ONGC prepares to award CBM stakes

In a little over a month, state-run Oil and Natural Gas Corporation (ONGC) will be able to award its coal-bed methane (CBM) blocks to interested bidders.

CBM is natural gas, trapped within coal formations. The gas is extracted by drilling holes into the seams that contain gas and are commercially unviable for mining.

A senior official with the company said domestic and international companies had shown interest and it was working on legal issues for the farming out of a 35 per cent stake in the blocks, including whether or not to split the 35 per cent between two parties or not, and how much. A decision was likely by year-end.

TIMELINE

• June 2011
  ONGC decides to farm out stake in 4 CBM blocks
   
• July 2012
  ONGC decided to farm out 35% stake in its CBM blocks to UK-listed Great Eastern Energy Corporation, Brisbane-based Dart Energy, Essar Energy and a consortium of Jindal Steel and Deep Industries
   
• August 2012
  Oil ministry intervenes asking ONGC to call for international bids; ONGC scraps the earlier bid
   
• September 2012
  ONGC sends out fresh expression of interest

 

"Certain legal angles need to be looked into. The participation interest we would be alloting to interested parties needs to be looked into in detail. We are discussing if the share should be split, between 25 and 10 (per cent) or 17 and 18," said the official.

ONGC holds four CBM blocks — in Jharia, Bokaro, north and south Karanpura - in Jharkhand and Raniganj in West Bengal. It is the operator in the Raniganj north block, with 74 per cent stake, while Coal India holds the rest. At Jharia, it holds 90 per cent stake and CIL 10 per cent. At Bokaro and north Karanpura, too, it is the operator, with 80 per cent. In these blocks, Indian Oil Corporation holds the remaining stake.

Planned investment for the blocks is Rs 5,000 crore. Production from the blocks is salted to rise 600-fold to six million standard cubic metres a day (mscmd) in 10 years. The company has maintained it needs to bring in a joint operator. So far, ONGC has spent about Rs 510 crore on the four CBM blocks, which the winning bidder might have to cough up in proportion to its stake.

According to ONGC estimates, the Jharia block holds about 85 billion cubic metres of gas reserves. North Karanpura has 62 bn, Bokaro holds 45 bn and Raniganj North 43 bn. Currently, ONGC produces 8,000-10,000 mscmd from the Jharia block.