ONGC wants $8.3 price for CBM gas from West Bengal

State-owned Oil and Natural Gas Corp (ONGC) wants a gas price of at least USD 8.35 to break even on producing coal-seam gas (CBM) from Raniganj block in West Bengal after part of its acreage was taken away for building of an airstrip.

ONGC does not want to relinquish the block which holds some 43 billion cubic metres of in-place reserves and is instead looking at alternate options like deviated drilling from outside the airstrip.

Of the 350 square kilometer area in North Raniganj coal-bed methane (CBM) block, 7.05 sq km is part of an Airport City Project (BAPL).

Top officials said the project BAPL overlaps 7.05 sq km. To compound the problem, Ardhagram coal block falling in assessment area has been allotted to OCL Iron Steel.

"This has reduced the scope for ONGC to produce CBM gas from the block," an official said.

Two options are under consideration but none of them would be viable unless a gas price of at least USD 8.35 per million British thermal unit (mmBtu) is paid, he said.

In the first option, the entire BAPL overlap area is excluded and 67 wells drilled on the remaining area. But the break-even price of gas for the investment made would come at USD 8.77 per mmBtu.

The other option is to consider drilling eight deviated and two vertical wells in the overlap area apart from the 67 vertical wells, officials said adding the break-even price of gas under this option comes to USD 8.35 per mmBtu.

"The project is commercially not viable on standalone basis. The break-even price in both the options is significantly higher than the expected realisation price," an official said.

The price it wants is higher than CBM gas sold from similar blocks and more than double of the USD 3.06 per mmBtu price set by the government for most of the domestically produced conventional natural gas.

ONGC has stakes in three other CBM blocks in Bokaro, Jharia and North Karanpura in Jharkhand.

Of the total nine CBM blocks allocated to ONGC, five have already been relinquished due to poor output potential.

It plans to produce first gas from the Bokaro, Jharia and North Karanpura blocks in July.

ONGC is the operator of the Raniganj North block with 74 per cent stake, while the remaining 26 per cent is with Coal India Ltd.

The firm has partnerships in other blocks, too, with CIL holding 10 per cent stake in Jharia and Indian Oil Corporation holding 20 per cent stake in Bokaro and North Karanpura.

ONGC has sold gas from its Bokaro CBM block for USD 5.77 per mmBtu on a gross calorific value basis. State gas utility GAIL India is buying gas found below coal-seams in the North Karanpura block at USD 5.56 per mmBtu while private sector company Positron Energy would offtake gas from Jharia CBM block at USD 6.12 per mmBtu.

ONGC expects peak volumes to touch 3 million standard cubic metres per day.

Essar Oil and Gas Exploration and Production (EOGEPL) has sold CBM gas from its Raniganj block for USD 7.1 per mmBtu.

Reliance Industries' Sohagpur gas at today's oil price comes to USD 7.15 per mmBtu on GCV basis.