In a move that could have some bearing on the future of the energy sector in India, Reliance Industries Ltd (RIL) plans to start commercial production of six million metric standard cubic metres per day (mmscmd) of gas from its coal bed methane (CBM) block in Madhya Pradesh by 2009, said an executive of the company who did not wish to be identified. The Mukesh Ambani-controlled company will be among the country’s first to commercially extract CBM, a fuel that is akin to natural gas, only less polluting.
The executive, however, refused to provide any details on the capital expenditure the company will incur as it extracts gas. “Drilling in CBM blocks is more expensive than drilling for oil and gas in hydrocarbon blocks as it requires the drilling of more number of wells,” he added. RIL’s website puts the gas-in-place or GIP estimates for its CBM blocks located in Sohagpur East and West in Madhya Pradesh at 3.65 trillion cubic feet; this estimate has been cleared by the Directorate General of Hydrocarbons (DGH).
CBM, which could be a viable alternative fuel for several industries, is a gas found in coal seams. There are no estimates of the reserves India has of this gas. But the volume of CBM is related to the amount of coal in a country, and India has the fourth-largest reserves of coal in the world.
The government has awarded 26 CBM blocks for exploration. RIL has five of these, over an area of 4,000 sq. km. If CBM is produced in significant volumes, it could help address India’s gas shortage. The country’s demand for gas (natural gas, which can be substituted by CBM) is currently 179.17mmscmd, while the supply is 80.54mmscmd. The 26 CBM blocks are estimated to have reserves enough to produce 38mmscmd.
Arvind Mahajan, executive director at accounting firm KPMG, welcomed the move and said that given India’s appetite for gas, RIL’s plans would “build momentum in the CBM space.”
“We may also witness some degree of competitive action by other CBM block developers such as Oil and Natural Gas Corp. and the Anil Dhirubhai Ambani Group,” he added.
In another development, RIL also plans to file the development plan for its block in the Mahanadi basin by June this year with the DGH, according to the executive. The development plan explains the cost incurred in producing oil or gas from the hydrocarbon blocks. As per the production sharing contract between the company and the government, the government’s share from the hydrocarbon blocks, also known as profit petroleum, comes only after the company recovers all its costs. DGH scrutinizes the development plan to ensure whether the cost of recovery by the contractor (RIL) is genuine or not. RIL had announced its Mahanadi discovery in March this year and renamed it as Dhirubhai 32. While RIL holds 90% operating interest in the block, the remaining portion is held by Niko Resources of Canada.