Bsp In Talks With Ongc To Buy Coal Bed Methane

Bokaro Steel Plant (BSP) has initiated negotiations with Oil and Natural Gas Commission (ONGC) to buy coal bed methane (CBM) from the latter's exploration site in Parbatpura village near Bokaro. Though the dialogue is still at an informal stage, as ONGC is yet to begin commercial production from the site, the steel plant has expressed interest to buy 24,000 cubic metres of CBM per day initially from the nine pilot wells the oil major would dig in a phase manner within 18 months in areas close to the plant.

CBM would be a cheaper alternative than the existing fuel Bokaro Steel Plant uses. The steel major uses furnace oil, tar and metallurgical coke which is imported from Australia. At a later stage, when ONGC would begin commercial production from 70-100 wells, the steel plant may switch over completely to CBM as fuel. cutting its energy costs significantly.

The two public sector units would also look at the possibility of setting up a 50MW CBM-based power plant to ensure uninterrupted electricity supply to critical units. The project can be developed on a joint venture basis though the modalities are yet to be worked out. BSL was unhappy with the quality of power available now.

Moreover, Steel Authority of India (SAIL) has in-principle decided to hive off its two captive power plants at Bokaro. It has started negotiations with Damodar Valley Corporation (DVC) to divest its stake in two power plants of capacity 180 MW and 122 MW. This is a part of SAIL's financial restructuring plan approved by Union government, which says SAIL would have to get out of all non-core businesses in a phased manner.

However, much would depend on how fast ONGC would be able to develop the CBM field. The field was expected to unearth a reservoir of 10-15 billion cubic metres of gas. Funding such a large project would cost nearly Rs 800 crore. The project would involve development of 80-100 wells within an area of 18 square km area by ONGC.

At the initial phase ONGC likely to invest Rs 90 crore to drill the nine pilot wells. Later, this would be turned into CBM commercial production plants at nominal cost. ONGC was confident of selling CBM as it was a cheaper and greener fuel comparable with natural gas in terms of calorific value. Experts felt CBM was expected to fetch Rs 5000 per cubic meter which was the prevailing international price once administered price mechanism (APM) was dismantled in April 2002.