Coal India may get go-ahead to extract CBM from mines

Written by Subhash Narayan | Prashant Mukherjee | New Delhi | Updated: Dec 12 2012, 07:04am hrs
Coal India (CIL) may be allowed to extract coal-bed methane (CBM) from its vast leasehold mining areas soon, opening new business avenues and boosting revenues for the state-owned coal monopoly. Current rules prohibit coal miners from extracting methane released during the mining process, wasting a valuable natural resource.

We have given in-principle approval to a new policy on coal mine methane. We will soon move a Cabinet note to allow CBM extraction by CIL, a petroleum ministry official said.

At first, CIL may be allowed to extract gas from 80% of its coal blocks on nomination basis. However, the company will be subject to petroleum ministry regulations in marketing gas. Under the CBM policy, blocks are currently auctioned during the Nelp rounds.

The petroleum ministry recently approved a minimum well-head price for Great Eastern Energy Corporations CBM gas at $6.79/mmBtu. Essar Oil has sought $4.20 for CBM gas from its West Bengal block while Reliance has sought around $12-13.

With its proven coal reserves of 52.5 billion tonnes among the highest by any company globally extracting even a moderate amount of gas could significantly help CIL, since a lot of these reserves are expected to hold huge CBM potential as well.

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It is difficult to calculate gains at this juncture as everything will depend on the cost of extraction and availability of gas. At present, its too premature to estimate, CIL chairman and managing director S Narsing Rao told FE.

Once the new policy is approved, CIL can extract CBM from all leasehold areas which are yet to come under production. It can also extract gas from existing operational mines where deeper seams of coal exist beyond 300 metres.

Coal India had cash balance of Rs 58,202 crore in 2011-12.

The total sedimentary area for CBM exploration in India is of the order of 26,000 sq. km. Out of this, exploration has been initiated in only 52% of the area and large area remains to be explored. At present, the countrys total methane production stands at approximately 0.32 million standard cubic meters per day (mmscmd), potential to generate approximately 80 MW of power, it is expected to go up to 7.4 mmscmd by the year 2014.