New coal-bed methane policy to be unveiled shortly

Coal India Ltd will be allowed to produce natural gas trapped in coal mines it owns in the new coal-bed methane policy

The government will allow Coal India Ltd (CIL) to produce natural gas trapped in coal mines it owns in the new coal-bed methane policy to be unveiled in coming weeks, Oil Secretary Vivek Rae said.

 

CIL has vast tracts of coal blocks with potential to produce coal-bed methane (CBM) gas from below coal seams.

 

"We will go to Cabinet with a new CBM policy and a policy for shale gas exploration in coming week," Rae said.

 

The proposed CBM policy will provide incentives to CIL to exploit gas in its coal blocks, he said adding that the state-owned firm would not have to bid for the blocks as it already owns them.

 

So far, the government has bid out 33 CBM blocks to companies like Oil and Natural Gas Corp (ONGC) and Great Eastern Energy Corp Ltd (GEECL).

 

"We want to boost natural gas output," he said. India has the world's fourth largest coal deposits.

 

Both CBM and shale gas will be priced as per the Rangarajan panel formula. The Cabinet Committee on Economic Affairs (CCEA) had on June 27 approved pricing of all forms of gas - conventional and unconventional like shale gas and CBM, at an average of cost of imported LNG into India and international hub rates.

 

The price of gas when this formula comes into effect on April 1 could come to about $8.4 per million British thermal unit as compared to $4.2 currently.

 

Rae said pricing and commercial aspects like allocation of gas produced by CIL would be decided by the oil ministry.

 

Simultaneously, the ministry is also working on a proposal to allow gas production from coal blocks allotted to several other private and state-run companies for captive use.

 

Also, a shale gas exploration policy will be unveiled with an aim to launch the first auction of shale gas block by 2013-end, he said.

 

Shale gas blocks will be offered on terms that are likely to be remarkably different from those offered in bid rounds for oil and gas blocks.

 

Shale gas or natural gas trapped in sedimentary rocks (shale formations) below the earth's surface, is the new focus area in the US, Canada and China as an alternative to conventional oil and gas for meeting growing energy needs.

 

Six basins -- Cambay (in Gujarat), Assam-Arakan (in the North-East), Gondawana (in central India), KG onshore (in Andhra Pradesh), Cauvery onshore and Indo Gangatic basins, hold shale gas potential.

 

The Directorate General of Hydrocarbons (DGH), the Oil Ministry's technical arm, has proposed to offer areas for exploration shale gas on royalty and production-linked payments to the government.

 

Different studies have put recoverable reserves of shale gas between 6 trillion cubic feet and 63 trillion cubic feet.