RIL, Reliance Power in Talks to Jointly Develop Sohagpur CBM block

Mukesh Ambani's Reliance Industries and his younger brother Anil's Reliance Power are reportedly planning to jointly develop their adjoining coal-bed methane (CBM) blocks.

According to report in Economic Times, the two companies had initiated discussions a few months ago to optimise costs by developing common infrastructure at the contiguous CBM blocks in Madhya Pradesh. Reliance Industries is close to starting production from its Sohagpur CBM block in 2012-13 and is locked in a dispute with the oil ministry over CBM pricing.

Reliance has opposed the oil ministry's directive that the government will choose the customers with whom it can negotiate prices and wants to use the pricing formula prevalent in LNG trade. 

The peak gas production from the three Sohagpur blocks is estimated at around 7 million standard cubic metres per day (mmscmd), about one-fifth of current output from RIL's KG-D6 block. While RIL has two blocks: Sohagpur-West and Sohagpur-East and Reliance Power has one block, Sohagpur-North. 

RIL bagged the two Sohagpur blocks in the first CBM bidding round in 2002. The West block has an area of 500 sq km, while the east block is spread in 495 sq km. RIL holds 100% interest in the two blocks. 

The government had awarded Sohagpur-North block to the Reliance Power-led consortium in September 2006 under the third bidding round. GeoPetrol International is its partner in the project with 10% stake in the block with an area of 609 sq km. 

India has world's fourth largest coal reserves, which are estimated to hold about 92 trillion cubic feet of coal-bed methane. The government has awarded over 30 CBM blocks and Great Eastern Energy-operated Raniganj block is commercially producing CBM.