While the government is getting ready to auction shale gas exploration blocks, the country’s track record on the front of another unconventional gas source — coal-bed methane (CBM) — has not been very encouraging.
Compared to the expected production of 1.11 million standard cubic metre a day (mscmd) of CBM in 2010-11, the current production stands at only 11.71%, or 130,000 cubic metres a day. Gas production from CBM blocks of Reliance Industries and Great Eastern Energy are behind their approved plan due to issues like the lack of market access and land acquisition.
Of the three CBM blocks for which the development plans had been approved by the government, only one, belonging to Great Eastern Energy Corporation Ltd (GEECL), has started production, while the two blocks allotted to RIL in 2002 are still under development. According to the projections of the Directorate General of Hydrocarbons, CBM production was to increase to 7.41 mscmd by 2013.
Explaining the reason for the current level of production, Prashant Modi, president and chief operating officer of GEECL, said: “Unlike conventional oil and gas, where the initial production is high and then it drops, CBM production starts at lower level and increases with age. In CBM, there is no cost recovery like conventional gas blocks and, therefore, it is more in the interest of the producer to produce as fast as possible.” No data was available when the development plan was approved and production projection was based on ‘guesstimates’, he added. The block was awarded in 2001 and it went into commercial production in 2007. Director General of Hydrocarbons S K Srivastava was not available for comment.
RIL, which was awarded CBM blocks — Sohagpur (East) and Sohagpur (West) — in Madhya Pradesh, in 2002, had announced CBM discovery in 2005, but is still developing the blocks. In his AGM speech in 2005, RIL Chairman Mukesh Ambani had expressed optimism about commercial production from these blocks by 2009-10.
RIL did not respond to an emailed query on the status of CBM production. The company’s website says the development activities have been planned to commence in 2010-11 by drilling and completion of additional wells. Prolonged production testing was undertaken in the wells drilled in Sohagpur CBM blocks with favourable results. The plan for 2010-11 is to monetise the production capability from the present as well as the proposed wells.
CBM is natural gas found trapped within the coal formation. The gas is extracted by drilling holes into the coal seams that contain gas and are commercially unviable for coal mining. The government has so far held four rounds of bidding for CBM blocks and has awarded 33 contracts.
Minister of state for Petroleum and Natural Gas Jitin Prasada said current gas production from these approved blocks was lower than approved development plan, due to reasons like the lack of market in nearby areas, delay in laying of pipelines due to user right issues, land acquisition and law-and-order problems, among other things. “These issues are being sorted out and it is estimated that the total CBM production in the country is likely to increase to the tune of 5 mscmd in the next 2-3 years,” Prasada said.
Among other companies that announced CBM discoveries are Essar Oil and Oil and Natural Gas Corporation. Essar, which had announced earlier this year that its three CBM blocks held about 7 trillion cubic feet (tcf) of recoverable gas resources, had also not started production. It had said in March 2010 that CBM production would start in the second quarter of 2010-11.
