Indian CBM Gas Commands Premium
The first coal-bed methane (CBM) gas produced from Raniganj block is commanding a 67% premium over the price of Reliance Industries' KG-D6 gas, prompting Reliance and Essar to speed up similar projects which will add up to 10% of the country's current gas output in two years.
"Gas from Great Eastern Energy Corporation's Raniganj block is sold at $7 (per unit) which is an encouragement for other CBM players," one government official said requesting anonymity. The government has fixed KG-D6 gas price at $4.2 per unit for five years.
Great Eastern, the first company in India to commercialise CBM gas, is currently producing 0.16 million standard cubic meters per day (mmscmd) gas, which will be ramped up to 3 million mmscmd in next 6-7 years, the official said after a review of the CBM blocks auctioned under four bidding rounds. Great Eastern's block is located in southern part of Raniganj near Asansol in West Bengal. The company is supplying fuel to over two dozens small industrial units through a 78 km pipeline.
The next commercial production of the CBM gas is expected anytime from another block in Raniganj, operated by Essar, the official said. "The block, which has a potential to produce 3.5 mmscmd gas, has already started supplying fuel in a small quantity to local buyers," the official said.
A spokesman of Essar confirmed that the block was currently producing 0.3 mmscmd gas per day. "Financial closure of drilling 143 wells in the first phase has been achieved and Essar Oil is fast-tracking the drilling of new wells," the spokesman said. The company holds five CBM blocks.
RIL, India's most valued company which is credited with country's largest conventional gas discovery at KG-D6, will also commercialise its two CBM blocks at Suhagpur in Madhya Pradesh in 2012-13, the official said. "RIL's Suhagpur blocks are expected to achieve peak production of 4.5 mmscmd in 2014-15," the official added.
An RIL spokesman said: "The development plan for the Sohagpur CBM blocks has been approved by the government and the development activities are currently underway." The company plans to market its gas through Hazira-Bijapur-Jagdidhpur (HBJ) pipeline owned by state-run GAIL India. RIL currently holds three CBM blocks.
"While private firms have made significant progress in developing CBM blocks, ONGC is lagging behind despite having some blocks adjacent to private CBM projects," the oil ministry official said. ONGC spokespersons did not respond to an email query of ET.
According to website of Directorate General of Hydrocarbon (DGH), a technical arm of the oil ministry, ONGC holds nine CBM blocks including a block in Raniganj north.
Source: Economic Times