ISLAMABAD: The Federal Cabinet approved on Wednesday a policy framework for exploitation of Shale Gas deposits, roughly estimated at 51 trillion cubic feet (TCF) and constituted a committee, led by law minister Farooq H. Naik, to prevail upon the Oil and Gas Regulatory Authority (Ogra).

Presided over by Prime Minister Raja Pervez Ashraf, the Cabinet was informed by the Ministry of Petroleum that Ogra’s refusal to pass on to consumers the Rs11 billion financial impact of gas theft, losses in law and order hit areas and minimum gas consumption had created ‘survival challenges’ for gas utilities.

The meeting was told that the Ogra did not implement a previous decision of the Federal Cabinet on passing on this impact to consumers through gas prices.

The Ogra informed the Cabinet that under the Ogra act, the regulator was required to allow recovery of only prudent cost of gas supply from consumers and was not bound to implement policy directions inconsistent with the law as also ruled recently by Supreme Court.

“The cabinet considered policy guidelines under section 21 of Ogra Ordinance 2002 and decided that the decision of the cabinet committee on this issue will be implemented,” said an official statement.

Prime Minister’s adviser on petroleum Dr Asim Hussain told Dawn that the cabinet directed the cabinet committee, led by law minister and comprising federal ministers Nazar Mohammad Gondal and Farooq Saeed Khan, to hold its meeting on Thursday to take a final decision within a day.

In case, minimum charges, gas theft and losses in security affected areas are passed on to consumers, gas prices are estimated to increase on average by Rs13 per unit.

Dr Hussain said the approval of the shale gas policy framework was a major initiative that would bring into production of a major portion of 51 TCF shale gas reserves – an unconventional and technically difficult resource.

He said that according to a study conducted by a group of gas exploration and production companies, shale gas production would become economical at about 80 per cent of Brent Crude but this would have to be brought down to 70 per cent of Brent Crude Oil.

He said development of shale gas was initially expected in upper Sindh and Lower Punjab and the government would be offering a few areas through international competitive bidding as pilot projects.

The bidding firms would be selected on the basis of “lowest price and highest work programme and investment.”

Subsequently, the policy would be updated on the basis of outcome of the pilot projects.

According to Shale Gas Policy Framework, it was expected that new fields will be predominately smaller gas fields as major fields have already been developed or exploited.

The summary said the Shale Gas reserves in Pakistan have been estimated by US Energy Information Administration (EIA) at 51 trillion cubic feet (TCF).

Currently, no Shale Gas is being produced in Pakistan and significant work is required to kick start this high potential energy source; whereas, conventional gas reserves of the country have been estimated as 58 TCF.

Shale Gas is extracted directly from a sedimentary source rock and since it has low permeability as compared to conventional reservoirs, it did not come out easily and hence specific investments and pricing were required for its exploitation.

Dr Hussain said an investment of about $1.5 billion was required for about 500 exploration and development wells because such projects were capital intensive and required high level technological expertise.