RIL to produce methane from Sept

CBM to power a 500 mw plant near the blocks in Madhya Pradesh.

Reliance Industries (RIL), the country's largest company in terms of market capitalisation, will begin production of coalbed methane (CBM) from its Sohagpur blocks in Madhya Pradesh by September, well ahead of its mid-2009 schedule.

The Mukesh Ambani-promoted company aims to produce around 5 million cubic metres of gas a day (mcmd) from the blocks, most of which will be used for a 500 mw power plant that the company plans to set up in the area.

"We are de-watering the production wells to separate gas from water. This process can take two-six months. We will be ready to produce gas from the block by September this year," a senior company executive official said.

Typically, an investment of around Rs 4 crore is required per megawatt for setting up a gas-based power plant. Thus, RIL's 500 mw plant would involved an investment of around Rs 2,000 crore.

RIL shares closed flat today at Rs 2,553 on the Bombay Stock Exchange.

RIL will be the second company in the country to produce methane from coal beds after Kolkata-based Great Eastern Energy Corporation (GEECL), which began commercial production from its Ranigunj block near Asansol, in West Bengal, in July last year.

CBM is a natural gas occurring in coal seams.

RIL will start with a production of around one mcmd of gas from the block to get to a peak level of five mcmd over the next couple of years.

The block is estimated to have around 3.6 trillion cubic feet of gas reserves.

Some of the gas will be sold to industries around Sohagpur. "There are not enough industries around Sohagpur to take all of the production. It makes much more sense to put up a power plant and feed the electricity into the grid," the official said.

The company had originally planned to carry the gas by pipeline to Uttar Pradesh for industries there. "It may not be economically feasible to lay such a pipeline," the executive said. He explained that getting right route for a pipeline would be more difficult than getting land for a power plant.

RIL could, however, face opposition from the Anil Dhirubhai Ambani Group (ADAG) as the two brothers had agreed when they split not to enter each other's business areas. ADAG is already in the power business through Reliance Energy and has plans for generation projects through Reliance Power.

The government has awarded 26 CBM blocks for exploration so far, five of these to RIL. ONGC and Reliance Natural Resources of the Anil Ambani group also have CBM blocks.