Reliance Industries (RIL) has sought one-year extension for development of its two coal bed methane (CBM) blocks — Sohagpur (East) and Sohagpur (West) in Madhya Pradesh — due to a delay in land acqusition. The Ambani firm bagged both these blocks in the first round of the CBM auctioning in 2001 and the development phase expires in 2014.
The upstream regulator Directorate General of Hydrocarbons (DGH) has opined in favour of the explorer to extend the development phase by one year under the Article 10.5 of the CBM contract till 2015, a source told FE. Article 10.5 of the CBM contract provides for extension of the development phase not exceeding one year to complete the development phase.
The development phase for Sohagpur (East) would end on December 1, 2014, while in case of Sohagpur (West) it was valid till October 25, 2014. Currently, CBM production in the country is just 0.60 million metric standard cubic metre per day (mmscmd). It is likely to go upto 4 mmscmd by 2016-17, with substantial gas being produced from the two RIL blocks.
The gross in-place CBM potentials of RIL’s Eastern block is 1.69 trillion cubic feet (47.7 billion cubic metres) while it is 1.96 trillion cubic feet (55.5 billion cubic metres) for the western acreage.
RIL has told the government that both the CBM blocks are located in tribal districts of Shahdol and Annuppur in Madhya Pradesh. The major portion of the land falls under the category of tribal or forest land and therefore land acquisition has been a major challenge to make progress.
“The contractor has informed that development activities are under progress, but land acquisition process is getting delayed due to land owner’s unwillingness and new land acqusition of 2013,” said the official quoted above.
Earlier in December 2012, the government accepted RIL’s plea to consider commencement of development phase from the date of grant of mining lease, which was December 2, 2009 for Sohagpur (East) and October 10, 2009 for Sohagpur (West). This was because RIL lost about two years in the process of getting mining lease before it could commence any activity for the development phase. Moreover, this delay was not because of any fault of the contractor, the Ambani firm had told the petroleum ministry.
On the other hand, RIL, which started development drilling in February 2011, suspended the work in March 2012 pending clarity on pricing of gas produced from the CBM blocks. The latest gas pricing policy, approved by Prime Minister Narendra Modi-led government on October 18, has set gas price at $5.61/mBtu from all sources including CBM blocks.
Earlier reports suggest that RIL came up with gas pricing hovering around $12-13/mBtu, while carrying out the price discovery for these blocks.