In an effort to boost hydrocarbon exploration in the country, the government will auction coal-bed methane (CBM) blocks in Assam, Arunachal Pradesh, Orissa, Jharkhand, Madhya Pradesh, Gujarat and Tamil Nadu in a forthcoming round of bidding. This will be the fourth such tender in six years.
The bidding for these blocks will be held by the petroleum and natural gas ministry in consultation with the coal ministry. “These are the tentative states where the blocks will be awarded. Once the areas for CBM blocks are earmarked in consultation with the coal ministry, the Directorate General of Hydrocarbons will come out with more CBM rounds,” said a senior petroleum and natural gas ministry official, who did not wish to be identified since he wasn’t authorized to talk to the media. No date has been fixed for the bidding.
CBM, which is a viable alternative to natural gas as fuel for several industries such as power generation, fertilizers and ceramics, is a gas found in coal seams. India has no official estimates of CBM reserves, but its volume is related to the amount of coal reserves a country has.
India has the fourth-largest reserves of coal in the world and if CBM is produced in significant volumes, it could help address the country’s gas shortage. The demand for gas in the country is currently 179.17 million standard cubic metres of gas per day (mscmd), while supply lags at 80.54mmscmd.
Bidders for CBM blocks will also come from foreign countries and the government should work on generating interest in the international market, an industry expert said. “CBM as a technology is more Australia- and US-driven and the companies there have been able to successfully monetize the technology,” Ajay Arora, partner at audit firm Ernst & Young, said.
To date, the government has awarded 26 CBM blocks for exploration spread over 13,600sq. km. The total CBM resources in these blocks is 1,374 billion cubic metres with a production potential of around 38mscmd.
“CBM has a healthy potential in India and the next round is being eagerly awaited by the industry and the international players,” Arora added.
The terms of the next CBM round are considered attractive since it comes with no upfront payment, no signature bonus, no government participatory interest, no customs duty on imports, the freedom to market the gas in the domestic market, and relatively-flexible contractual and fiscal terms.
Earlier rounds of CBM bidding had evinced strong interest from domestic and international companies, including the UK’s BP Plc., Coal Gas of the US, Arrow Energy of Australia, CDX Gas of the US and GeoPetrol of France.
Indian suitors in earlier CBM rounds include Reliance Industries Ltd, Reliance Energy Ltd, Oil and Natural Gas Corp. Ltd, Indian Oil Corp. Ltd, Tata Power Ltd, Essar Oil Ltd, Reliance Natural Resources Ltd and Indiabulls.