In­dia’s stag­ger­ing coal-bed meth­ane projects

Resource Digest - - CONTENT -

Over a decade af­ter In­dia be­gan al­lo­cat­ing coal-bed meth­ane (CBM) blocks to in­vestors, the coun­try is nowhere near what the US, Canada and Aus­tralia have achieved in de­vel­op­ing this en­ergy re­source — while 17 of the 33 CBM blocks al­lo­cated since 2001 have al­ready been re­lin­quished by the firms con­cerned, the to­tal gas pro­duc­tion from the re­main­ing blocks is lan­guish­ing at an abysmal 1.38 mil­lion met­ric stan­dard cu­bic me­tre per day (mm­scmd).

An­a­lysts cite sev­eral rea­sons for the un­der-per­for­mance, in­clud­ing the over­lap­ping of coal and CBM rights held by firms and lack of in­fra­struc­ture to evac­u­ate the gas and trans­port it to the con­sumer lo­ca­tions. To top it all, the ex­ten­sion of the new nat­u­ral gas pric­ing pol­icy to the CBM sec­tor (un­der which CBM can­not be sold above $3.06/mbtu by pro­duc­ers with­out preap­proved price) has made the busi­ness un­vi­able for the likes of ONGC and Re­liance In­dus­tries.

The pric­ing pol­icy has also cre­ated a di­vide in the in­dus­try with two firms pro­duc­ing CBM — Es­sar Oil and GEECL — be­ing able to sell CBM gas at pre-ap­proved (high) prices of $6 and $15/mbtu re­spec­tively, while RIL and ONGC, which are only gear­ing up to start pro­duc­tion, would have to fol­low the nat­u­ral gas pric­ing for­mula. The last round of CBM bid­ding took place in 2008. The stand­ing com­mit­tee on pe­tro­leum and nat­u­ral gas, in a re­port ta­ble in Par­lia­ment on Au­gust 11, said many CBM blocks could not be brought un­der pro­duc­tion either due to poor prospec­tiv­ity or be­cause of the is­sue of over­lap­ping of rights. “In view of the newer tech­niques of as­sess­ment and ex­plo­ration, drilling of CBM has sig­nif­i­cantly im­proved… the com­mit­tee, there­fore, feels that there is a need to for­mu­late a new com­pre­hen­sive CBM pol­icy con­sis­tent with de­vel­op­ment in reg­u­la­tory regimes and also tak­ing into ac­count the per­for­mance of ex­ist­ing pol­icy,” it said.

Tak­ing note of the anom­aly in pric­ing of gas pro­duced from CBM blocks, it rec­om­mended that the pe­tro­leum min­istry for­mu­late a sep­a­rate pric­ing and mar­ket­ing mech­a­nism which also con­sid­ers avail­abil­ity of small gas vol­umes, re­quire­ment for higher drilling and re­mote lo­ca­tions, among oth­ers.

In the ex­ist­ing regime of award of CBM blocks, com­pa­nies with rights over coal ar­eas find their rights usurped by those with rights over CBM and vice-versa. This sit­u­a­tion has given rise to delays in pro­duc­tion and is un­sus­tain­able… For in­stance,

AN­A­LYSTS CITE SEV­ERAL REA­SONS FOR THE UN­DER-PER­FOR­MANCE, IN­CLUD­ING OVER­LAP­PING OF COAL AND CBM RIGHTS HELD BY FIRMS AND LACK OF IN­FRA­STRUC­TURE TO EVAC­U­ATE THE GAS AND TRANS­PORT IT TO THE CON­SUMER LO­CA­TIONS

ONGC was given blocks in Jharia and Rani­ganj on nom­i­na­tion ba­sis in 1997, but it could not start pro­duc­tion due to over­lap is­sues with ECL, a pri­vate coal op­er­a­tor in that area. Af­ter the can­cel­la­tion of the coal block by the Supreme Court, the area has now been given to SAIL and ONGC.

The two min­istries con­cerned — coal and pe­tro­leum & nat­u­ral gas — could not take any steps to sort out over­lap­ping is­sues in the past two decades.

Evac­u­a­tion of nat­u­ral gas and lack of in­fra­struc­ture is an­other hin­drance while ex­ploit­ing CBM.

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