Reliance to invest over Rs 1,000 cr in Sohagpur CBM to boost gas output

Reliance Gas Pipeline Ltd operates a 302-kilometer pipeline connecting the coal bed methane (CBM) gas fields in Shahdol, Madhya Pradesh, to Phulpur, Uttar Pradesh

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Reliance Industries Limited (RIL) is set to invest over Rs 1,000 crore in its coal bed methane (CBM) blocks located in Sohagpur, Madhya Pradesh, according to a report by The Economic Times. This move aims to enhance gas production from these fields.

RIL’s subsidiary, Reliance Gas Pipeline Ltd, operates a 302-kilometer pipeline connecting the CBM gas fields in Shahdol, Madhya Pradesh, to Phulpur, Uttar Pradesh. This pipeline integrates the CBM production with the national gas grid, providing access to consumers across India.

RIL is currently experiencing a decline in CBM production from its Sohagpur blocks. In its FY24 annual report, RIL disclosed that it has over 300 wells in production, yielding an average output of 0.64 mscmd of gas during the year. However, this is a decrease from the 0.73 mscmd average in FY23 and FY22, and the 1 mscmd recorded in FY21 and FY20.

To counter this trend, the company plans to drill multiple new wells to increase production to one million standard cubic meters (mscmd) per day within the next three years.

Investment in coal bed methane (CBM)

CBM, a type of natural gas stored within coal seams, is extracted by drilling wells into the seams. The gas is then used as compressed natural gas (CNG) for a variety of domestic and industrial applications. RIL’s two CBM blocks in Madhya Pradesh span a total area of 995 square kilometers.

Multi-lateral well (MLW) programme

In response to the declining production, RIL has initiated a multi-lateral well (MLW) programme to boost both production and reserves. “The performance of the first 20 wells has been quite encouraging as we have seen a significant increase in production,” a company spokesperson told The Economic Times, emphasising RIL’s commitment to continuing the drilling of MLW wells to enhance CBM production.

The spokesperson also highlighted that CBM enjoys marketing freedom and is sold in accordance with auction guidelines issued by the government.

Reliance Gas auctions

In February, RIL conducted an online auction to sell 0.90 mscmd of gas from the Sohagpur block, securing bids at $11 per million British thermal unit (mmBtu). The majority of the gas was purchased by state-owned GAIL (India) Ltd and city gas distributor Indraprastha Gas Ltd (IGL), with GAIL acquiring 0.63 mscmd and IGL securing 0.14 mscmd.

This pricing strategy marks a shift from the March 2022 auction, where RIL sought bids based on a premium of over 13.2 per cent of the Brent crude oil price. At that time, Brent crude was trading above $115 per barrel, compared to the current rate of around $78 per barrel.