Policy tweak to tap methane

The government plans to amend the existing policy on natural gas to allow public and private sector companies to produce coal bed methane from their existing mines.

“The public and private sector firms, who have been allotted captive coal mines, would be allowed to produce coal bed methane from their existing coal blocks without competitive bidding. They would also be encouraged to sell the natural gas based on price bidding without following any allocation priority,” officials in the oil ministry said.

They said a note to make amendments to the existing coal bed methane policy would soon be moved to the Cabinet Committee on Economic Affairs to formalise the changes.

If and when approved, the move is likely to help power, cement and iron and steel companies that are holding mining rights for captive coal blocks.

Essar Power, JSW Steel, Tata Power and GVK Power & Infrastructure are among the private companies that could benefit from this policy.

According to existing norms, the government has to invite bids from public and private firms for producing gas trapped in coal seams under the CBM policy.

The government has already made an exception to the rule for CIL and its subsidiaries such as Eastern Coalfields, Bharat Coking Coal and Mahanadi Coalfields, which can produce natural gas from their blocks without any competitive bidding.

Finance minister Arun Jaitley in the budget said the country would now seek to double its existing gas pipeline infrastructure of 15,000 km as the government wanted to provide a clean energy source to consumers.

“We look forward to a policy on CBM and PNG, as has been hinted by the government. India has good potential in CBM, which not only provides a cleaner energy option compared to other fossil fuels, but is also an import substitute,” L.K. Gupta, managing director and chief executive officer of Essar Oil, said.

With the third-largest proven coal reserves, and the fourth largest coal producer in the world, India holds significant prospects for commercial recovery of CBM.

According to the Directorate General of Hydrocarbons (DGH), India has CBM reserves of 4.6 trillion cubic metres. The current CBM production is 0.45 mmscmd and is expected to go up to 4 mmscmd by 2016-17. Since 2001, 33 CBM blocks have been awarded in four auction rounds.

Two CBM blocks were awarded to ONGC and one to Great Eastern Energy Company on a nomination basis.

Many of the coal blocks are gaseous and unsafe, where mining of coal is possible only after the extraction of CBM. The extraction of CBM from these mines would help unlock significant quantities of coal in areas of Jharkhand and Bengal.

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