Mumbai: Twelve years after being awarded the coal-bed methane block, Anil Dhirubhai Ambani Group will soon begin test production from the block, according to two sources aware of the development.

The block is the group’s only coal-bed methane (CBM) gas block located in Sohagpur (North) Madhya Pradesh, and is held by Coastal Andhra Power Infrastructure Ltd promoted by Reliance Power.

“Drilling and production testing work of exploration phase-I has been completed in one of the CBM blocks. Phase-II pilot testing work is being planned in this block" Reliance Power said in its annual report for 2018.

The company did not reply to an email sent last week.

The company was awarded four coal-bed methane (CBM) blocks in 2006, of which the company relinquished three due to bad prospects.

Mukesh Ambani’s Reliance Industries (RIL) also holds two blocks in the Sohagpur block — Sohagpur East and West.

CBM is a natural gas stored or absorbed in coal seams and contains 90-95% methane.

“Anil Dhirubhai Ambani Group had Geopetrol International Inc as their partner in their block but they bought them out. Now Reliance Group is the owner and operator of the block. The company had applied to the Directorate General of Hydrocarbons for a change of operatorship. They could be producing shortly," a source said on the condition of anonymity.

The Sohagpur block covers around 609 sq km, and till March 2018, the Reliance Group spent 61 lakh towards expenditure on survey and prospecting activities, according to the company’s 2018 annual report.

The Cabinet on 1 August approved a policy allowing operators to explore all unconventional hydrocarbons, including shale, coal-bed methane and hydrates, in existing fields. This means the exploration of unconventional hydrocarbons can be carried out under existing production sharing contracts, CBM contracts and nomination fields. Also, the Uniform Licensing Policy, at present applicable to the Hydrocarbon Exploration and Licensing Policy (HELP) and Discovered Small Field (DSF) Policy, will be applicable to all operating fields.

Oil companies are boosting production of CBM since they are free to sell it at market prices. Natural gas price is currently capped at $3.06 per million metric British thermal unit (mmBtu), while CBM gas fetches $5.7-$10.64 per mmBtu.

Natural Gas prices, however, is likely to increase by over 14% to $3.5 mmBtu from October 1, since they are reviewed every six months based on average rates in nations such as the US, Russia and Canada.

Companies ramping up CBM output include RIL, Essar Oil Ltd, and Great Eastern Energy Corp. Ltd (GEECL). State-run Oil and Natural Gas Corp. Ltd (ONGC) has also begun test production from its CBM blocks in West Bengal.

Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.

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