 to boost oil and gas exploration. The format provides a level playing field to private firms by offering fiscal and contractual terms similar to those accorded to state-owned oil firms. 

The technology to process oil shale is largely used by Estonia, Brazil, China and Australia. But conventional approaches to oil shale processing require large amounts of energy and water.

In India, shale formation is common in Assam, Arunachal Pradesh and Nagaland. The reserves are estimated at around 100 billion barrels.

“The oil shale development plan in India has been divided into three phases. After the reserve assessment in the first phase, which is complete, now comes the part of establishing techno-economic feasibility, environmental impact among other things. Once that is done, the blocks will be bid out,” Srivastava said.

Besides conducting studies, India also needs to frame laws for extraction and preparation of model sharing contract. The third phase involves announcement, evaluation and awarding of blocks.

“Oil shale (processing) has a lot of potential and is looked upon the world over as a promising possibility,” said Anish De, chief executive at Mercados Asia, an energy consulting firm.

A difficult terrain, poor roads, large power requirement and environmental issues are key challenges to shale processing in the North-East.

India imports 75% of its oil needs and accounts for 3.5% of global consumption. It will become the third largest oil importer after the US and China before 2025, with energy demands expected to almost double by 2030, according to the International Energy Agency.