A new feather

To meet its growing energy demand, India will soon begin commercial production of coal bed methane.

A few months from now, commercial production of coal bed methane (CBM) "" a burning fuel for domestic and industrial use that is two-thirds cleaner than coal "" is expected to begin in India. This would place the country among the first crop of eight odd nations worldwide to do so.

CBM exploration activities are on in Australia, the US, Russia, China, Ukraine and the UK, but with the fourth largest coal reserves in the world, India is likely to emerge as one of the biggest producers of CBM.

"As fossil fuels get depleted, oil and gas companies need to find more sources of energy to cater to the increasing demand. As the demand will only increase in the future, it is natural for us to diversify into the exploration and production of CBM as an alternative energy source to oil and natural gas," says a Reliance Industries Limited (RIL) official.

Three rounds of auction of CBM blocks are over and the upstream regulator, the directorate general of hydrocarbons (DGH), is readying for a fourth round.

RIL's blocks at Sohagpur in Madhya Pradesh are expected to be among the first CBM producing blocks. A company official says that commercial production is likely to commence by December 2007 or January 2008.

"While the demand for natural gas in India is 118 million metric standard cubic metre per day (MMSCMD), the current supply from various sources is 80 MMSCMD, leaving a shortfall of 28 MMSCMD. That deficiency can be covered by CBM production," says Anindya M of KPMG. 
 

CBM STORY
Rounds of auction of CBM blocks	3
Number of blocks awarded	26
Total area covered	13,600 sq km
CBM potential in awarded blocks	1,374 BCM*
Production potential	38 MMSCMD*
*billion cubic metres  *million metric standard cubic metres per day
Source: DGH Website

So far, 26 CBM blocks have been awarded under three rounds, covering an area of 13,600 square kilometres. By 2010-2011, CBM production in India is expected to be between 8 and 10 MMSCMD. The 16 blocks awarded under the first two rounds have the potential of generating 23 MMSCMD. The other 10 blocks awarded have the potential of 586 billion cubic metre.

However, the investments in CBM have fallen short of the target of Rs 675 crore by a huge margin of Rs 170 crore, according to the data on the DGH website.

Phase-I activities in five blocks have been completed so far, and phase-II activities that include market survey and pilot assessment are on in these blocks. In another 11 blocks, phase-I activities are underway.

Nevertheless, participation in the bidding process has seen a steep rise in terms of number of bids and number of companies. A record 54 bids were received from 18 Indian companies and eight foreign companies during the third round for 10 blocks.

Great Eastern Energy Corporation, has plans to commission drilling in 20 wells of the 100 CBM wells in Raniganj. The company has already found 1.385 trillion cubic feet (TCF) of CBM in the region.

RIL, which has delayed drilling in some blocks, has found 1.69 TCF in Sohagpur East and 1.96 TCF in Sohagpur West blocks in Madhya Pradesh.

SNIPPETS

Problem areas
The shortage of exploratory rigs, which has affected oil exploration in the country, has already spilled over to the CBM sector, even before commercial production has commenced.

However, the process of extraction of CBM itself poses several hazards that can adversely affect the ecology of a place.

The coalification process, whereby plant material is progressively converted into coal, generates large quantities of methane-rich gas which is stored within coal. However, it is in the form of a mixture of methane, water, nitrogen and carbon dioxide. During extraction of CBM, water needs to be separated.

The disposal of this methane-rich water could become a potential problem for extractors. Though this water might be suitable for drinking in some cases, it is not suited for irrigation.

Moreover, in some cases, it has been found that water level in drinking water wells near the site of CBM development has dropped substantially as more water from coal beds gets extracted.

Contamination of groundwater is another potential hazard that CBM extraction poses.

"To tide over these hazards, latest technology is needed for extraction of CBM, making the process relatively more expensive than the extraction and production of natural gas. However, since natural gas already contains some amount of methane, the existing infrastructure for distribution of natural gas can be used for distribution of CBM as well," explains an official of Reliance Industries Limited.

Despite delays and potential hazards, a royalty at 10 per cent of the value of the gas would be payable to the government for CBM, as it is a natural gas. Thus this will be a new source of revenue for the government.

Global scene
While India is gearing up for commercial production of coal bed methane (CBM), production in China, Australia, the US and the UK is already underway.

Extraction and utilisation of methane from abandoned and operational mines in the UK has been a commercial success, according to information supplied by the UK's Cleaner Coal Technology Programme.

Most projects have been industry-led. There were six abandoned mine projects producing an equivalent of 42.5 Mw of electricity and two projects using extracted methane from operational mines, generating about 22 Mw .

Proven reserves of coal bed methane in the US had increased from nearly 3.7 trillion cubic feet (TCF) in 1989 to more than 15.7 TCF in 2000. Production had increased even more dramatically, from 0.09 TCF in 1989 to more than 1.4 TCF in 2001.

However, 700 TCF of CBM exists in the US, out of which 100 TCF would be economically recoverable. This would account for 7.5 per cent of the total natural gas production in the country.