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Coal: Oil Ministry to move Cabinet to allow private firm in CBM mining

After allowing Coal IndiaBSE -0.18 % Ltd to produce natural gas from coal seams (CBM), the Oil Ministry is proposing to give licence to other public and private sector firms to produce CBM from their existing coal mines.

The government had in December last year allowed only CIL, the world's largest coal miner, to explore and produce coal-bed methane (CBM) in its existing coal mines.

With a view to capture CBM from all available coal bearing areas, the ministry is now moving the Cabinet again to bring all coal mining areas held by not just CIL but other PSUs, joint ventures and private companies as well under this framework, sources privy to the development said.

This would enable degassing of coal seams ahead of coal mining operations and capturing it for commercial use. Also it will help bridge the gas deficit in the country.

Towards this, the ministry is proposing that all CBM rich coal seams, irrespective of depths, including areas planned for coal mining, be allowed to
produce the fuel.

In addition to payment of royalty to respective state governments, coal companies would be required to pay a production level payment of 5 per cent,
they said. Sources said the Coal Ministry is opposed to allowing miners other than CIL for exploitation of CBM, which is natural gas found in coal seams.

The ministry is proposing that where mining lease for extraction of coal has been granted, the rights for extraction of CBM should also be available with the operator.

For areas where a CBM exploration or mining licence has already been granted, Ministry of Coal should refrain from allotting coal blocks in that area.

However, in cases where coal mining lease has been already been granted within an area where significant investments have been made by a CBM operator, and it is not possible to carry out simultaneous extract of coal and gas, the CBM operations in and around the overlap area will be terminated.

If the coal mining operator intends to extract gas, it will takeover the assets of CBM operator and pay a fair value for the investment, sources said.

Prior to the December 2013 decision of the CCEA, rules and regulations prohibited coal mining firms from extracting CBM as the policy did not allow for simultaneous extraction of methane (CBM) and coal.

CBM exploration and production was allowed only in pure coal-seam gas bearing blocks which are auctioned. Since 2001, 33 CBM blocks have been awarded in four auction rounds.

Besides, two CBM blocks to Oil and Natural Gas Corp ( ONGCBSE -0.30 %) and one to Great Eastern Energy Co Ltd were awarded on a nomination basis.

Source: Economic Times