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New coal mine allottees likely to be allowed to extract CBM

All new allottees of coal mines will be allowed to simultaneously explore/extract coal-bed methane (CBM) also, according to a draft Cabinet note prepared by the oil ministry. The move is expected to give an additional incentive to investors, besides imparting fresh momentum to CBM extraction.

India has rich CBM reserves of an estimated 63.85 tcf but the current production of fuel stands at a measly 0.6 mmscmd although commercial production started eight years ago. The main constraint is that four-fifths of the known reserves are with Coal India, which has no competency to explore the gas aggressively, hamstrung by technological deficiencies and priorities needed to be given to meeting coal supply obligations.

A sum of around R5,000 crore has been invested in the CBM sector by public and private companies and nearly 700 wells have been drilled for extraction of methane gas. An estimate is that production of CBM will touch 4 mmscmd by 2016-17, but untapped potential would still be huge.

Currently, firms with coal blocks are barred from extracting CBM during mining of coal. Concurrent exploration of the two — coal and CBM — are not allowed.

As per the oil ministry’s new note, the coal ministry, while auctioning off blocks for mining, will invite bids for exploration of CBM from the same block. The change, if cleared by the cabinet, will enable private miners with mining licences to extract CBM as well. “It would be made mandatory for bidders to bid for both resources,” a government official told FE.

Only in December last year, the then government allowed CIL, the world’s largest coal miner, to explore and produce CBM in its existing coal mines.

The oil ministry suggested that the lessee will not be allowed to alienate CBM lease rights and relinquishment of CBM mining lease will be co-terminus with coal lease. The lessee will have to operate in a manner so that CBM is extracted prior to coal mining or simultaneously with coal mining operations to optimally develop CBM.

An empowered committee has been proposed to resolve issues in cases of partial overlap of the proposed coal block with the CBM licence area.

CBM exploration and production is allowed only in pure coal-seam gas bearing blocks which are auctioned. Methane being a natural gas is explored under the provisions of Oilfields (regulation and development) Act petroleum and natural gas rules, administered by the MoPNG. The Directorate General of Hydrocarbons acts as a designated agency for implementing CBM policy.

Source: Financial Express