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At a time when there is a wave of protest against raising the domestic gas price to $8.4 a unit from April next year, coal-bed methane (CBM) producers are already making merry. Essar Oil and Great Eastern Energy Corporation Ltd (GEECL) are charging as much as $10-14 a million British thermal unit (mBtu) for gas from their CBM blocks in West Bengal.
While Essar Oil is producing about 0.1 million standard cubic metres a day (mscmd), GEECL is producing 0.57 mscmd from the Raniganj (South) block in Asansol in the state.
Based on the recommendations of the Rangarajan panel, the government had in June decided on a uniform pricing formula for all domestic gas, which is expected to work out to $8.4 a unit when it is implemented in April 2014. For conventional gas, this would be a near doubling of price, though for CBM producers it could mean a controlled pricing regime in which they would have to bring down the price in line with the formula.
In CBM, only the minimum well head price is approved so as to protect the Government’s royalty and production link payment.
An Essar Oil spokesperson in an emailed response said the company was at present selling to about half a dozen customers in the region and planned to ramp up production to 3 mscmd by next year.
GEECL on the other hand said production would be ramped up over a period of time. The company has drilled 150 wells and plans to drill 150 more wells in the Raniganj block over the next few years. Production is expected to ramp up to 3 mmscmd when all 300 wells are on production.
"The Asansol-Durgapur region where the Raniganj field is located is an industrial belt. Our customers here include mainly small and medium enterprises," said Prashant Modi, President & COO, GEECL, addding that CBM contracts are based on royalty and production link payment, not on cost recovery.
Essar Oil which received phase III environmental clearance for its CBM gas field at Raniganj, this March, has been allowed to increase drilling to 650 wells, up from 135 wells. "The company is awaiting a government decision on an appropriate commercial sales price for Raniganj, but in the meantime will continue to sell gas from the block at the approved test sales price," Naresh Nayyar, Essar Energy, Chief Executive, said earlier this year.
Raniganj, in which Essar Oil holds 100 per cent interest, is a 500 square kilo metre block with total proven and probable reserves of 113 billion cubic feet (bcf), independently evaluated by consultants Netherland, Sewell and Associates Inc.
Essar Oil's total investment for the block is Rs 4,000 crore which has been tied up, Essar Oil Spokesperson said.
“We expect to grow the coal bed methane business significantly in the coming years as we utilise the learnings from Raniganj to develop our other four blocks," Nayyar had said.
Of Essar’s eight oil and gas blocks in the country, five are CBM blocks, with more than 10 trillion cubic feet (tcf) of reserves and resources. This includes the large Rajmahal gas field in Jharkhand province, which has around 4.7tcf of best estimate prospective resources, located 150km from Raniganj.
