India said it would let state-run companies explore for shale reserves in blocks awarded without a competitive bidding process. That leaves independent companies like Reliance Industries and Cairn India on the sidelines.
The Economic Times of India reported Tuesday the measure means state-run energy companies can exploit shale reserves identified in more than 175 separate onshore areas.
The report said government officials were keen to try to replicate the shale success in the United States, where unconventional oil and natural gas programs have lead to major production gains. The government said hydraulic fracturing should be "viewed with circumspection," however.
Some European countries have placed a moratorium on hydraulic fracturing, a drilling process known as fracking.
The drilling method gives energy companies access to oil and natural gas reserves previously off limits. The practice is water intensive and some of the chemicals used in the process are seen as threats to the environment.
The Indian report offered no estimate of shale oil and natural gas reserves.