CBM producers can now use gas for internal consumption

Cabinet also gave go ahead to Indian Oil to sell 24% stake in India JV to Lubrizol

The Cabinet Committee on Economic Affairs (CCEA) today allowed companies producing coal bed methane (CBM) to sell gas to its own affiliates, by giving marketing and pricing freedom for CBM.

This is likely to be a boost for companies like Reliance Industries Ltd (RIL), Great Eastern Energy Corporation Ltd (GEECL), Essar Oil and Oil and Natural Gas Corporation (ONGC), which are the major players in the segment. As per the decision, while discovering the market price for arms length sales, the contractor has to ensure a fully transparent and competitive process for sale of CBM with the objective that the best possible price is realised for the gas without any restrictive commercial practices.

CBM contractors have also been permitted to sell the CBM to its any affiliate, in the event contractor cannot identify any buyer. Royalty and other dues to the government, however, shall be payable on the basis of petroleum planning and analysis cell (PPAC) notified prices or selling prices, whichever is higher. 

The policy is expected to incentivise the CBM operation in the country to boost gas production and will generate economic activities which in turn will be beneficial for creating more employment opportunities in CBM operations and related activities. Though, about 33 CBM blocks were awarded so far in India, gas is produced only in four of them. 

The overall production of CBM from the four blocks comes to around 1.17 million standard cubic metres per day, while India is expected to have overall reserves of about 92 trillion cubic feet. The current price of domestic natural gas in India is $2.5 per million British thermal unit, while in many CBM blocks operators are already getting a higher price. Meanwhile, the Cabinet today gave in-principle approval to permitIndian Oil Corporation Limited (IOC) to sell its 24% equity in one of its joint venture companies, Lubrizol India Ltd (LIPL) to Lubrizol Corporation, USA (LC), the other Joint Venture Partner.

"The sale will enable IOC to have long term association with its joint venture partner and thus LIPL to have access to the latest global additive technologies developed by Lubrizol Corporation, USA," a government statement said today.